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Extreme TMA System

  • #9,981
  • Apr 26, 2012 1:22pm Apr 26, 2012 1:22pm
Quoting domino01
Al, what do you think of shorting gold? Seems to have hit resistance at 1660 and a good number of MTF indicators are flashing sell on the dashboard. Thanks.
Thatīs another one I havenīt had luck with. Iīm staying away from it.

Iīve had a bunch of winners in a row with the S&P500. Must be from all those years trading Index Options...
Observation is the path to discovery.
  • #9,982
  • Apr 26, 2012 1:24pm Apr 26, 2012 1:24pm
Quoting domino01
Al, what do you think of shorting gold? Seems to have hit resistance at 1660 and a good number of MTF indicators are flashing sell on the dashboard. Thanks.
Gold is bouncing off support and an upward Trendline that goes back to Jan 2011, so more than a year old.

I'd be very carefully trading Gold in either direction, until one of the TL's break. If 1610 support and that TL broke, I was going full short, won't touch it short now.

jmo
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  • #9,983
  • Apr 26, 2012 1:24pm Apr 26, 2012 1:24pm
Quoting grechmar
I took a look at the gold H4 chart in regards to what Mr. Domino said above. I can see potential for some 200 pip taking here, besides this can be coupled with a USD up-trend since when gold goes up usd goes up aswell. Al, ur opinion is much appreciated, correct me if im wrong.

Vide below.

Attachment
No. Gold has been Risk on lately, going up with the market and with the Euro.
Observation is the path to discovery.
  • #9,984
  • Apr 26, 2012 1:25pm Apr 26, 2012 1:25pm
Quoting Alorente
No. Gold has been Risk on lately, going up with the market and with the Euro.
Agreed, total opposite of what grechmar said is true . USD up, Gold, Oil and USA markets down, been like this for years now with little periods of inconsistency.
  • #9,985
  • Apr 26, 2012 1:26pm Apr 26, 2012 1:26pm
Quoting Grins
'Euroscare', Hah, hah, ha..., I'm going to remember that one.

I'm trying to avoid eurusd lately, a rumor sends it 100 pips one way, the denial right back again..., far too much emotion in that pair for me..., if I want a roller coaster ride I'll go to the amusement park. Seems to me there are better pairs to play the eur off of, gbp for one.

Lee
Yes, I agree. EurGbp or EurAud are much more reasonable. Still, I canīt stay away from the sucker... Maybe I like uncertainty...
Observation is the path to discovery.
  • #9,986
  • Apr 26, 2012 1:28pm Apr 26, 2012 1:28pm
Quoting jayjonbeach
Gold is bouncing off support and an upward Trendline that goes back to Jan 2011, so more than a year old.

I'd be very carefully trading Gold in either direction, until one of the TL's break. If 1610 support and that TL broke, I was going full short, won't touch it short now.

jmo
Yeah, that thing is coiling real bad... I would wait till a trendline break AND a test of the broken trendline.
Observation is the path to discovery.
  • #9,987
  • Apr 26, 2012 1:41pm Apr 26, 2012 1:41pm
Quoting jayjonbeach
Agreed, total opposite of what grechmar said is true . USD up, Gold, Oil and USA markets down, been like this for years now with little periods of inconsistency.
Umm i compared e/u chart with gold and if u check the 3 rd, 13, 23 april both gold and e/u had a good fall down simultaneously. But i might be watching the short term perhaps?
  • #9,988
  • Apr 26, 2012 1:48pm Apr 26, 2012 1:48pm
Quoting grechmar
Umm i compared e/u chart with gold and if u check the 3 rd, 13, 23 april both gold and e/u had a good fall down simultaneously. But i might be watching the short term perhaps?
Very short term. As I said, little periods of inconsistency. If they were 100% correlated trading would be "too easy".

I've been watching these things live Daily for years, just look back in History and you'll see what I posted was accurate.

This doesn't mean things can't change, there were years before where Gold and USD moved together for long periods, but in recent years most of the time, what AL and I are telling you is the case.
  • #9,989
  • Apr 26, 2012 1:54pm Apr 26, 2012 1:54pm
Quoting jayjonbeach
Very short term. As I said, little periods of inconsistency. If they were 100% correlated trading would be "too easy".

