Low Risk, High Reward Trading Experiment

Tuesday 5/23/2006 4:00 ET

TS#71 Buy GBP/USD

The market just did something quite special. A buy of GBP/USD at exactly 1.8796 is an excellent through very exotic low risk / high reward trade opportunity. The target is 1.8910 and the stop is 1.8791.

Risk is only 10 pips, reward is 110 pips.

Tuesday 5/23/2006 4:15 ET

Trade Signal #72

Special momentary exotic buy opportunity in EUR/USD.

Buy EUR/USD at 1.2821 - 1.2825

Stop is 1.2818

Target is 1.2923

Risk is max. 10 pips

Reward is min. 95 pips

Reward : Risk ratio is min. 9.5 to 1

For test purposes only.

Tuesday 5/23/2006 4:15 ET

Re-enter USD/CHF short trade at market price approx. 1.2080 - 1.2085

This trade was an experimental mid-trend trade that was not too lucky, as a kickback retracement occured. This, in its present configuration, is now a prime low risk / high reward trade.

Stop should be 1.2093

______________________________

Original trade signal:

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.

The USD/JPY also rose abruptly 60 pips in the opposite direction of the trend, for a reason that our system fully understands and can predict if we do our work properly. In fact, we can not only predict when this will occur, but the exact price that it will rise to. But to be able to do all these predictions correctly one would need a team of master analysts working around the clock.

The difference with the USD/JPY is that it only touched its high point for a moment and then quickly fell thirty pips, unlike the other three major currencies - GBP, EUR, and CHF. This is typical of the rather jumpy and spiky JPY.

The USD/JPY should now continue to travel down to its target of 110.30, 126 pips from the top of the recent spike, and then later it will fall another 70 pips to 109.60, no doubt with an intervening retracement.

I noticed this pattern in the USD/GBP chart just now, and thought I would pass it on to the people of the forum to solicit your opinions and comments.

I've noticed a few head and shoulder formations before, but never a "headless" shoulder formation.

This warning is on the front page of the Elliottician.com website. It makes some good points, so I will reproduce it here:

Let’s get this out of the way right upfront: Trading is a tricky business. Even with good money management practices and accurate forecasting technology, trading has the potential of substantial losses. Leveraged trading has the potential of losing even more money than you have invested. So, for the sake of your financial health and emotional wellbeing, never trade without knowing exactly what you are doing. Make your learning mistakes while paper trading a demo account. Always use good money management practices. Fully understand your risk at all times. Always use stops to limit your risk to something that allows you to sleep well at night. Understand that your results are not going to be the same as the trader next door, even if you are using the very same trading methods. Know that past results can never guarantee future profits. Understand that anyone who says that trading is easy has never traded. And any trader who says they are always profitable would lie about other things as well. Accept that a trade will always go against you at the worst possible moment – such as the only time you ever didn't place your stops. Accept that the market will always do exactly what you expected whenever you didn't enter. Just accept it. Learn to live with it. Get over it and move on. That's the nature of the beast. Know yourself and how you respond to the game. Only then can trading be the path to wealth that you want it to be.

We thought we had it figured out, and we partly did is seems. However, once again, the system is so complex that we neglected to trust certain features of it. Yes, USD/CHF and USD/JPY did spike up suddenly, which we took for the short entry opportunity. However, we should have known that it was not complete in this retracement phase, and that it had more to go. Both currency pairs subsequently came up a second time to fully fulfil our system requirements in two separate ways, and then started a downwards travel.

Our practise account with large stops is doing extremely well (all positive large trades on multiple currency pairs). But our system trial account is once again afflicted with small losses.

The exact same analysis applies to GBP/USD and EUR/USD. They both descended one more time, just enough to hit our stops, and then started an upwards trend that may continue on to our targets. Time will tell, and our system will be tested again.

Once again - system 100, operators 0.

Our job is to learn the system, learn to trust it 100%, to develop more thoroughness and patience, and analyse the market with ALL system criteria successfully fulfilled before a trade concept is given the green light.

Another way to see it - we need to close the gap between our practise (virtual) account, which is earning literally thousands of pips per day, and our system test account, which keeps on diminishing.

The challenge is big. But we are closing the gap, we feel.

Your forgot to mention EUR/AUD trade; which came down today significantly as predicted; but after hitting your stoploss point twice.

Yes, Purple. We had alot of difficulty pinning the entry point on that trade, but it was the big mover last night. We are progressing at mastering this process, but slowly it seems.

I am preparing a commentary on that trade to follow.

Tuesday 5/23/2006 14:45 ET

TS# 73

Sell EUR/JPY at market price ( 143.23- 143.33)

Stop is 143.41

Target is 140.65 or lower

Risk is max. 21 pips

Reward is min. 255 pips

Reward : risk ratio is 12.1 to 1

For testing purposes only. Trade at your own risk. Don't risk too much of your capital in any single trade. (5% is a maximum according to most advisers)

Though we don't advise anyone trading these signals until we get the many bugs out of our system, but we do recommend looking at these situations we point to in the light of your own trading system to see whether they consist of valid trade opportunities.

In addition, each of our trade signals is, in effect, the prediction of a trend of at least 100, and up to 500 pips.

We are confident in saying that in every case, there exists at least a distinct possibility that the predicted trend will occur.

Tuesday 5/23/2006 16:00 ET

TS#74

Sell USD/CAD at market price of 1.1220 to 1.1225

Stop is 1.1243

Target is 1.1083

Reward min. is 132 pips

Risk is max. 28 pips

Reward : risk ratio is min 4.7 to 1

For testing purposes only. Trade at your own risk.

