Low stress swing trading with momentum

In a trend following system there is not a lot you can do except exercise good risk management.

In any trend following system we are waiting for the large trends to recoup our losses and go beyond them for our large profits, or the fat tails.

That pretty much sums it up LOL. The hardest part of being wrong is admitting you are wrong, taking the hit and getting out of the way.

I can't get out of the way all the time but I'm trying to find a decent way of filtering some of it out if I can.

I find it really easy to get into a momentum trade in the right direction with confirmation, cut it short, take the profits and run and have a great win / loss ratio. But you are really leaving a lot on the table trading a 100 pip sl and taking profits at 100 pips and then wishing you stayed in while it ran 250, 500 or 1000 pips.

Now those home runs are a heck of a lot of fun to stay in but if you trail it too tight you get taken out too early.

Hi PipKiller
I like your trading approach. I have been trying to find a way to trade the Day chart without a huge Stop Loss. I now use a relatively small initial SL with the knowledge that it will be hit frequently and that I will have to re-enter. My approach causes several small losses and a poor win/loss %.
I hope you keep the Heiken Ashi candles (or similar), they are visually appealing to me.
I doubt I will post often but will follow silently.

The Most important portion of my post is a large "Thank you" for your service to our nation. I have huge respect for our armed services, firemen & police.

Thanks again

gmcc

LOL - we have similar strengths and weaknesses - and ideals, so I'll post my current set-ups to see if they add anything to what you and others are doing.

Firstly, my daily chart.

As uncluttered as possible, with only the currently relevant levels shown, more added as they start to come into play. When / if 3160 is broken I'll pull a fib over the last fall.

The SMA bands show me when price is extended and historically liable to pull back - especially useful if combined with a suppy / S&R area.

The notations should be obvious.....ditto the loss of momentum in the weakening drives lower - also on reducing volume. The TVI indy confirms this.

So today € is rallying towards the upper line of the down channel, currently ~ 3120 which is also this months pivot and I'm already long off the lower TF charts - they follow....

So on my hourly chart I add the weekly and monthly pivots - the new low for 2011 was exactly at last week's Weekly S2 level!

Cumulative volume is shown in grey on the RHS with its peak around the WR1 level. I have drawn fibs over the 2 week range and this nicely places the 61.8 retrace with the resistance arear around the 3018 area.

Rather than using a MA, I've put on the TrendMagic indy by Tudor Girl as I find its helping me stay in trades longer.

I'm still trying the Symphonie Market Emotion histogram - but as I dont have its mq version, I'm looking to replace it. It gives early warnings of potential reversals.

Finally the TVI indly for divergence and loss of momentum.

The candlestick pattern at the Dec 29 low - a bullish harami - at the weekly S2 was a good signal to bank and consider a small intra day buy.

PS Thanks for Cobra's THV indy - already in use!

This and the 5 min chart are the ones that I actually trade off.

The set up is similar to my hourly chart and I would normally show the daily pivot levels, but due to yesterdays ultra narrow range, today they are IMO useless.

The two pink areas are resistance from my hourly chart and when the lower was respected during Frankies Hour, I pulled a fib off yesterdays low. The 38 retrace was in a small suppy area and was hit during a typical post LO pull back ......

If you look at the intra day sideways action in the Euro, you will see that it frequently pauses for an hour or two in an ~30 pip range, during which indicators are useless. I look for these areas and look to get in early for a continuation out of the range. I'm thinking that research on the higher TFs might show similar action in a wider box more relative to the higher TF......

So volume was low in the Asian Session, picking up as the European Traders came to work for the Frankfurt Open at 7am GMT and the action on both this TF and the 5m chart gave good reason to buy after the London Open as the confluence of the 38 fib and yesterdays high held as support.

My initial ID target was at the T2 fib expansion confluence with the imported resistance area = ~125 pip daily range, so IMO best to bank some before lunch and wait to see what the US traders do......AND remembering that the higher TFs have yet to turn up.......

GMCC, Thank you.


Islander, I'm all over the place right now trying to build a very, simple, profitable swing system off the daily without getting whipped too bad. The THV3 info panel is the only thing left on my chart right now as well as some color and the idea of the Ichimoku cloud which I am using another indicator for. I think I have used ideas and pieces of about 4 or 5 different systems on the latest idea that is looking pretty good so far.

It's met most of my criteria, the only way I have been able to prevent some of the whipping associated with trend following systems is using hard SL and hard TP and not trailing. Just take the money and run LOL. You have opportunities to jump back in if you had a fairly fresh signal right before a spike hit the TP, wait for it to bounce back and jump back in for round 2.

