Buy sell line trading

You really hit the nail on the head there

I always have trouble knowing when to exit a trade and because i'm lacking confidence in my ability I usually end up exiting much to early with a small profit only to find, if I had stayed in longer I could have made a much larger profit.

[quote=60minuteman;5711640] There's a good Free webinar by fxevolve that discusses this process in detail. Its basically Van Tharp's expectancy formula. Good stuff and definitely a psyhological wake up.

Touching more on making simple strategies...

you could just trade the engulfing and type 2 entries from s/r

or you can draw trendlines against the trend, stop over the swing

etc etc...

Your strategy can be very simple... and moreover it should be very simple...

[quote=Porkpie;5711989] Yeah I got lots from it myself Porkpie... I urge everyone to do one..

every single trader on the planet does exactly the same thing...

when you break that desire to win every trade (which is whats really going on in your head) then you will be one step closer... if not at the finish line..

As an exercise (on demo) take every trade with 2 lots, close one where you think/usually would close.. and let the other lot run... record your results and profit for 1 whole week.... That usually fixes people pretty quickly...

here's the webinar that porki pie mentioned on building a risk model... this is a step you can not skip!!!

watch it...

Do it!

http://fxevolve.com/blog/forex-tradi...sk-model/1202/

60
i have been in the FF forums for years but never saw a thread I cared to post to...until now. Thx for your effort in putting this thread together. I have traded stocks successfully for 20 years. A few years ago I began trading forex, and it was then that I read Steven Primo's book. Since then, I have traded engulfing bars on D1, risking 0.5%, and returning about 4%-5%/monthly on average whilst trading 25 pairs and spending 25 minutes/day. This translates to 16%-20% on average had I been risking 2% instead of 0.5%. H4 is my favorite TF, but my schedule is better suited with D1.

Recently, I saw Steven's webinars at www.fxstreet.com and have been trading his strategy #4, which is your Entry #2, I believe. I actually prefer the consistency of Entry #2 over the engulfing bar strategy, and do not take EB setups as much now unless they are with the Entry #2. I trade another of Steven's strategies which is not covered in the webinars, and it is mint.

Here is one of the most valuable concepts I learned in forex: By reducing risk, your reward:risk ratio increases and your profitability goes up even though your win rate goes down. So, for example, when I traded EBs, my win rate was about 35%, but my reward:risk was between 3.5 to 1 and 4 to 1. This was significantly more profitable than simply using 1:1.

Another thing I learned years ago in my stock trading days is that if one trades the same way everyone else trades, one's results will tend to be like everyone else's. For this reason, I never felt completely right placing my s/l just beneath the nearest swing low (for longs), because this is the most often-used place for an s/l.

Hopefully there is some food for thought here.

Long live PA!

Hi California, thanks for this post, it outlines exactly what I have been trying to put across..

consistency is not just about a high win rate.... you dont need to win every time for profits. You can have many small losses and a few big winners.

With regards the type 2 entries... I agree 100% again, this is why I keep pushing people to look for their entries at retraces.... a signal at the end of a retrace/ swing hi (for down trends) is far more reliable and offers the best R/R

Great to have you on the thread Cali and good trading to ya.... bet you're loving these trends too !!

Something I do now is use the rules on the daily tf to determine the trend, then I look for H1 entries in the direction of that trend after a retrace. I also mark the daily s/r lines, entries occurring there are very reliable. On the H1 chart I dont mind if price briefly crosses the 50sma as long as the daily trend is still in force..

here's 2 type 2 entries on GU I took this week for massive R/R

Here's my current EU H1 chart with the first 2 daily levels I am watching... a nice engulf or type 2 at these levels would be nice

AU retrace im watching H1

UCHF

came very close...

60, Porkpie

Thank you for the recommendation of the fxevolve webinar. It is xlnt. We speak the same language.

Dr. Elder says trading is like a three-legged stool, where all three legs are needed in order for it to function: strategy, money management, and psychology. Probably every trader at some point in his or her career spends more time with strategy, entries, indi's, and searching for the holy grail. IMO, if there is a holy grail, it is money management.

