Chicky's Trading Method Viewer

1. The research (Part B)

Kindly do remember before reading further that most part of my research was done prior to on-line trading and some part even before personal computers.

Later, I turned my focus from gambling to stock markets. Here I was not looking for a flaw or statistical method but how to consistently make money without losing.

I soon found out that there is no such thing as zero risk. One has to lose money in order to make some. The research objective now was how to consistently make money in the stock market by losing less and gaining more?

Finding answer to this question was not easy at all. That required studying the whole bloody market, each and every aspect and detail of it. Starting from how market indices work, how stocks are traded and trading reported, what moves the market, how liquidity flows, roles of jobbers, runners, brokers, you name it.

I met several brokers, mutual fund managers, investment bankers, big market players, a person who designed a new stock market index and tested it for nine months before replacing the existing index. Luckily my job with the world's biggest firm of independent accountants provided me all these opportunities. But no one could convince me that they had a fool proof method.

I decided to create one of my own, using all the knowledge and skills gained in those years.

Initially I thought it would take trying five or six methods before my job is done. That was foolish. It took me over a hundred methods to develop and discard before I finally settled for a couple of them. A friend of mine helped me in refining these methods. He was my Hacker, that is, every time I came up with a method his job was to break it and make it fail. He would brutally test my new method / modification to a method and do his best to show me it doesn't and cannot work. Many times we had to again dig out a discarded method on finding something new or after developing a new concept. That means we repeatedly tested each and every of those scores of methods.

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2. The research (Part C)

One of those methods in its crude form was (please don't laugh that was silly but later it became base of a good system): If one randomly buys stocks of 10 companies there is 50% chance of their showing gain. That means 5 out of 10 companies randomly selected will show gains and rest 5 will show loss. However, if all these 10 stocks are selected after a careful analysis of their financials and future prospects more than 5 will show profit. That is the edge.

One could give over 20 arguments against the above method and all such arguments will be valid. But over the years we refined that basic method to my 1:1 1% R/R with fundamental and technical analysis as the edge.
You got it?

If you say yes, you haven't got it. Let me explain

The basic method talks only about number of trades showing profit and loss i.e. more than 50% of the trades showing profit. The next important thing to consider is how much profit and how much loss.

1% profit or 1% loss. Why one per cent? Why not 1.25% or 2% or 7% or 63%?

Another thing is how many pips?

2. The research (Part D)

There are so many things to share but trying to limit these discussions in context of those four lessons learned and to give the background what went into this learning process.


1:1 1% Risk/Reward Method

"If it isn't based on a logic, it’s not a good system". Whenever I find a new method posted on FF go visit the first page. Immediately leave the thread if it says enter at certain candle formation, sma/ema cross, talks about 15 pip sl and 30 pip tp, or similar indicators. Why? I find no logic in such systems. Real factors and real people move this market, not lagging indicators, candles or support/resistance levels. However it doesn't mean one should not use technicals. Technicals are just tools or tactics. Like tools alone cannot build you something or tactics alone cannot win a war for you, these technicals only help but cannot achieve your trading objectives.

First step in 1:1 1% risk/reward system is to identify support and resistances. I find this very simple. Just study history of moves on a chart and mark those levels. Bigger the timeframe, stronger the support and resistances.

Second step is to wait when pa hits any support or resistance. Logically, there should be more buying and selling at these points. Sometimes price hits and hangs around at these support or resistances just before a session is about to start or just prior to a key news release. This is the starting point. Price either bounces or breaks through these levels when race starts (session begins or news is out).

Step 3 is to estimate if it breaks how far it may go or if it bounces how strong would be the bounce (in number of pips). One thing I know is that if it breaks the level it would go very very far but if it does not break the level the size of the bounce would be less than the size of the break. The trend could also change with the bounce but this is irrelevant information for this method and therefore we are not worried if the bounce turns into a big move. There could be a fake breakout, but this is also irrelevant info for this method, not always but most of the time.

Not all the time, but many times price bounces several times before breaking a level. Even if it breaks a level, it first bounces and then snaps back to break.

Step 4 is calculate as many lots that give you profit of 1% or loss of 1% if it hits tp or sl. Why one percent? If 60 out of every 100 trades are winners one would net 20% profit (+60% -40% = +20%). But you never know if you lose first 40 trades. Even if you lose first 40 trades in all 100 trades, you would still be in the game with 60% account balance intact.


The maximum consecutive losses I experienced are 52. Therefore don't under-estimate how things can go against you.

Discussion on this method does not end here, there is much more to share on this method.