Please Note: The small IBFX account I allow everyone to see in the trade explorer is the live account I use for strategy testing. You should be trading your own plan, make your own decisions and trade at YOUR comfort and skill level. I do this for educational purposes only. If you copy my trades into a live account, you do so at you own risk.

Please realize that not everyone will trade the same exact plan, the same exact way no matter how clearly it is written. The most important part of YOUR trading plan is that YOU understand it. Use the information and ideas I'm posting as a guide to help you develope a plan that works for YOU, not for me.

 

1. Chart setup
   1. Bar chart with the setting to have the chart on the foreground.
      1. You don't need bars on the chart but I prefer them there because I like to be able to see where price is really at by just a quick glance at the chart when using Heiken Ashi candles, WYFX candles, Renko bars or whatever you prefer.

   2. WYFX Clear Chart bars with custom settings
      1. MovAvgMethod 2
      2. MovAvgPeriod 3
      3. MovAvgMethod 3
      4. MovAvgPeriod 3

   3. 5 EMA
      1. Settings
         1. 0 shift
         2. Levels
            1. 100 (10 pips)
            2. -100 (-10 pips)
            3. NOTE: This is for 5 digit brokers.... 4 digit brokers drop a zero off each level. this gives me a 20 pip zone for entry.

   4. ZB-Cloud Matrix
      1. Settings
         1. Tenkan.................. 2
         2. Kijun..................... 3
         3. Senkou.................. 5
         4. Signal arrows...... true

   5. SSL Bar
      1. Settings
         1. LB.........................5

Let's make a simple plan

 

1. Money management
   1. 1 Micro lot per $1000 of risk capitol maximum. Each trade will be approximately 1.5% risk on average. Some will be more and some less but it should average out across 20+ pairs.
      1. It is OK to lower this ratio but DO NOT increase the ratio and over leverage. Over leveraging your account is the fastest way to blow it out with a margin call. No trading system is perfect, you WILL have bad days, bad weeks and possibly even bad months. Big funds often have bad years.
      2. Just keep it simple, Each pair has it's own currency value per pip but it should average out over time.
      3. There's no need to complicate things trying to calculate the pip value, position size vs maximum percent risk for each pair.

2. Pairs traded
   1. The majors and major crosses only.
   2. No exotics
      1. This means both sides of the pair will have one of these currencies.
      2. EUR, USD, AUD, GBP, CAD, CHF, JPY or NZD only

   3. NOTE: EUR/CHF and USD/JPY is off limits to short because of intervention risk. EUR/CHF I trade only long when price is below 1.22 and stop loss below 1.20 and I wait for a rally toward 1.24 on rumors the Swiss will raise the floor to 1.25. The Japanese central bank likes to intervene and spike the yen with the USD/JPY so close to historic lows. If you are new and/or are not familiar with what is happening in these 2 pairs with the intervention, do not trade them.

3. No trading in December ... Take a vacation.
4. Entry signal confirmation
   1. WYFX candles, ZB cloud matrix and SSL bar must all match colors
      1. Green - long entry
      2. Red - Short entry

5. Order Entry
   1. Long entry
      1. Price must be at or below the 5 EMA zone for a market order.
      2. If price is above the 5 EMA zone place a limit order and wait for price to come back to the 5 EMA zone

   2. Short entry
      1. Price must be at or above the 5 EMA zone for a market order.
      2. If price is above the 5 EMA zone place a limit order and wait for price to come back to the 5 EMA zone

   3. NOTE: Understand that on the current day the EMA is dynamic and will move as price moves, you can try to project your entry and the EMA with a simple trend line .
   4. NOTE 2: You can front run entry by the pairs spread. If it doesn't come back to your entry, let it go and enjoy the show. Don't chase it, let it come to you.
   5. If entry not met by the daily candle close, trail the limit entry along the projected EMA zone.

6. Stop loss and Take profit levels
   1. Stop loss for all entries 150 pips
   2. Take profit for all entries 200 pips
      1. Limit orders - Place initial SL and TP order with the limit order
      2. Market orders - Immediately place the SL and TP orders after entry

7. Trailing stop
   1. Once price has moved 150 pips in profit, move the stop to break even and leave it alone. This is the only time you move a stop loss and you never move the target.

You get one of 3 things with this plan
· 150 pip loss
· Break even
· 200 pip profit
Nothing more, nothing less. Be happy with what the market gave you and walk away with a smile.