Tuesday 5/23/2006 16:15 ET

TS#75

Sell AUD/CAD at .8507 or higher

Stop is .8527

Target is .8370

Reward is min. 127 pips

Risk is max. 30 pips

Reward : Risk ratio is max. 4.2 to 1

Confidence level : average

For testing purposes only.

Tuesday 5/23/2006 17:00 ET

TS#76

Sell EUR/AUD at market price of 1.7060 - 75 approx.

Stop is 1.7101

Target is 1.6640

Reward is min. 405 pips

Risk is max. 56 pips

Reward : Risk ratio is min. 7.2 to 1

For testing purposes only.

Tuesday 5/23/2006 17:15 ET

TS#77

Sell USD/CHF at Market Price of approx. 1.2075 or higher

Stop is 1.2103

Target #1 is 1.1935

Target #2 is 1.1800

Reward is min. 135 pips

Risk is max. 33 pips

Reward : Risk ratio is min.4 to 1

Confidence level is medium to high

For testing purposes only.

Tuesday 5/23/2006 16:30 ET

EUR/JPY did a kind of "gap closing" behaviour according to our system, hitting our stop in the process. A triple top of sorts is in place. It is unlikely to surpass the current recent high of 143.65. Though it may rise near to that price once again. So a re-entry of this trade at market price of 143.32, or better yet, at 143.55 to 143.65 (or higher) if the opportunity presents itself is advised.

Original Trade:
Tuesday 5/23/2006 14:45 ET
TS# 73
Sell EUR/JPY at market price ( 143.23- 143.33)
Stop is 143.41
Target is 140.65 or lower
Risk is max. 21 pips
Reward is min. 255 pips
Reward : risk ratio is 12.1 to 1
For testing purposes only. Trade at your own risk. Don't risk too much of your capital in any single trade. (5% is a maximum according to most advisers)

Wednesday 5/24/2006 5:00 ET


We have already been stopped out twice trying to catch the top of this trend. We believe that this is finally it.

Stop is 144.21

_________________

Original trade:
TS# 73
Sell EUR/JPY at market price ( 143.23- 143.33)
Stop is 143.41
Target is 140.65 or lower
Risk is max. 21 pips
Reward is min. 255 pips
Reward : risk ratio is 12.1 to 1
For testing purposes only. Trade at your own risk. Don't risk too much of your capital in any single trade. (5% is a maximum according to most advisers)

Wednesday 5/24/2006 5:30 ET

We are sorry that the forum was down so that we couldn't post a sell signal at the top of the channel, at 1.8850 - 60 (we entered at 1.8851) but there is a bit of a retracement here, so one could enter a sell GBP/USD at 1.8825 - 1.8835.

Stop is 1.8861

Target #1 is 1.8730

Target #2 is 1.8575

Reward is min. 90 pips (270 pips for Target #2)

Risk is max. 41 pips

Reward : Risk ratio is min 2.2 to 1 (Target #1) and 6.6 to 1 (Target #2)

For testing purposes only. Trade at your own risk. Don't risk too much of your capital in any single trade. (5% is a maximum according to most advisers)

Wednesday 5/24/2006 15:00 ET

This was a very successful trade. Thankfully we invested in it with our live account from 1.8851. It progressed directly down 210 pips from its high of 1.8860 down to its daily low of 1.8650, a price in between our Target #1 and Target #2. (We considered offering an intermediate target at 1.8675, but decided to keep it simpler.)

While GBP/USD descended 210 pips, EUR/USD descended 150 pips, USD/CHF rose 176 pips and USD/JPY rose 197 pips. USD/CAD rose 72 pips, and AUD/USD fell 52 pips.

The movement is not over yet in our opinion. GBP/USD has retraced about 90 pips, which is 45% of its downward travel, to 1.8740. It has now resumed its downward travel, towards our second target of 1.8550 or lower.

We will really be ultimate traders when we can predict not only the top and bottom of trends, but the point where the big retracement happens. We keep on dreaming!

______________________________

Original trade signal:


TS#78 Sell GBP/USD at market price - approx. 1.8825-35

Wednesday 5/24/2006 5:30 ET
We are sorry that the forum was down so that we couldn't post a sell signal at the top of the channel, at 1.8850 - 60 (we entered at 1.8851) but there is a bit of a retracement here, so one could enter a sell GBP/USD at 1.8825 - 1.8835)
Stop is 1.8861
Target #1 is 1.8730
Target #2 is 1.8575
Reward is min. 90 pips (270 pips for Target #2)
Risk is max. 41 pips
Reward : Risk ratio is min 2.2 to 1 (Target #1) and 6.6 to 1 (Target #2)
For testing purposes only. Trade at your own risk. Don't risk too much of your capital in any single trade. (5% is a maximum according to most advisers)

We survived another upward impulse of this trend by only 1 pip! Technically the stop should have been adjusted a few pips higher by the time the top was challenged again 4 hours after the signal was generated. So we are in this trade and our system indicates that it will descend to 140.50 and possibly even lower - 140.00 - for at least 255 pips of profit.

Original trade signal:

TS# 73 Re-entry - Sell EUR/JPY at market price ( 143.99- 143.95)


Wednesday 5/24/2006 5:00 ET
We have already been stopped out twice trying to catch the top of this trend. We believe that this is finally it.
Stop is 144.21
_________________

Original trade:
TS# 73 Sell EUR/JPY at market price ( 143.23- 143.33)
Stop is 143.41 Target is 140.65 or lower Risk is max. 21 pips
Reward is min. 255 pips Reward : risk ratio is 12.1 to 1
For testing purposes only. Trade at your own risk. Don't risk too much of your capital in any single trade. (5% is a maximum according to most advisers)