Low Risk, High Reward Trading Experiment

The overnight version of the trade was profitable (looking back). The re-entry at 9:15 EST was not (taken out on the very next 15 minute bar), and I suspect it had to do with the general micro-trend looking upwards combined with the Fed speech (which I didn't hear), and a sell-off from the previous day. It sounds to me that USD bears wanted any excuse not to drop even further.

Thursday 5/18/2006 11:00 ET

TS#63

Sell EUR/CAD at 1.4392 or higher

Stop is 1.4411

Target is 1.3985

Reward is min. 397 pips

Risk is max. 29 pips

Reward :Risk ratio is min. 13.7 to 1

For testing purposes only.

Thursday 5/18/2006 11:15 ET

Possible re-entry opportunity for EUR/USD short position may present itself in the range 1.2820 to 1.2830.

Stop is 1.2851

Target is 1.2600

Note, EUR/USD rose higher than expected, possibly due to news releases. Here is a comment from dailyfx:

The pound strengthened this morning as retail sales for April beat expectations. Monthly sales gained 0.6%, a notch faster than anticipated, while purchases rose 3.0% from the same month last year. Household goods stores saw the largest growth, up to 3.3%. Meanwhile the food store sector realized the only slowdown, dipping to -0.3%. Economists attribute the acceleration to wage gains outpacing inflation in March, which gave consumers more purchasing power. The Bank of England is hoping that consumer spending, which accounts for two thirds of the economy, continues to boost GDP. Yesterday’s BoE minutes show that sentiment toward a rate increase is developing. The GBP/USD traded up to 1.8886 at 9:48 GMT, up from the New York close of 1.8829.

Previous trade signals:

Wednesday 5/17/2006 24:00 ET
TS#61
Sell EUR/USD at 1.2780 or higher
Stop is 1.2805
Target is 1.2600
Reward is min. 177 pips
Risk is max. 28 pips
Reward : Risk ratio is 6.3 min.
For testing purposes only.
Note: due to oversight this trade signal was not posted last night. But for completeness of the experiment it is added to this forum, because it was a trade signal that our system generated.
Note - there is right now, at 19:15 ET on 5/18/2006 a second entry opportunity on this trade at a price of about 1.2790 to 1.2795. We recommend that people short EUR/USD at market price.

Thursday 5/18/2006 11:35 ET

Re-enter GBP/USD Short position at market price 1.8910 - 1.8925

Stop is 1.8935

_________________________________

Original trade signal:

TS #60
Sell GBP/USD at 1.8868 or higher
Stop is 1.8910
Target is 1.8582
Reward is min. 281 pips
Risk is max. 47 pips
Reward : Risk ratio is min. 6.0 to 1
For testing purposes only.

I just want to note that EUR/USD and GBP/USD both retraced almost exactly 61.8% of their yesterday declines last night.

USD/CHF retraced almost 61.8%, and USD/JPY retraced half way between the 38.2% and 50% fibonacci ratios.

TS #60 GBP/USD Short position at market price 1.8910 - 1.8925

TS #61 Possible re-entry opportunity for EUR/USD short position may present itself in the range 1.2820 to 1.2830.

Thursday 5/18/2006 12:00 ET

Re-entry opportunity and stop adjustment TS#62 Sell GBP/JPY

Re-entry opportunity at market value of 209.55 to 209.75

Adjust stop to 210.05

Original trade signal:

______________________

Thursday 5/18/2006 10:25 ET
TS#62
Sell GBP/JPY at 209.30 to 209.40 (Market Price)
Stop is 209.73
Target is 206.80
Reward is min. 241 pips
Risk is max. 52 pips
Reward : Risk ratio is min. 4.6 to 1
For testing purposes only.

Thursday 5/18/2006 12:15 ET

Re: TS#58 Short USD/JPY

Last night USD/JPY declined by between 38% and 50% of its previous strong up move, down to a low of 110.30.