1. Logic of what I believe in (Part A)


Logic behind 1:1 1% Risk/Reward Method

Listed below are some advantages of 1% risk/reward. But before that it will help to learn 1% of what?

1% of account balance just before taking a position. It is vital not to carry more than one position at a time. This defeats the whole purpose of this method.

Advantages of 1% risk/reward

1. Each position is so small that losing a trade doesn't matter much to the total account size. Therefore all trades are stress free letting trader focus and think clearly. Objective decision making is possible, no decisions are based out of fear or greed.

2. On losing a trade, the remaining 99% becomes the account balance and again 1% risk of this latest account balance. For example if one starts with $10,000, the first trade will risk $100. On losing this trade, the account balance would now be $9,900 and 1% of this would be $99. This way a winning streak would generate more and a losing streak would cost less. If it’s not possible to re-adjust lot size because of lot size restrictions, one can say $100 until account balance decreases to $9,000 and then $90 after that until account balance again gets back to $10,000. That would indeed require winning more trades than lost to break-even but there would be time for a winning streak too. Sometimes weeks go by without a losing trade and sometimes no winners in weeks.

3. The most important capital of a trader is his/her Mental Capital. One waits for a big move to recover loss, enters a huge position, everything goes as planned but fear of losing whatever gains made from such huge position forces the trader to prematurely close the trade. Similarly a trader feels pain in closing a position with huge drawdown when over-leveraged. This way loss is a total loss and gain is very small.

4. Market does not make big moves every day. If a trader loses on a big move, the next move of such size may not come in days or weeks. Plus with less margin trader cannot open same size position and yet again has to wait for move even bigger than the one that sets him/her back. This causes frustration and anxiety that in its own turn, leads to wrong decisions.

5. It is possible to gain or lose 1% even on 10 or 20 pip move and therefore one does not have to wait for 200 pip move to make or lose money.

6. Even if one goes against a major move, retraces at the supports/resistances in the way provide chances of small bounces and one can trade those bounces. But if one is eyeing at 20% or 30% from a move, cannot take advantage of such small bounces. Since 1% rule is regardless of number of pips involved in a move, one could lose 1% with a 100 pip tp and sl, but can recover that 1% with 15 pip tp and sl.

7. Although it is very important to keep an eye on fundamentals, with 1% profit or loss, one could also trade purely on the basis of technical tools. However, I rarely take a position against key fundamentals.

8. If you miss a major move, so what? You missed only 1% and that you can make on a small bounce.

1:10 ½%/5% Risk/Reward Method:
I have now replaced 1:1 1% Risk/Reward Method with 1:10 ½%/5% Risk/Reward Method. It is basically one and the same thing, but gives me more opportunities to try catching the same move.

1. Logic of what I believe in (Part B)


Logic behind having an edge

it would be illogical trying to give logic for having an edge. However, just want to mention that my research concluded that whatever statistical methods and calculations you apply (martingales or semi-martingales, or reverse martingales whatever), they won't produce an edge by themselves, they simply cannot.

Study of fundamentals or underlying conditions is the real edge. An edge that gives traders the confidence and skins thick enough to stick to their positions when market temporarily moves against them.

Many times, market takes its time to do the right thing. The time from now and when market starts doing what it is supposed to do shakes confidence of many. Some consider this manipulation, some think its stop loss hunting or squeeze, and some feel market is random.

Please don't confuse underlying conditions with day to day news. Underlying conditions are those conditions that move the market in a big way in thousands of pips.

Unfortunately there is no short-cut to the process of assessing the underlying conditions. It requires constant study of what's going on this planet. This requires hard work but worth it. Taking first step in doing this analysis would look difficult, but if one keeps on adding little by little every day, this becomes easier.

Then there are technical edges. These edges are very small and therefore require consistent application. If one deviates from this consistency or keeps on changing position sizes very frequently, this edge is lost. If one takes chances on break-outs, should always take a chance of a breakout. Most projects are abandoned when success is only inches away. Prudent traders don't do this mistake. One should consider the risk before jumping in and not when off the diving board. If one has a system that generates 60 wins out of 100 trades, should not get disappointed after few losses or get carried away on spotting an "exceptionally good" opportunity. Anything is possible; therefore ALWAYS rely on your method if you think it’s a sound one. Again, keeping your position sizes small will help in sticking to your system.

3. Logic of what I believe in (Part C)


Logic behind understanding market behavior

Decades ago as a teenager I heard a phrase that this market moves like a wall clock's pendulum, to and fro or up and down. This concept in my subconscious mind made me a counter-trend trader, a situation that took years of work to come out of. For many years I believed that what goes up is bound to come down. However, this is true to a great extent because this market moves in cycles.

