Fail Better

looks like a good level, my only worry was the BUOB it posted on H1, lets see how it goes

Hi

since a few days I'm reading this thread and try to understand the trading of sfp etc. So first I want to say thanks to Tom and the other traders for the thread and sharing your experience!

I am watching some forex pairs and made a demo trade last wednesday. I think there was an SFP at GBD/USD daily. The bar on 31 January breaks the swing high and close above it. After the close on Tuesday I am going short

http://i39.tinypic.com/s12jq8.png


Hm, I think the trade fails - but I don't know why.
Did I make a mistake?

Hi klp,

I apologise for not giving a very detailed reply here but I am quite pressed for time during the trading day.

I have some key rules which would have either meant you didn't take this, or if you did, got you out of it with profit.

1) Don't trade SFP's at levels that are being hit for the 4th time or more. That level in GBP/USD is the 4th touch.

2) If you decide to take the trade, since you have D1 bias you have to play to the D1 FTA. For me this was 1.5709 which was hit perfectly resulting in a winner if you had taken it.

the fact that it failed doesnt mean you made a mistake , just playing your edge, you win some you loose some.

the SFP was actually a good play on daily but it did not work, imo

I know there are quite a few people that try this method after learning from other price action threads or courses on the web.

It is important to note that there are a lot of differences between what I do here and what a lot of the readers of such threads will be used to doing.

It is important I highlight the ways in which I now differ for the simple reason that if you don't understand these differences, you will struggle to make things work for you.

Here is a quick outline ;

1) We don't IGNORE news. News drives markets. I think too many people try to market their strategies by making them too simple. I recently read this classic on the net from a "professional trader" : "I do not waste my time reading the paper or visiting any news blogs...I couldn’t care less which Euro-zone country is going bankrupt or issuing bonds, and I don’t care what Oil country in the middle-east is starting a civil war; this stuff does not help a price action trader and it does not influence or concern me."

Try saying that at an interview to become a professional trader and there is a 99% chance you will get laughed out the room before you say anything else. Don't get me wrong. While I don't sit there trying to trade figures, NEWS DRIVES MARKETS and once you understand how new works (what news traders expect, what news they actually receive, how price reacts) then you can start to understand the puzzle a lot more.

News is ;

- The reason I got out of my Gold short at $1703 and caught 80 ticks rather than everyone that tried to run to the FTA and lost money

- The reason you know to short USDJPY every time they intervene APART from 16th March 2011. (16th March was co-ordinated CB intervention rather than single)

- The reason you get long EURCHF on the 6th September 2011. Everytime the SNB intervened, a study of pure historical price action tells you to begin looking for shorts on the day of intervention. A news trader, sees the peg announcement flash across the wires and not only does he know not to get short, he actually gets long on the rally.

- The reason you don't sell USDJPY at the 76.60 level on Friday after a blowout non farms number.

If you are long the FTSE off a great level and price starts plummeting because there has been a terrorist attack, a good trader will cut and reverse immediately. Meanwhile all the rest will be saying "Oh I don't watch the news...so I'll just hold this to my stop gets hit"...

Those that IGNORE news do not, to put it bluntly, have the first clue what is going on in these scenarios.

I could go on all day. Someone once asked one of the prominent J16'ers in a webinar, do you trade news and they said "Look at a chart, if you can backtest it visually and see that it works then news is unimportant because you can see the setups work and you have no idea of whether there was news or not".

While this is a good answer, I still think it is viewing things a little too simply. That is just my opinion.

How do you know that the setups that didn't work were all news based? How do you know whether the setups that do, were? You don't.

Now, no one should be suddenly pulling up their wires and reacting to every bit of news that comes out because much of the time this just serves to scare you out of taking or holding a position. But news and what it does to markets is something to WATCH and LEARN.

News related trading is a very hard area of trading to master. That's why it is usually ignored. But no one said the game was easy.

2) The breakeven maneouvre. If you are still using it, you haven't read the thread. Using breakeven is akin to gambling ; I HOPE it will carry on in my favour but I DON'T want to take a loser if it turns.

It's simple ; once it reaches the next key turning point, get out and be ready to get back in again if necessary.

The number one rule that you hear time and time again? Never trade your P&L. This is exactly what breakeven stops are. They are trading your P&L.

Use a stop that makes sense. Not one that is an emotional crutch.

3) Running trades. It is not neccessary to be trying to run a trade for 500 pips profit with this strategy. The people that try to do this are usually either ;

- Trying to compensate for a huge stop e.g. when you are trading a D1 pin with an entry on one side and a stop on the other.

- Trying to compensate for having a small account.

Once again, I am NOT saying that profitable traders do not run trades. Many do. However, I am saying that this is not my style and I think that if you have been trying to do this and not having success so far ; stop thinking it's all BAD LUCK and actually be honest and ask yourself if you fit into either of those two categories above.