The smart trader would have taken profit out there of about 75 to 80 pips. Since then it has risen strongly, and could rise all the way up to 112.50.

We should have foreseen this. Our error in perception (bias) prevented us from realising that the decline is a retracement on a likely longer upwards trend.

We suggest taking profit at the current price of about 110.95, or wait for the price to fall, as it likely will, to 110.75 to 110.80, at which point exit, or at least move down your stops to a no-risk position.

_______________________________

Original trade signal:

Re-enter short USD/JPY at market price (111.05 to 111.37)
USD/JPY moved very strongly upwards, and is likely to retrace down to 109.00 for a large profit.

Original Trade Signal: Wednesday 5/17/2006 12:00 ET
TS#58
Sell USD/JPY at 110.77 or higher
Stop is 111.07
Target is 109.00
Reward is min. 173 pips
Risk is max. 34 pips
Reward : Risk is min. 5 to 1
For testing purposes only.

Thursday 5/18/2006 13:30 ET

Last night USD/CAD fell to 1.1096 and then rose strongly to 1.1222. Our stop would have been taken out for a loss.

As with USD/JPY , we misread this chart and falsely believed that we were at the top of a trend. But upon further examination, we believe that USD/CAD could rise to 1.1244, 1.1264, or, most probably, 1.1300.

Therefore we advise exiting any short positions that anyone might have at market price of about 1.1210, and refrain from trading this currency until it reaches the top of the trend.

Alternatively, one could enter a long on a break of 1.1220 with a target of about 1.1300. But this would not be a low risk / high return trade.

___________________________


Original Trade Signal:

TS#59 Sell USD/CAD at 1.1148 to 1.1155


Wednesday 5/17/2006 15:10 ET
TS#59
Sell USD/CAD at 1.1148 to 1.1155
Stop is 1.1178
Target is 1.1000
Reward is min. 143 pips
Risk is max. 35 pips
Reward : Ratio is min 4.1 to 1
For testing purposes only.

TS#59

This is the correct title of the above comment.

Thursday 5/18/2006 13:30 ET

The trade concept that we started this trade journal with may have finally arrived.

Upon further examination, the entry price for EUR/CAD short should be adjusted to between 1.4440 and 1.4456

Adjusted Stop is 1.4470

Target is still 1.3985

Original trade signal:

___________________________________

TS#63 Sell EUR/CAD at 1.4392
Thursday 5/18/2006 11:00 ET
TS#63
Sell EUR/CAD at 1.4392 or higher
Stop is 1.4411
Target is 1.3985
Reward is min. 397 pips
Risk is max. 29 pips
Reward :Risk ratio is min. 13.7 to 1
For testing purposes only.

Thursday 5/18/2006 13:45 ET

Upon careful examination, we advise adjusting target for TS#62 (Short GBP/JPY) to 209.10 and wait to re-enter this short position after the price rises to 210.40 or higher. In any case, the short of the current short position should be tightened to 209.64.

When the price rises to 210.40 or higher, the stop should be set at 211.16

Original trade signal:

________________________________________________

Re-entry opportunity and stop adjustment TS#62 Sell GBP/JPY
Thursday 5/18/2006 12:00 ET
Re-entry opportunity and stop adjustment TS#62 Sell GBP/JPY
Re-entry opportunity at market value of 209.55 to 209.75
Adjust stop to 210.05
Original trade signal:

______________________

Thursday 5/18/2006 10:25 ET
TS#62
Sell GBP/JPY at 209.30 to 209.40 (Market Price)
Stop is 209.73
Target is 206.80
Reward is min. 241 pips
Risk is max. 52 pips
Reward : Risk ratio is min. 4.6 to 1
For testing purposes only.

Bye Itme ,

I suffered worst loss last night . 2/3 of my live account was gone .
Your prediction signal deteriorated slowly to the point that it's useless now.
So many stop out and always revision correction , i think you just do the guessing work like flipping a coin. I suspect you don't know your analysis well.
Trade with your signal was very tressful , 50/50 chance of win/loss and signal revision advice appeared off-guard . I have enough with your trading signal .
I have to search for a good and reliable trading signal source now .
My 2 cent advise for another trader is staying out of your guessing work .
Don't trade with your signal , never ever: ....
Bye bye ITME .