In early 2007, did a study on monthly charts of almost all currency and commodity pairs. It was strange to note that all these pairs for many years maintained their trends without a significant retrace. Then from late 2007 or early 2008, we saw such a volatile movements that disturbed everyone.

The cycle completed. MARKET MOVES IN CYCLES.

Then there are short term cycles, up and down movements. Two pips up, seven pips down, 15 pips up, 23 pips down, so on and on and on .......

It is therefore very important for a trader to understand how market moves, what factors make it move, how much movement to expect, when movements occur, what to expect from Asian session, what happens just before London open, how market reacts when Asia closes during London session, why spread suddenly widen for a minute on Asia close, why this sudden increase did not happen on Friday the nfp day, why many times all gains during London session completely reverse just prior to NY open, if market went up during London session will it go down during NY session, what if NY session continues momentum developed during London session, will it touch Pivot after NY close and before Asia opens, how movement in equities affect currencies, if market starts picking a direction in late NY session does it mean London will push it further in the same direction, what is the truth about week-end gaps, why Friday is a crazy day, if London moves in one direction during a whole week will it show retrace on last day of the week, what happens during low liquidity times, if an intervention is due will it take place Friday afternoon or middle of the week, etc, etc, etc.

Our fundamental analysis and technicals will help only if we also know truth in and answers to the above and like questions. Therefore it is important to understand market behavior and place trades accordingly.

How to do this? The answer is: Experience. I normally take note of such situations and then try to write the answers i.e. why market behaved this way.

3. Logic of what I believe in (Part D)


Logic behind "If a trade gives stress, something is wrong with Money Management"

I don't know about others, but number one killer of my profits and primary reason for my losses was fear. Kindly note there is a difference between thrill and fear. If you are riding a roller coaster, it is thrill, not fear. This thrill will change to fear as soon as you find something wrong with the safety system of roller coaster.

No matter how much efforts you put in, no way your fundamental or technical analysis can provide a 100% confidence. It cannot and it should not, because we live in a dynamic world. You never know what happens next that changes the whole scenario. The best way therefore to reduce stress from a trade is to limit your risk to a reasonable level. Trill will be there but no fear.

The greatest mistake I repeatedly made was to deviate from my method, "this one time only" thinking. This one time produced nothing but fear and stress and seldom proved profitable.

People who have read "Reminiscences of a Stock Operator" know that Jesse Livermore had a tough time changing his method from a scalper to a longer-term trader. He had to do this only because of the lead time between what goes on at the trading floor and when it appears on the quotation board. Today, we live in a different world. Information passes at the speed of light and therefore this gap is minimum. We can now do what he couldn't do. I don't promote scalping, but trying to make a point that we can now benefit from many smaller moves and frequent opportunities. It is possible for us to increase number of trades and decrease risk per trade.

3. Logic of what I believe in (Part E)


Logic behind "Think twice before you leap, wait for the right time"

Have you ever noticed how meticulously hawks maintain their wings; how silently, patiently and carefully tigers prepare for pounding on their prey; how much effort goes into collecting intelligence and planning a war before attack takes place? Everyone knows this.

The principle behind this is to maintain the edge and take no chances even if the prey is a sitting duck. This market is high risk and therefore managing risk is the name of the game.

No matter what is our edge, it is not definite and is very small. We cannot afford to lose this meager edge. But the good thing about this market is that we live in a very rich land. Plenty of opportunities show every now and then. If we have a system that is not reliant on big size of the moves, we can afford to watch opportunities develop and vanish without feeling left behind. There is always another opportunity not too far.

Winning and losing in forex has multiplier effect. Once buried in losses, it is very difficult to come out because losses hamper not only one's operating capacity but also shake confidence in the method and trust in one's abilities. But if one is inch by inch collecting profits, the compounding effect generates snowball effect.

Chicky's Trading Method

1. Most trades are placed on 5M and 1H Timeframes, however, I never lose sight of Daily and fundamentals.

2. Trade only EuroUsd but keep an eye on other pairs and commodities to know what market is trying to do in general

3. The main technical indicators/tools are 50% and 25% fib retracements and 150% fib extensions combined with HHs, LLs, LHs and HLs to indentify trend continuations or reversals.

4. The best time of the trade is when market is moving during high liquidity.

5. Try to catch tops or bottoms. Not a new top or a new bottom but HL or LH. If pa is in an uptrend, try to catch a Higher-Low. If pa is in a down trend, try to catch a Lower-High.