Back testing results. This is what I see so far with pen and paper for 1 year. No new trades opened in December.

1. AUDCAD - 13 win, 2 BE, 3 lose, 2150 pips profit
2. AUDCHF - 16 win, 4 BE, 12 lose, 1400 pips profit
3. AUDJPY - 9 win, 7 BE, 6 lose, 900 pips profit
4. AUDNZD - 13 win, 6 BE, 11 lose, 950 pips profit
5. AUDUSD - 14 win, 6 BE, 12 lose, 1000 pips profit
6. CADJPY - 13 win, 2 BE, 9 lose, 1250 pips profit
7. CHFJPY - 12 win, 4 BE, 14 lose, 300 pips profit
8. EURAUD - 16 win, 2 BE, 15 lose, 950 pips profit
9. EURCAD - 15 win, 4 BE, 14 lose 900 pips profit

Let's have some fun and do some math.

So far we are looking at a roughly 1200 pip per year average profit per pair per year and not entering any new trades in the month of December.

Now let's round that number down to 1000 pip per pair average

Now multiply that by the 24 pairs traded by not trading the USDJPY or EURCHF pairs and it would be a decent year if the average stays roughly the same... Approximately 24000 pips profit per year. That's 2000 pips per month average.

Let's have some more fun

 

1. $100 account trading 1 micro mini lot (nano lot)
   1. $0.01 per pip avg.
   2. $20 per month

2. $1000 account trading micro lots
   1. $0.10 per pip avg.
   2. $200 per month

3. $10000 account trading 1 mini lot
   1. $1.00 per pip avg.
   2. $2000 per month

4. $100000 account trading 1 standard lot
   1. $10.00 per pip avg.
   2. $20000 per month

And the best part..... The accounts would double on average every 5 months if you did not withdraw any money. There's no need to be in a race to get rich quick by overleveraging a trade which 99% of the time means blowing it out fast. Pips and pennies add up fast.

I've taken it live. There's only one real way to know if it works and that is to put it to the test with real money.

I have fresh signals for long on the AUD/JPY, NZD/JPY and a fresh short signal on USD/CAD. Extending the lines of the 5 EMA zone from the previous 2 days bars puts all of them in the zone for a market order.

Game on.

You are making this harder than it needs to be... Also you are limiting your potential wins. You need to be able to capture the big moves, the ones that will give you many times the initial risk in returns.

You may find something of interest HERE.
You might also like to get a copy of Van Tharp's book, Definitive Guide to Position Sizing. it's a very dry read but has some very good risk management guidelines.

Just some ideas.

Thank you.

Somebody might find the book and link usefull. No need to keep selling the book to me. I can't read.


Actually. If I go completely mechanical I'm making things so much easier on myself it isn't funny.

No more up at 2 am NY to see what's going on in the european bond markets, no more trying to figure out when Yoda is going to intervene in the Yen, no more sitting for hours watching the news and webcasts for the latest tweets, rumors and statements during european summits to figure out how the market is going to run. No more trying to be at the computer for evey major economic release. You could say I'm suffering from eurozone fatigue.

I'm trading momentum. I'm trying to run with the market. I am not trying to pick tops and bottoms. Taking what she'll give me. Not trying to capture every pip.

I have looked at many systems and indicators the last few weeks and have spent countless hours calculating win/loss ratios, profits and losses in pips looked at systems on both the weekly and daily charts.

What I have found with systems that trail stops trying to catch a big trade and systems that catch a hard exit is in the end they both average out about the same. The trailed stops seem to get whipped more with more losses than wins and I don't like that.

Another thing I don't like doing and never have liked is to take off part of a position, trail the rest to BE and let it run. If you traded the E$ pair like that this year that second half of the position ran alright. It ran right back into the SL @ BE most of the time.

I know a few position traders looking into smaller TF trading because, jumping in and hanging on for the ride is quickly becoming a thing of the past.

Check this out... Where did the E$ go in 2011..... Nowhere, it ended right back where she started and made a whole lot of noise doing it.

yup E$ went nowhere.... but this is what my mechanical method did with last year.......Without listening to the talking heads and about 20 minutes a day at the charts My Journal

Hi PK - as I'm concentrating on the 60m & 15m charts, I'm not certain if I should continue posting here, given that you're focused on the daily......

Either way, I'll look into your latest ideas and see what I make of them on these TFs

Yep,

You did good, you made money............ But your journal doesn't tell anyone anything about your system other than.