A gentleman whose fund was ranked by one service as No. 1 global macro fund for two five-year periods said it best: "I would rather have a mediocre strategy and good money management than a good strategy with mediocre money management."

Besides the fxevolve webinar (thanks again, 60 and Porkpie), I believe the best illustration of how sound money mgt can dramatically change a system's results may be in this 9-minute video. It shows how a 30% win rate can produce major returns.

http://www.youtube.com/watch?v=IbBfNf7yKZQ

While mathematically a low win-rate can work, consider this.

At a 30% win rate, you have a 10% chance of losing 5 in a row and a 2% chance of losing 11 in a row. If you take 50 trades a month, you'll hit that 11 in a row streak quite a few times a year.

Will you still be risking your 2% after 11 losers? How would you know it was just expected losses, and not a problem with your system, a change in the market, or your psychology?

On the other hand, if you have a high win rate strategy, say 80% or more, you can quickly see when things are going wrong, work out why, and make corrective measures before your account takes too much damage.

You bring up a good point, for sure. In a perfect world, a high probability strategy is preferred, all else equal. But IMO, a high win rate is not the holy grail that so many believe it is. More important is the return, adjusted for the amount of risk necessary to produce that return.

I once thought that win rate was everything. I traded a simple 100% mechanical system for trading stocks/ETFs. I backtested it going back 15 years and the win rate averaged 95% (most stocks were in the 90s and a few like CSCO, DELL, MSFT were 98%). When I traded it live, the first 25 trades were winners. The lowest stress ever, for me as a trader. I then stopped trading it because I had found a better, more profitable system that had a win rate of "only" 52%. It was more profitable because it had many more trades than the other system in a typical month.

The EB system I mentioned trading previously did have losing streaks of 12+ on a couple of occasions, but over the last 27 months the max dd is just 8% and I was always prepared for twice that, or a 15% dd. For me personally, the potential for a 15% dd was a reasonable price to pay for a system that produced 60%-80% annual returns using 0.5% risk. (Large, trend-following funds whose objective is to annualize at 25% fully expect 33%-40% draws.)

To mitigate the risk of any system, it is a good idea to decrease exposure once a pre-determined dd has been reached, as well as use multiple strategies.

NorwegianBlu, I think we are coming from the same place...i recently stopped trading EBs so I could trade strategy #4 of Steven's (60mm's entry #2), which i believe has higher consistency.

im enjoying this conversation on the risk model..... because it really is one, if not the most important part of trading if you are in it for the long run...

Here's a quote from Chris Capre, a price action trader I respect greatly.. and he collects a lot of data on patterns....

Quantitative Data on Engulfing Bars
My programmer and I have actually built an algo which can test engulfing bars on any time frame for any pair. After spending the last 3 days crunching the data, not only does this confirm the pullback is the far superior entry, but we were able to determine based on several metrics which time frames the pattern performed best, along with what were the optimal targets based on time frame, volatility, along with what is an optimum entry level.
What was interesting to note is the pattern by itself (with a few filters) was able to give profitable setups with 60% accuracy or better on the daily, 4hr and 1hr time frames. However, below these time compressions, we were unable to find any of these patterns in isolation that performed above 55% accuracy using a minimal 1:1 reward-to-risk ratio, telling us by itself, the pattern only works best on medium/higher time frames.
This makes sense if you think about it, whereby an engulfing bar setup on a 5min time frame will only be engulfing 10 minutes of price action which may not be that significant. But 4hrs of price action is half a trading session and that is a lot of sentiment, order flow and transactions that have just been reversed with the engulfing pattern, so it carries more weight.
This is not to say one cannot use this effectively on lower time frames. It simply means more variables have to be used in conjunction with the engulfing pattern by itself to make it more effective. In reality, price action patterns work across all time frames, but when using them in pure isolation, they traditionally test better statistically on 1hr, 4hr and daily time frames.


here's the link to the full article http://2ndskiesforex.com/strategies-...bar-reversals/




So if the data is to be believed we can presume the 60% will go for at least 1/1... (I have other data saying 50% go to 1/1 based on 20,000 instances.) That's half way to a very profitable system, all we need to do is find out what percentage go to 2/1, 3/1 etc and what conditions exist that will make those set ups easily identifiable...