Those that attend the webinars have been given a clear set of rules for when to get out. When you have a D1 bias, run to the D1 FTA and use the H1 to trail. If you do not have a D1 bias and enter on the H1, exit at the H1 FTA.

4) Forget about the crosses when you are new to this. The key to making decent profit in the markets is knowing a few in depth. You cannot possibly know large numbers of different markets inside out and back to front. It's part of many price action strategies because they almost always advocate taking W1 or D1 based trades which means you do not get enough trades to see any meaningful improvement unless you analyse 376 markets every night. If you use this strategy across the 6 - 7 USD majors, you should get one trade per day on average.

That's it for now!

Sorry for the rant, it's just something I feel strongly about :-)

Update: My usdcad trade failed, i have no idea why and commments??

Bez

Just my 2 cents......but Tom's previous post has a lot of weight and I will need to reread it a few times!! Talk of Greek defaults affecting markets....a time to be wary. Also on this trade I also saw a level at 9981 and thought the market would probably go and test this level, which it has done. Once price cut through this level ......time to get out the trade. Maybe not the srtongest level but still a valid setup......I believe the trick is to cut early when you see momentum against you but this is easier said than done and only comes with a lot of experience(eg Tom).

Time to move on and look for the next setup. Just my 2 cents.......

Kal

I got taken out by 2 pips, price hit 0.9992 then dropped 30 pips in my direction. I think my broker has it in for me ha ha

Hi Tom

thank you very much for your fast reply!

A point which I did not consider at all Now I have noted it in my tradingbook

Oh, the FTA I saw @1,56690, the two highs from early january, to optimistic I think.

Hey Bez,

I think this was an interesting point highlighted by Daft: http://www.forexfactory.com/showthre...34#post5356734

Price had already tested that level in the pre-market action on Oanda, so taking that into consideration, your trade would have been a second touch of that level.

I certainly hadn't checked it on Oanda before Daft pointed it out.

Best,
Chris

Hi Bez, I saw this setup and skipped it. Why? Because USDCAD is an unpredictable market and I was not in the least surprised to see it continue to rally through resistance. Look back through the charts and you will see it does not seem to respect levels that well. A very tricky market to trade. Swing failures seem to work OK on it, although I don't have any stats to back up that comment.

Thanks keymoo.

I also posted three charts on it. The last one shows clearly the level was touched and shot off during pre-market hours. Check page 177, in fact you posted just two posts below the chart I showed.

Do not change a thing, that goes for everyone else on this thread who has made this one of the best threads on FF.

I'd appreciate any comment about this possible hindsight SFP in hourly gold.

First swing low broken, and price closes higher than previous low forming a doji.

Trade long into FTA.

Is this right?


http://i1084.photobucket.com/albums/...LD06022012.jpg

The SFP was the first candle to break the low and close above it.

Bez - I don't believe the level was strong. Compare this UCAD trade to your last UCAD trade (short 1.0060 zone), which you took for ~65pips if I recall?

Set up the charts side by side...do you see how weak this level looks compared to the 1.0060 you took last week? The 4hr looks like mush and only on the 1hr can you see there may be a trade.

IMO, the more reliable setups can be seen clearly on the 4hr, most reliable on the daily and it may not be a bad route to stick with those until you really hit your groove.

You're seeing the levels, this is great...now just add a couple of filters and focus on the cleaner setups.

HTH.

Tom, regarding the above post, do you have room on the first page for a "sticky" type post of A+ setup charts?

We could setup a system where members PM you their A+ setups over the last six months & pending your approval, you add them to the front page.

I (and I'm sure many others) keep a folder on my pc stocked full of the no-brainer, A+ setups and make it a point to review them weekly, compare to present possible setups and weed out the maybe trades. I know there are several dozen, if not hundreds of great charts in this thread that could be included.

While I do feel there is great benefit in reading the entire thread, a central post/stick would be great to skip to for a quick review & comparison.

Thoughts?

Wizard, thanks.

A couple of questions which have occured to me lately, which I have not yet seen answered on this thread (they may have been in some of the earlier webinars which I missed):

1. What news source do you use to gather all of the relevant announcements?

2. I know you are not too worried about R:R ratios because you rely much more heavily on a high win ratio. But is there a minimum R:R below which you will not take the trade, in order to preserve your overall positive expectancy? My impression so far (and it is only an impression based on a relatively small amount of evidence so far) is that you need your R:R to average around 0.8 in order to have an overall positive expectancy using these methods. (Obviously I do not include the gap strategy in this, where you have already clearly stated your stats).

Many thanks.

Hi Bez....my small point of view:

Price did't make anything strange.....except the strengh of the level where in insight i would say could be a better one,price dropped exactly where everybody would expect a bounce.....If i would be a bull i would enter at the point where price reversed.

Now it's up to you,to :
1)Take full profit
2)Take partial profit and move to BE(Tom would disagree i guess)
3)Do nothing like you did......

If i where you i would not blame the validity of the set up,but i would think on how you managed the trade.

Sorry for my english....i hope you got the point.