Dude, just put stoploss 20 pipes above what is said and you will make money.

Noone can post winning trades 100% of the time.

I'll admit, the signals were not as strong as they were the past few weeks, and perhaps that is indicative of the change in market (from strong-trend to weak-trend or even ranging). However, to say that his signals eroded 2/3rds of your account sounds like you risked much more than you should have. For the longest time you were touting how well these signals worked, but that you didn't like getting stopped out. So you took more risk, and this is how the market has rewarded you.

To say all of his signals today were unprofitable is not really true. The initial call on the EUR/USD (during the middle of the night when the signal was actually triggered) was profitable by at least 50 pips, but fully retraced by the time the US open rolled around. The GBP/JPY initial call was profitable by at most 50 pips within 15 minutes of the release here on the forum. It retraced rather quickly, but that is indicative of the GBP/JPY (which is a highly volatile pair).

There is a disclaimer on the bottom of each signal that says it's for testing purposes...so you have to take everything with a grain of salt. It's obvious that in weekly ranging conditions, this system does not perform as well, however, the signals still make excellent scalping type opportunities (which would make sense during ranging conditions anyway).

I feel your pain...2/3rds of your account lost in a day really sucks...so I understand why you're upset...but hell, the information was free, and STILL profitable if you could avoid the greed factor associated with the high profitability targets.

That's not to say that his signals were meant to be traded in a scalping fashion, but whatever he is doing, his targets are indicative of the strength of which his system is traded on. That information alone is important.

How many lots did you trade or how much ABOVE the recommended stop did you trade in order to lose 2/3rds of your account in 1 day? Whatever it was, it couldn't have followed good money management principals because his signals from last night were in the single digits...and from what I remember you saying, you had accumulated a bit of wealth from these signals in the last few weeks.

I have only been using the signals for a few days and can happily say that I have made more than I have lost. Sometimes I have traded the signals exactly and sometimes I have used the information provided as a springboard for other trades not specifically suggested. I trade a very small account and must exercise good money management because it is unavoidable in my case. Possibly this is why the losses did not affect me very drastically.

These signals are being offered free of charge and we use them at our own risk and hopefully with a good measure of good judgment and common sense, as well as at least some familiarity with the market. Thus, it has to be our personal choice which trade to make and to judge when market conditions have changed in a way which could not have been predicted in advance by the author of the signals.

All systems, no matter how good, are best suited to certain particular market conditions and they perform best under those circumstances. Another thing to remember, is that losing is as much a part of trading as is winning. We all aspire to win more than we lose, but losing is going to happen. Be prepared to deal with it when it does.

I, for one, appreciate this system, and I am grateful that these signals are being made available to us.

fxnewbie what is with you? this sistem is still in development! so why are you trading it? you are listening to somebody that you don't know whith a sistem that is not tested yet, and what did you expected to achieve whith that?! to become a billionaire? start developing your own sistem and listen to your own signals! itme this is a good sistem but I don't prefer you money & risk management method, you are risking too much capital per trade, a little losing strike and you are history, try work on it

We're gods one minute, and coin flippers the next! At least in one person's mind!

Sorry about your account, Newbie. Ours isn't looking so good either. But the idea here is to develop and test a high performance trading system. We don't already have it. It's a work in progress.

It's like a racing car. If you don't have everything perfectly engineered and tuned up, and the driver isn't in the perfect head space, or if the driver makes an error in any way, then the racing car can crash or blow an engine. This isn't a freight train we're trying to construct, it's the trading equivalent of a Indy 500 racing car, driver and team.

We are attempting the near impossible - consistently making high precision predictions of the endpoints of significant trends ahead of time - both ends of the trends! Not just 20 or 30 pips - but the entire trend!

