Low Risk, High Reward Trading Experiment

In a situation like this, would it be wise to wait for a little consolidation at this price before jumping in? Especially since you expected it to drop from certain levels and it just hasn't.

Yes, if the confidence in a reversal is low, one can wait for a consolidation pattern to emerge, and either:

1) enter the trade at precisely the top of the consolidation pattern, with a small stop (about 5 pips above the resistance level). Employing an entry order is a good way to ensure entering at precisely the correct price, or

2) waiting for a breakout of the consolidation pattern or supporting trendline. The likelihood then of a reversal is much higher, but the advantage of the small risk trade is thereby lost.

For this reason, we prefer option #1.

OMG checkout the number of thread veiws this journal is getting! Finally the thread has picked up from its humble days in Classified Section.

I think you hit it this time itme. Gonna be watching this one close.

Yes, I thought it would do better here...

Nice Trade calls Itme.

Scott

re EUR/AUD antics this morning, I can feel a nice head and shoulders coming on.....

It did form a head and shoulders bgut did not go anywhere with it. I think it is trying to form a double top now.

Monday 5/22/2006 9:45 ET

Good News:

OK, another entry opportunity has presented itself on EUR/AUD at about 1.7045 to 1.7050.

Bad News:

This is probably not the ultimate high. EUR/AUD will probably only go down to about 1.6962 and then rise all the way up to 1.7117 to 1.7132 (depending on how long it takes to get up to this region).

Our big low risk / high reward trade will be selling EUR/CAD from this higher price, where it will have finally reached its ultimate high.

So for those who are in this trade, we recommend setting limits at 1.6962

For those who want the low risk / high return trade opportunity, keep waiting for a few more hours so that EUR/USD can get all the way up to the top of its current trend at about 1.2800 to 1.2814.

_______________________________

Last trade signal:

EUR/AUD re-entry opportunity TS#67 This is finally it! We are quite sure that 1.7023 is the final top of this trend. A small stop at 1.7036 should protect this trade, which should be good for several hundred pips of profit.

Confidence: very high

Monday 5/22/2006 10:30 ET

TS#69

Sell GBP/USD at 188.10 - 188.20 or higher

Stop is 188.43

Target #1 is 186.26

Target #2 is 1.8600

Target #3 is 1.8530

Reward is min. 180 pips

Risk is max. 38 pips

Reward : Risk ratio is min. 4.7 to 1

Confidence Level: Average

This is a system compliant trade and appears like a good trade if it is tradeable and meets the system criteria of independent traders as well.

For research and testing purposes only. Trade at your own risk. Trade risk capital only.

Monday 5/22/2006 11:15 ET

GBP/USD and EUR/USD have moved strongly upwards since we entered our trade signal #69. Current analysis indictates the likely top for GBP/USD is about 1.8855.

We therefore recommend adjusting stop to 1.8871

Original trade signal:
Monday 5/22/2006 10:30 ET
TS#69 Sell GBP/USD at 188.10 - 188.20 or higher
Stop is 188.43
Target #1 is 186.26
Target #2 is 1.8600
Target #3 is 1.8530
Reward is min. 180 pips
Risk is max. 38 pips
Reward : Risk ratio is min. 4.7 to 1
Confidence Level: Average
This is a system compliant trade and appears like a good trade if it is tradeable and meets the system criteria of independent traders as well.
For research and testing purposes only. Trade at your own risk. Trade risk capital only.

EUR/AUD has certainly been perverse. It has gotten to within 43 pips of the years low. The good thing about that is that I think that it is unlikely to go higher than that, so an end may be in sight. It has to turn downward some time.

We realised in the last post that EUR/AUD had not yet reached its ultimate high for this trend, which was somewhat higher. It needed to go down and up one more time. Now that we are approaching this pivot point we feel that we can predict it according to our model to be at 1.7158 (or slightly higher due to the overshoot factor). The stop should be safely placed at 1.7210, 52 pips from the entry point, creating a total risk (including spread) of about 62 pips.

Targets are the same as before.