I'm not going to sugar coat this.

Q...How does that help anybody become a better trader
A...It doesn't.

If you are here to gloat about how good you are, be critical of others methods, but not contribute anything but pushing a book or others newsletters or blogs are you really doing anything but wasting time.


I havn't had time to dig through all your posts and threads, and I probably never will dig through them all, but I did catch something about a 5 and 8 EMA strategy scanning a bit and the journal tells me you are trading the EU pair almost exclusively and you made money. Quite honestly that's all it tells anybody.

If you are trading a moving average strategy it's not that much different than what I am doing.

A moving average strategy is all the WYFX candles are in a very visual way of seeing it.

The SSL bar is also a moving average strategy and the ZB cloud matrix is the Ichimoku cloud, but it's not in the middle of the charts

You are fine. TF doesn't matter.

Actually the journal is not to gloat but an attempt to use some reverse psychology .... In the past I have tried to help others and they just didn't "get it"..... so this time I am trying to get the results out for a while then I will share the method.... there are quite a few that seem to be following the journal and hopefully this time there will be more that "get it".

Even after that people will mutate the method till it becomes unrecognizable from it's original, as Richard Dennis said he could have published his rules in the news paper and people would not do it, even some those under his direct tutelage could not trade his simple method.

Everybody thinks they have to have a dozen indicators on the charts, or the newest neural net software, or they have to be trading the nanosecond chart...... if that is so how did the trading legends ever make any money using end of day prices? notice I said prices not data.... because I refer to a time before the computer. In some ways the computer has made trading more difficult.

I have been down the road your going, endless testing and yes we need to test but there comes a point where we have to just take the market by the horns and take it for a ride.... control risk take our losses and let our winners run.

Regards.

Hi PK

Your equity is up just over 140% at current, if you end the year at this
you will have had an amazing years trading....

20% + a year and your trading with the pro's...

Why the concern to find another trade plan ?

Great post keep it up.. Ja

LOL.
OK, I understand what you are saying completely and agree 110%

You can lead a horse to water but you can't make them drink. You just have to accept it and let it go.

If they don't want to drink from the same cup, so be it. After all we do need someone on the other side of our trades. It sounds mean and cruel but it's a fact.

We used to do a memory excercise in the military where an order was passed down from one person to the other. By the time it got to the end it wasn't even close to the original.

They would start with "the admiral wants everone on the pier at midnight to watch Haley's comet" and it would end up with something like "we need to go watch admiral Haley drive his comet off the pier" No kidding.

I'm getting killed with questions about how I'm doing what I'm doing and most don't understand or just want to "copy" my trades. Most don't understand that they are not going to trade the same as someone that's been following the financial markets for 37 years and trading Forex for amost 7 years. There's a point when you start to be able to see patterns and market behavior almost subconciously after watching charts and news for years.

Probably 99% who see results in my trade explorer completely skip where I've said repeatedly that it's an account I use for live strategy testing too. Live testing often gets different results than demo because of slippage, spread widening and requotes. Thankfully this isn't as bad as it used to be but there are still plenty of bucket shops out there.

One of the things I was trying to do was teach how to create a basic simple plan that could get a newbie pointed in the right direction. If only one person actually "gets it" , slows down, makes a solid, profitable and simple plan they can follow and makes a better life for themselves I'm happy with that. Then I've done my part to give back what I have learned.

They don't get the fact that I've been following the financial markets since I was 9 years old. That's 37 years and boy have things changed. There were no computers to check prices by the tick or 24 hr cable news coverage and unless you were trading on the floor of the exchange or at a brokerage, you were getting your info from the newspaper business section, the wall street journal and the news at 6PM off whatever station was coming in the best on your antennae. Then you had to go to the bank to buy some stock or call your broker on the phone to place an order.

As far as backtesting and looking at new things. I do that from time to time always looking for ways to improve. I've look at a few EAs and tried a couple a few years ago but 99.9% are not worth using so I don't even bother looking into that anymore.

I do want highly visual stuff though. These old tired eyes ain't what they used to be.

Heck If you just broke even or got out still wearing the shirt on your back this year you were doing a lot better than many of the "Pros"

I am always looking for ways to improve.

We also have a lot of stuff going on right now where I may need to go completely mechanical to free up a lot of time and still keep trading. I don't have to trade, but I want to trade.

Sent ya a PM........

i believe you meant to say if price is below for the sell setup...
If price is above the 5 EMA zone place a limit order and wait for price to come back to the 5 EMA zone