Just one tiny mistake, and either -

1) the entry point is not met

2) the stop is hit, or

3) the target is not met, and the market turns around.

So everything has to be absolutely perfect for even one of our trade signals to actually work. There are so many things that can go wrong. However, when we get it right, the return on investment is substantial.

Overall, in spite of the difficulties of the past few days, the system is proving itself to us. Most of the failures have been our own - not the system's. We are learning about the system as we go, and introducing improvements, believe it or not, based on both our successes and failures.

The system of analysis we're employing is quite complex and intricate, and needs to be updated to the current moment each time a trade signal is generated, which takes alot of time and effort. Ideally, we would spend a few hours on each trade signal. And then monitor it continually to make sure we didn't err, or something didn't happen in the world to modify the situation.

In our haste to get the trade signals out in time, we've made quite a few errors. We apologise, but we did at the time believe that the opportunities were real. And we never encouraged anyone to actually trade these signals, just to watch in interest and offer suggestions and comments.

Also, it's harder to generate tradeable trade signals than it is to trade live in one's own account. So we are experimenting to see how we can actually make tradeable signals that other people can employ with a time lag. That is a much harder challenge than trading one's own account real time.

In addition, we generated way too many signals because we wanted to practise, to test the system as much as possible and learn as much as possible. Our goal hasn't been to maximize return on investment - for that we would have been highly selective and only chosen the most high probability and high reward/ low risk trades. Also, since we aren't experienced enough at it we've made operator errors, which was to be expected.

In addition, the system isn't perfect, as no system is. So the combination of human errors and system failures has produced some losses and some wins. Also, we haven't been as picky as we could have been, so some of our trades didn't have tiny risks with huge potential rewards, which is the ultimate idea. The hope is that the wins have outweighed the losses. But the main idea here has been to test the system, practise and learn, and make improvements. Not to give investment advise to anyone.

This is a fun and exciting project, and we are learning a great deal. If we're successful, we and alot of other people will get rich quickly. If we aren't, which is highly possible, then this will be just another of thousands of failed efforts to master the Forex market.

The Forex market is like the legendary gold mine of El Dorado, or the Holy Grail. Mastery of it is tantamount to instant millionairehood. It attracts the greedy, the adventurous, and those who like a good challenge. But only the foolhardy are convinced that it is easy, or that the results will happen overnight.

The nature of our system is that it factors in a fair number of small losses in order to achieve a few large wins. This kind of trading obviously is not for the faint of heart. And a proper risk factor is needed. At this stage, if someone wanted to take a huge risk and trade these signals, then I would recommend a 5 - 10% risk factor at most. If things go well, they could make a high return on investment. If they don't, then they can preserve some capital to carry on another day.

If someone knows about a signal service out there that generates large, consistent earnings, then please let us know, because we would much rather just pay someone a few hundred dollars a month to do all the work. But since we haven't found one yet (not for lack of searching), we are in the process of trying to create one ourself. And we think we're close to doing it, employing a very special form of analysis that is original and potentially very effective. With careful review, we think we can narrow the stops, expand the winnings, weed out some of the failed trades, and thereby improve the win / loss ratio and return on capital.

Time will tell. In the meantime, we will do a detailed performance review of the past week and see what the numbers look like. The first week's 39 trade signals produced a 15,000 times multiplication of capital based on a 25% risk factor. That is an objective fact. That is because we had quite a few big wins, which counteracted the smaller losses. Perhaps we were lucky. But especially in a situation such as this, past performance is no guarantee of future earnings.

This week we missed several big trends because we took some time off, and then instead of waiting for a few days we tried to jump in in the middle of the trends. That has proved to be a bad idea. We won't be likely to try that again in the future. It's hard enough to try to accurately predict the endpoint of large trends, without also having to accurately predict the exact path the market will take between one end of the trend and the other. We believe that we will be able to do this one day, but as it currently stands this is not our specialty. Also, world events, in our opinion, alter the distance the market moves in its forward and backward gyrations from its beginning point to its endpoint. Which makes them inherently unpredictable. The beginning and endpoints, however, are in our opinion quite predictable with considerable accuracy.