I've been watching these things live Daily for years, just look back in History and you'll see what I posted was accurate.

This doesn't mean things can't change, there were years before where Gold and USD moved together for long periods, but in recent years most of the time, what AL and I are telling you is the case.
Ok, i just started taking a look at gold this week, never traded metals. While gold really seems tempting as it moves 100's of pips at a time, the more i see the more i think its very hard to trade and recovery would not be possible.
  • #9,990
  • Apr 26, 2012 1:57pm Apr 26, 2012 1:57pm
I get caught out every now and then still...
Entering trades when the price is way outside the TMA bands...small SL (maybe 20, because all the conditions/indicators show that the price is turning around) .... change in colour of the bar takes place...... rsi & trix shows positive...... even the R or S lines were tested a number of times... semafor shows yellow 3.....it really looks as if the price can not extend further outside the band.

It start to run my way ....I start to profit with the trade....but then time and again it takes me for a ride.... there is a sudden change in price .. the bar repaints... rsi changes direction, etc....... and it runs over my SL like a bulldozer just when I turned my back..... and there goes the small profit of my mini account again I worked so hard on, and everything starts right from the beginning again! Never a dull moment..
  • #9,991
  • Apr 26, 2012 2:04pm Apr 26, 2012 2:04pm
Quoting grechmar
Ok, i just started taking a look at gold this week, never traded metals. While gold really seems tempting as it moves 100's of pips at a time, the more i see the more i think its very hard to trade and recovery would not be possible.
I don't think I would ever attempt recovery with commodities, want to blow up an account? Try recovery with Natural Gas! Can you imagine trying recovery if you were short Gold anytime in 2009 or 2010? No, I would leave recovery for currencies and only for really experienced traders, jmo.


btw - I just checked my correlation chart on Gold and USD on the weekly chart going back to 2006. For 3 months in 2009, 5 months in 2010, and 2 months in 2011 Gold and the Buck were positively correlated. For the rest of that 6 year period, they were not.
  • #9,992
  • Apr 26, 2012 2:27pm Apr 26, 2012 2:27pm
Quoting interbucks
I get caught out every now and then still...
Entering trades when the price is way outside the TMA bands...small SL (maybe 20, because all the conditions/indicators show that the price is turning around) .... change in colour of the bar takes place...... rsi & trix shows positive...... even the R or S lines were tested a number of times... semafor shows yellow 3.....it really looks as if the price can not extend further outside the band.

It start to run my way ....I start to profit with the trade....but then time and again it takes me for a ride.......
Do you check all the big charts, especially the weekly and monthly, to see if there is a new direction underway that will "swamp" your little boat trying to go against it? Also, remember that every smaller chart has retracements to the biggest chart that has turned most recently. The closer you get to that biggest chart, the bigger the retracements tend to be.

I do charting on NinjaTrader to easily get custom timeframes. Using a 2048 minute chart, EURUSD has been in a down trend, probably a leg1. About April 19, I see a confirmation of a rally. Based on past behavior, I anticiapate the rally will last about 2 weeks. If price doesn't go "too far" during the rally, then when it turns, we'll be in the continuation down. (I'll be looking at some smaller charts for confirmation signals that the 2048 minute rally has ended.)

So, if you have been shorting the EURUSD because of the price vs. H4 top band (and other TMA signals), I'd say that either you have not looked at big enough charts, or that you realize that entering too soon on a big chart like H4 has the possibility of some very heavy drawdown that you are prepared to deal with (via recovery, getting stopped out, adding on more short contracts at certain higher price levels, etc.)

DrDave
To free Gazans of Hamas, use whatever it takes.
  • #9,993
  • Apr 26, 2012 2:40pm Apr 26, 2012 2:40pm
Quoting Ever E. Man
...but it would be impossible, IMHO, to know who, why, or what their motives are, exactly, without being privy to all the ongoing secret communications, negociations, etc. which the power players are certainly engaging in to stay in power (and, thereby, enhance their personal self interests.)...Price action, itself, may be a much better indicator than speculation if you know how to read it.

My best guess at how to read it, based on my meager (compared to Al's and others') experience of twelve years, will follow.
I'll just cut to the chase and say this, "Expect the market to do the opposite of what the media driven majority thinks it will, at least initially. This PA shakes out the weak holders and gives the big money a better entry."