Previous trade signal:
EUR/AUD Re-entry Op and Bad News Also! - TS#67
Monday 5/22/2006 9:45 ET
Good News:
OK, another entry opportunity has presented itself on EUR/AUD at about 1.7045 to 1.7050
Bad News:
his is probably not the ultimate high. EUR/AUD will probably only go down to about 1.6962 and then rise all the way up to 1.7117 to 1.7132 (depending on how long it takes to get up to this region).
Our big low risk / high reward trade will be selling EUR/CAD from this higher price, where it will have finally reached its ultimate high.So for those who are in this trade, we recommend setting limits at 1.6962
For those who want the low risk / high return trade opportunity, keep waiting for a few more hours so that EUR/USD can get all the way up to the top of its current trend at about 1.2800 to 1.2814.
______________________________

Last trade signal:
EUR/AUD re-entry opportunity TS#67 This is finally it! We are quite sure that 1.7023 is the final top of this trend. A small stop at 1.7036 should protect this trade, which should be good for several hundred pips of profit.
Confidence: very high

Excuse the slip, I meant year's high, which is 1.7163.

Famous last words right befor margin call.......LOL

There are advantages and disadvantages to trading one mini lot at a time. The disadvantage is that you do not stand to get a lot of pips on good trades, but on the other hand you are very unlikely to incur a margin call unless you indulge in too many trades at one time for the size of your account.

The key to low risk / high reward trading is finding a setup where you can accurately predict a turnaround point that preceeds a sizeable move that follows.

One way is to try to catch the top or bottom of trends. There are many other ways.

I said earlier that EUR/USD would top out "at about 1.2800 to 1.2814".

It is now trading at 1.2870, and seemingly heading for about 1.2900.

Regarding EUR/AUD, we said "EUR/AUD will probably only go down to about 1.6962 and then rise all the way up to 1.7117 to 1.7132 (depending on how long it takes to get up to this region)."

EUR/AUD is now trading at 1.7058. We believe that it will rise to about 1.7148, depending on when it rises.

GBP/USD is headed to the range 1.8906 to 1.8933 (plus overshoot).

Now that the current trends have come most of the way to their endpoints, there is alot more information to calculate their turnaround points. As the price approaches the entry or exit target, more more information becomes available to pin down the entry point with more accuracy.

If the macroscopic analysis is erroneous, however, the most accurate entry calculations are useless, because it isn't the beginning of a trend, only the beginning of a small corrective wave in the course of a larger trend.

Hi itme,
I've just become a member to this site, and I admire your effort to educate people on this trading business.
But I dont understand the high reward ratio thing:
stoploss about 30 pips above(or below)
limit to about 300 pips below.
Then you have a net gain....
But this assumes that the price moves up 30 pips or down 300 pips with equal probability (50-50)
Which is so not true.
The price will 95% of the time hit the stop-loss before anything else happens.

How do we really know that the price is going to move one-way 300 or so pips in one leap?

Yes, this is the million dollar question. Is it even possible, or is the market for all intents and purposes, random? Well, we know that it isn't random. We've done dozens of large successful trades in a row, employing a small stop. (Not in the course of this trading experiment - here we're doing quite poorly lately.) We did it by making certain assumptions. Those assumptions can be verified by checking the history of the charts. The market makes repeatable patterns. It has certain laws which govern its conduct, like any natural system. We are trying to ascertain and exploit those natural laws of the market. If we succeed, then we will win fortune and fame. If not, then we will have learnt alot, and made a good effort. At least we will have tried.

p.s. m- Phincorp predicts continuing downward movement of the EUR/USD, though they didn't give precise trade specifications.

Monday 5/22/2006 23:40 ET

TS#70

Sell USD/CHF at market price (1.2042 approx. or higher)

Stop is 1.2074

Target is 1.1820

Risk is max. 46 pips

Reward is min. 218 pips

Reward : Risk ratio is min. 4.7 to 1

For testing purposes only. Trade at your own risk. Employ discretion. Risk only money you can afford to lose. Be smart. Use a stop. Don't risk more than 5% of your capital at one time.

tops are hard to pick.

I do, but lose a few befor the big retrace sometimes. The key is to find the point right befor a 5-10 pip move. so when you enter you are in small profits from the start. And your entry is on top of resistance or support so a break the wrong way immediatly signals a reversal the other way. Then you don't have to guess. Just exit and wait for new entry or reverse if you thinks its gonna be significant(5+ pips.)

Dave

and limmit yourself to how many you'll lese in a row befor you walk away. Mines 3. then I wait for it to start its retrace and don't get optimum entry. But gotta have the rule.

Like the top on eur$ now. I see the top plain as day but the market is still holding steady. I want to short but cannt. It might not go.

2 cents