6. Risk approximately 1/2% for an approximate reward of 5% (10 times +/-), but it normally takes making more than one attempt, sometimes three, sometimes four before a position survives. Each such attempt risks about 1/2%. It is not necessary that I let a position run to hit its tp. If before hiting the mark, pa starts making some new HL or LH, I go for that new set-up closing the old one.

7. I may or may not enter in one go. If risking 1/2%, may enter with 50% to 75% of the position to start with and enter rest after observing the pa. I may also decide to enter with full 1/2% risk. This is necessary, because sometimes pa stays near my entry level for few seconds providing me opportunity to enter full position, but other times it moves away just after touching my entry point. In later case, I enter partial position and see if it gets any near to my entry level so that I could enter at a better price. Sometimes, I don't get a chance of entering the rest of the position and that's why my initial position is no less than 50% to 75%.

What Jesse livermore method you tested any details, just curious.
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Khan sahib, thanks for your interest in this thread.

Jesse's method is a great method. It basically looks for trend reversals. Once a mega trend reverses, this method establishes Line of Least Resistance. Jesse used to plunge when that line was established and carried his position until trend ended. He used HHs, HLs,LHs and LLs to identify trend reversals. If it was a fake breakout, his Line of Least Resistance broke and he used to get out. Then waited again for this line to re-establish. The new line of least resistance formed either in the same direction or the opposite direction. The only issue with his method is that it requires one to be right at least every 6 out of every 10 times (It's a lot different from being right 60 out of 100 times). His method cannot sustain more than few consecutive losses because one cannot afford getting repeatedly stoppd out after plunging. One reason his friends used to object to his method telling him that he wasted a lot of money in catching a trend. But it worked for him because he was right 8 or 9 every 10 times. There were several factors contributing to his this success ratio. For example, he traded stocks and commodities not currencies, he traded only one NY session because there were no London, Franky or Tokyo sessions at that time hence less distortion in HH,HL,LH and HL formations, he traded swings, etc. But today's market is so volatile that even one single move may take out several HHs or LLs without a warning.

I have therefore combined three methods to trade in today's market conditions:

1. Jesse's method to identify Line of Least Resistance (mentioned in my method above)

2. Mark Douglas' idea of limiting risks (I have chosen 0.5% per attempt /2%-3% per trade with a profiit target of 5% per trade)

3. My old method of playing bounces / retraces.

Hey Chicky, thanks so much for the information you are so kindly to share - i really enjoy reading everything you write , even if i disagree sometimes.

I would like to share something with you, and hope to get your opinion. Few weeks ago , i was reviewing some of my trades that i decided to close and was thinking about what Livermore said " I get in a trade for a reason and i get out also for a reason".

I was overwhelmed by the big moves i was to catch had i left the trade open or kept my stoplose and kept my cool. It showed me , that in some of my calls i was right about the direction - but timing was wrong or abit early. So, i decided to leave my stoplose and accept the price as a fee. However, i suffered really consecutive loses that i could bare. But most importanly was not the lose , but seeing a good trade turning back on you and in a very nasty way.

My worst trade was in the beginning 5 % in Green and was doing some acrobtics , so i decided to increase my position - and what happened was , it turned back on me and costed me 4 % ( A trade that i stayed in 4 days , doing nothing but monitoring what is happening and sitting tight )

So, my question is : Is , as a rule , when you have profitable trade - no matter how many pips are running, you immediately secure 1 or 2 pips ? Just in case something happens !

I tell you, my account bad calls are marginally small compared to good trades turning nasty on me ..

I'm subscribing to the topic , OF COURSE

Vachus, that's why I had to modify Jesse's method.

Look at the following chart. In all those months, Jesse's method would have allowed me two trades.

1. First short has the entry at the Red arrow and exit at the Green arrow. Note the Red line stoploss. The pink box represents profit. Its too much for too little.

2. The second short has the entry at the Blue arrow and exit at the Yellow arrow. Stop loss is the Blue line. Second pink box is the profit profit from second trade. Again too little for too much.

3. Now a third short set-up is in the making. But no confirmation yet.

However, shorter term trading may provide better and more frequent opportunities using the same method.

Trying a short

Moved sls to BE

Will take some profit at 1.2914

Manually closed at 16. 1.2914 is a good support and it may not hit this support so easily.

We are all set. Now, let the market play its role.

This chart shows it has broken our blue s/r line.

1.2958 is broken. Lets see if it makes an attempt at 1.2936 to regain its bullish status. Will be good scalp for a few pip bounce with sl just above 1.2943

Trying a long

Narrowed sls, but still below BE

BE+