Best wishes to all, and to all a good night.
The mind thinks, the heart knows...
  • #9,994
  • Apr 26, 2012 3:01pm Apr 26, 2012 3:01pm
Quoting interbucks
I get caught out every now and then still...
Entering trades when the price is way outside the TMA bands...small SL (maybe 20, because all the conditions/indicators show that the price is turning around) .... change in colour of the bar takes place...... rsi & trix shows positive...... even the R or S lines were tested a number of times... semafor shows yellow 3.....it really looks as if the price can not extend further outside the band.

It start to run my way ....I start to profit with the trade....but then time and again it takes me for a ride.......
Try going with pairs with H4 channel sloping in your direction even if you trade M15. It is much more consistent.
Observation is the path to discovery.
  • #9,995
  • Apr 26, 2012 3:08pm Apr 26, 2012 3:08pm
Quoting DrDave
Do you check all the big charts, especially the weekly and monthly, to see if there is a new direction underway that will "swamp" your little boat trying to go against it? Also, remember that every smaller chart has retracements to the biggest chart that has turned most recently. The closer you get to that biggest chart, the bigger the retracements tend to be.

I do charting on NinjaTrader to easily get custom timeframes. Using a 2048 minute chart, EURUSD has been in a down trend, probably a leg1. About April 19, I see a confirmation of a rally....
Dr Dave, can I ask what data feed you a using with currencies for NinjaTrader and are you satisfied with them? I'm looking to convert this system to NinjaTrader and will be looking for good data feed.
Thanks,
Brian
  • #9,996
  • Edited 3:47pm Apr 26, 2012 3:44pm | Edited 3:47pm
Quoting jayjonbeach
I don't think I would ever attempt recovery with commodities...No, I would leave recovery for currencies....
I had to sign back on for this one because you make such a great point, Jay.

I used to trade at a prop shop which traded primarily correlated equity pairs, Home Depot against Lowes, for example.

Pairs trade differently because they are relational. For Home Depot/Lowes to move past the statistical average maximun adverse excursion, one or the other would practically have to go belly up.

Mostly you can count on them moving so far apart and then returning to parity, and moving apart again, over and over, which is why so many hedge funds trade this method.

It's a method that's also market neutral. When one goes down, the other goes down in a move created by external market conditions, like a big drop in the S&P created by a recession, or a big move up created by QE32.

Currencies are a little different (since you are trading a medium of exchange, the trade cannot be market neutral - both the EUR and the USD cannot go down together like Home Depot and Lowes), but by their nature they are relational like pairs trades. This is the reason that their moves are so limited. In reality, how much is 100 pips, a tenth of a cent? LOL

Even if the EURUSD went to parity, it might be a move of 33%, which is huge for traders. But compare that to Google going from $89 to $500, gold going from $250/oz to $1900/oz, or oil going going from $40/barrel to $140/barrel, none of which are pairs trades, of course.

Outrights/futures can stay at extremes for long periods against all fundamentals and technicals. When fast Eddie Lambert bought K-Mart for pennies on the dollar and leveraged it into a takeover of Sears, the stock remained elevated above its fundamentals for years before returning to its currently overpriced level!

Never confuse pairs trading with its naturally limiting movements with trading outrights, or futures on outrights - they involve hugely different risks, and the recovery method used for currencies, and other pairs, will put you at grave risk trading most outrights/futures. Not only caveat emptor applies, but, also,caveat venditor! Just caveat - really, really caveat!

There are many ways to control risks of trading outrights and futures besides the obvious SL's, but the recovery method used for pairs is not one of them.

"An asset can remain irrational far longer than you can remain solvent, especially if you are using the recovery method." ~ Ever E. Man
The mind thinks, the heart knows...
  • #9,997
  • Apr 26, 2012 4:05pm Apr 26, 2012 4:05pm
S&P downgrades Spain to BBB+ from A
Observation is the path to discovery.
  • #9,998
  • Apr 26, 2012 4:14pm Apr 26, 2012 4:14pm
Quoting DrDave
Do you check all the big charts, especially the weekly and monthly, to see if there is a new direction underway that will "swamp" your little boat trying to go against it? Also, remember that every smaller chart has retracements to the biggest chart that has turned most recently. The closer you get to that biggest chart, the bigger the retracements tend to be.