It has been a very educational week, and we feel confident as we go into the future that we will succeed in creating a low risk, high reward trading system. It may not be possible to market or share the results in a form such as a signal service, as it may require split second analysis and actions. Especially the low risk part ( getting in at the precise endpoint of the trend) of the formula. That is best done by a qualified trader with his finger on the button who knows how to identify the precise endpoint of a trend. Predicting the exact end of a trend with precision is extremely difficult. This week has been particularly challenging for us.

Another factor is the currency pairs. The crosses like GBP/JPY, EUR/CAD, AUD/JPY, and GBP/CHF move huge amounts at times, but they are much harder to predict precisely. We have been trying our hand at them in order to test our system and our skills. We think that it will eventually be possible to generate low risk / high reward winning trades on the crosses, but this will probably be the fruit of alot more practise and research.

Thanks for everyone's support and interest!

Onward ho in the quest for the Holy Grail of Forex trading...

Fxnewbie I can't believe the ingorant and unreasonable tone of your remarks. I'm just grateful that Itme has taken the time to give us these recommendations to try. If you want a signal service, go subscribe to one, don't take something that's offered for free as part of an experiment and then complain about losses. If you lost 2/3rds of your account, it was your own poor money management....it was nothing to do with Itme's suggested trades.

I have a friend who sells subscriptions to his euro only system. He regrets it when it occurs, but he has periods of losses, particularly when the market is unusually chaotic. He has other periods when his system works very well, and the subscribers to his system understand that this occurs. The difference may be that they are paying $150 per month for the priviledge of receiving his signals. He sends them to me free as a courtesy, and in case you are interested, as a whole Itme's system is better with respect to potential profits.

My friend, despite the fact that he is selling his service, includes on each email a warning that the recipient is to check his own charts before taking action. Possibly Itme should require that anyone intereted in using the signals check them out themselves and thus take responsibility for acting on them.

We are, or should be, adults here. We are being offered an opportunity to take advantage of a great deal of work that someone else has done for us. I know how much time I spend at finding my trades. I use these signals to save me a great deal of time looking over potential trades. That does not mean that I blindlly follow them since I am prepared to personally accept the consequences of my trades. I follow them if they appear to be valid to my way of looking at the market. Presumably we all have an understanding of the market and at least some understanding of technical analysis. Anyone who does not, should run, not walk, to the nearest source for that information. Do not blame the system creators for the results of trading their system-under-development. They did not twist anyone's arm to use it. They were just kind enough to let us use whatever part of their system suits us. The choice and the decision is ours alone.

None of us is paying for the system, so that there is not the pressure of having to try the trades in order to get our moneys worth. If you go and pay for a signals you will rapidly discover that unless they have a huge drawdown they have frequent losses. If you have huge drawdowns, potentially unlimited ones, you can actually trade with no losses. However, unless your account is virtually bottomless, you run a very real risk of losing your entire account. I prefer a system with smaller drawdowns and therefore more losses but very little risk of losing my account unless I use irresponsible money management.

Come one, guys, lets act like adults, and let us all say thanks for being given the opportunity to choose to trade these signals or not.

Thursday 5/18/2006 20:00 ET

Dear traders,

The best advise I can offer right now is to short the GBP/USD or EUR/SD right now, at the market price of 1.8953 or 1.2860 with a large enough stop to survive whatever comes next. There is a high likelihood that we are at the top of the trend, or at least very, very close to the top. This is, in my opinion, as good as it gets for a low risk, high return trade.

My recommended stop for GBP/USD is 1.8972, and for EUR/USD is 1.2886

We took a short position at the previous peak, which was a bit higher.

For an expert Elliott Wave perspective, which is not our system, here is a link:

http://www.elliottwave.com/features/...d=2412*time=am