Well.... I have a strong suspicion that selecting a pair that is trending and then retraced will probably be the answer... if that is the case, and you should really collect your own data on this, then the bulk of your plan is complete. Or maybe it is a case of trading them at higher TF S/R... (in fact I know these 2 options will work)



With regards the emotional pressure of having losers, that is an issue that all traders have to deal with.If your data indicates you will have them but your profits will still be significant i.e 50% win loss and 3/1 R/R with a minimum of 10 trades a week...(as an example) then you know that it is just an expectation of the process.... all that is left for you as the trader to do is wait for the right conditions and execute.


I would pull some charts for a quick snapshot of data but the trend we are in now will so obviously give amazing results it would be kind of pointless... maybe I will pull up this week last year at random.... it doesn't prove anything but maybe it will get you thinking about collecting some of your own data?

To really simplify it, i'm just looking for 3 things on my chart..

60

Some time back, I believe you posted about the value in having data showing how far a typical winning trade goes, e.g. 1:1, 2:1, 3:1, etc. The following is for Entry #2 (Steven Primo's Strategy #4). It is a proof-of-concept that provided me with a rough idea as to "yes, there is an edge here...more research is warranted"...nothing more than that.

I chose two pairs that have a lot of persistent price movement and one pair that I thought may be the choppiest/noisiest pair of all, and that also has a high spread. There was no trade management used (price either hits the 1:1 s/l or the t/p, i.e. set-and-forget). All signals were taken regardless of perceived quality.

04/16/07-05/06/12 (5.06 years)
MB Trading data (excl spread)
D1
EURJPY
Wins: 36 (64.3%)
Losses: 20 (35.7%)
1:1 w/ no trade mgt

18 trades hit 1:1
7 trades hit 2:1
5 trades hit 3:1
2 trades hit 4:1
2 trades hit 5:1
2 trades hit 6:1

* * *

04/16/07-05/06/12 (5.06 years)
MB Trading data (excl spread)
D1
EURUSD
Wins: 50 (69.4%)
Losses: 22 (30.6%)
1:1 w/ no trade mgt

31 trades hit 1:1
11 trades hit 2:1
5 trades hit 3:1
0 trades hit 4:1
3 trades hit 5:1
0 trades hit 6:1

* * *

04/16/07-05/06/12 (5.06 years)
Alpari data (incl 12p spread)
D1
AUDNZD
Wins: 27 (61.4%)
Losses: 17 (38.6%)
1:1 w/ no trade mgt

21 trades hit 1:1
5 trades hit 2:1
1 trade hit 3:1

I am not a big believer in 100% mechanical systems, so the idea here is for me to take the above base case, isolate all the losing trades and see if a common thread or two runs among them, and then factor that into future trading. The surprise was that the difference between "good" pairs and a "bad" pair was not all that much, at least in terms of getting to 1:1 reward:risk. Going beyond 1:1, the difference between the two good pairs and the bad pair was substantial. The bad pair did not have the juice, the price persistency, for the bigger moves. It was also handicapped by its large spread. When I trade D1, I do not mind paying the larger spreads of A/N, G/N, etc. because a 12p spread does not amount to a lot when the t/p is 150p. Any TF < H4 would change that.

Again, this is just a rough proof-of-concept. I thought it might show some traders who are new to this thread/strategy and who have never before been successful in forex that, yes, there is an edge. The real secret sauce comes from testing various s/l and t/p combinations. I hope to test some of these in the future with Forextester and will share the results if anyone is interested.

Best trading to all!

Hi,

Thanks for providing valuable information.I am interested Please show me your forextester result.One more thing I want to know do you take into consideration support and resistance into your trading?

Regards,
Bedayan.