I do charting on NinjaTrader to easily get custom timeframes. Using a 2048 minute chart, EURUSD has been in a down trend, probably a leg1. About April 19, I see a confirmation of a rally....
Thank you Dr Dave...I take note of the above....
  • #9,999
  • Edited 4:37pm Apr 26, 2012 4:19pm | Edited 4:37pm
Quoting Alorente
If you bet small enough and wait long enough odds are high you will get a BE on large negative trades.

You know what? We talk a lot about different aspects of trading which are helpful, but if you only have to remember one thing, remember

the phrase in bold face above. If you do this always, you will beat the markets consistently. Remember, price returns to a price level

99% of the time. The key is playing small enough for two reasons:

1- So you can use Recovery without putting a strain in your account, in order to cut your BE time in half.

2-...
Thanks for the reply Al.

This aspect of Forex takes me back to how I got introduced to Forex. The guy was a Forex Fund Manager/Realestate investor etc., he taught me not so much a system but a solid foundation of the judicial use of margin and position sizing.

I can't go into his personal trading with full details unfortunately but his primary tenets were;

1. Never take a losing trade
2. Never use a stop loss
3. Never get a margin call

How do you manage this?

A. Small positions
B. Keep your account healthy. Limit the number of open trades (ie - don't overtrade).
C. Use only the major currency pairs

The next things I mention are to illustrate his confidence level based on his research and experience. He was trading his Forex Fund in the $10's of million of dollars at one of the larger forex brokers that could handle that size account.

So imagine trading that size account for a minute. Each position is hundreds of thousands of dollars and he had multiple positions open at any given time. Most traders would be on pins and needles. He wasn't. Why?

He knew he would never take a losing position. Ever. Why? His positions were too small. He would sit tight and wait until it BE or took a very small profit.

What happens if worldwide financial Armageddon happens? He knew he would never get a margin call. Ever. Why? He kept his margin percent way too healthy by not overtrading. In his words it would be "virtually impossible" to get a margin call keeping his margin levels so healthy.

He knew price would eventually return his negative trade to BE. Why? In his words an example Microsoft stock can go to zero, but with currencies there is no bottom or top. They keep on fluctuating, low to high and vice versa.

Don't get me wrong this isn't 100% perfect in that if you aren't an experienced trader you can take some really bad trades and wait a long time for them to close. But what's the financial damage if that happens? Nothing. You haven't lost a dime.

What you will have to endure in that scenario is lost opportunity costs because your margin is tied up in the negative trades thus limiting (or halting) your trading ability and a lower monthly/annual return depending on how negative the trades are, but still you haven't lost anything.

Another funny thing he told me was that because the forex brokerage had to take the other side of the trade and have to deal with the fluctuation/drawdown of positions so large in such a large account he got a call from the ceo of the brokerage who was nervous.

He said "what your doing is risky". He returned by saying "where in my system is the risk?" Reply was "well your positions can go against you". Return reply was "well how far against me would my positions have to go to get a margin call?" CEO reply was a sheepish "well we didn't calculate that". They didn't realize what the fund manager realized.

The fund manager knew that it wouldn't happen primarily because of his use of points A and B above and secondarily because of the fact that at some point if a Major countries currency gets too out of balance the central bank of that currency steps in and announces they are going to prop up their currency by entering the market themselves. Best example would be CHF.

Will Japan let their currency get so far out of balance that a Toyota Camry costs Americans $300K to buy? No, the central bank steps in with billions in their currency and intervenes. It's like Al said on page 1;

Quote
The market, like a pendulum, is a never ending sequence of extremes. It forever tries to reach the mean but never succeeds, constantly overshooting itīs mark, reversing and trying it again but always failing to reach balance.
So if you eliminate the possibility of losing any money through the use of small position sizes and smart use of margin, what then becomes your goal? Maximizing your returns. How? By becoming a better trader.

Just thought I'd share that story.

Best regards.

I think this video gives another type of good perspective on trading smaller;

Inserted Video
  • #10,000
  • Apr 26, 2012 4:19pm Apr 26, 2012 4:19pm
Quoting Alorente
Try going with pairs with H4 channel sloping in your direction even if you trade M15. It is much more consistent.
Thanks Al, yes, I might have been neglecting watching the higher TF's slope with some of the trades that went against me. Point taken!
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