The Coffee House Trader

I saw this out on the net and was drawn to the idea of trading forex in as simple a manner as is possible. Sitting in a Coffee Shop, bathed in wifi signals, sitting on a comfortable sofa, trading forex from a single screen. No extra graphic cards, no extra monitors...just one trader and a laptop sitting in the corner. Best part of the idea to me was trading the Daily charts as you really don't want to be glued to a monitor for hours on end. Look at the Daily trends, see which ones look the best to you, and make a trade. You may go back to it a couple of times a day if you want to adjust something or just follow the trade. But you really don't need too.

What I'll be looking at are Daily charts of the USD majors (EU, GU, AU, NU, UChf, UCad) and some of the Yen crosses (EJ, GJ). I usually use a ICCE chart (Bemac's ICCE and One Day's versions), and I also pay attention to Jaroo Levels from Monthly, Weekly, and Daily. I tend to be a J16 nut about Pinbars and other Price Action activities.

I am a Lifetime member of the J16 Private Forum. I have over 1,600 posts in there and I tend to spend a lot of my extra time in there. I have been involved in Forex since December 2009. I have traded Live on IBFx and on Oanda. IBFx has neat tools...and nice spreads on some things. Oanda tends to have better spreads on almost everything.

I have a tendency to not explain why I took a particular trade very well. But I do tend to talk a lot about what I was thinking about before I made the trade. I believe that it was fti (on the TAF thread) that said that trading the 5 minute time frame is a young persons game. I'm not so young a person anymore and I'm finding that the Daily/4hr/1hr time frames are more to my liking. My best successes to date have come from holding a trade for several days and moving my stop along with the moving trends.

I'd like to thank James16, fti, and a whole host of others for sharing their wisdom with the newbies in FF.

If this thread develops into anything I'll use this space below as an index into my thinking. Draw up a chair beside me here in the Coffee House, and lets see if we can't have some fun.

Best,

Eric.

Let's get the ball rolling with a Jaroo-like weekly chart of USD/CHF (UChf). Here I've been watching the Weekly chart dance around the Swing Failure Pattern line at 0.9250...if UChf maintains this relationship with the SFP and stays above it...UChf will continue back up...and EU will be heading back down.

At least that's what happens when these two stay locked inversely to each other.

We'll see what happens.

Best,

Eric.

Here's a little something that always gets my blood working. An EU Icce chart. The EU pool is the deepest one on the planet...and I am really comfortable looking at Icce charts. One Day (Aiden) does a much better job explaining Icce than I ever could. I recommend that anyone interested in Icce go over an look at Bemac's thread. It's super info. It's the sort of stuff that you'd expect to find as a proprietary tool set at a big hedge fund or a bank. Icce seems to be best used as a trade management tool. Kind of like...If I'm in an area of congestion right now...and that's a 50% fib level...where might the 100% level be?

I've been fooling around with Icce charts for a couple of years. This one is really respecting the Mid level inside of the Icce channel.

The best part (or the scariest part) of an Icce chart is what happens after you define a Channel and you start scolling back to the left and see how often the High, Lows, and Closes land on one of those levels. Sometimes it'll raise the hair on the back of your neck.

Best,

Eric.

Here's a GU Icce chart. Pound/Dollar is really respecting the levels formed on the this Icce channel. A pinbar sitting on that Top line is a nice thing to see. It really gives you a sense of where the pair is likely headed in the near term. For right now, we have no new PA to hang a trade on as far as directional bias. A retest of the 1.6162/1.6187 (61.803 Fibs Area) Price Flip seems likely.

Best,

Eric.

Okay, our Jaroo weekly level on UChf seems to be holding intact. The news supported what the Weekly Swing Failure Pattern (SFP) line was showing. The weekly candle didn't close below the SFP line at 0.9250, USD is gaining ground against the Euro pegged currency. The Euro Crisis reminds me of a Money Pit. Except in this case the USA is also backing trucks up to the hole and pouring in cash hoping that the mess that they allowed to get out-of-hand doesn't sink the entire ship.

Here is our Weekly ICCE chart of where USD is gaining. Too soon to call it a trend, but it is maybe an important reversal.

Best,

Eric.

I like reviewing how the week went on Saturday and Sunday. I've tried using a lot of different indicators over the years...in addition to J16 Price Action bars (Pinbar, Inside bar, Outside bar, Double bar high-lower close, and double bar low-higher close). I've used Moving Averages both as trending and ranging indications as well as entries (2EMA crossing a 50EMA...thanks, Bob). I'm very fond of ICCE charts and Jaroo levels (High Close of Resistance, Low Close of Support, Price Breaks Through and Closes Beyond, with an Entry of a retrace back the Level that was just broken). The Channel and Projected Fibs levels on Bemac's ICCE charts also function well as Jaroo levels.

On time frames lower than Daily...the Daily Pivots work pretty well if you combine them a Pending order placed at a level, with a stop loss placed a couple of levels away from the expected entry. Take Profit can be targeted at next level. It's not a 100% a sure thing...but if someone tells you they have a 100% sure thing here in Forex...keep you hand on your wallet (or your purse).

The short answer is that everything works to varying degrees. For my own part I like the ICCE charts that Bemac developed and OneDay (Aiden) pushed a little farther. I love reading the Technical Analysis Fallacy thread that fti started. Once you have an idea where the Daily bias may be headed (which is itself a Scorpion..must remember to not be rigid in my thinking, thank you fti) then you can try to have a dance with the market. I have friends who dance with the market on Weekly-Daily-4hr-1hr-15minute-5minute-1minute-30seconds and 10 second time frames. It's all what you get used too. One is not better than another for pulling your money from the market.

And trying to pattern yourself after someone who is really well-adapted to a time frame isn't a good idea either. You have to try trading on different time frames and see which one suits your personality (and your passions for forex) the best. One of my mentors makes 5% a day trading on 5minute and 1minute time frames...and is done trading in a few hours. Another mentor targets 5% a week trading on Daily and then holds the trade open for several months...as long as the major trend is still in effect. He'll wait for months for the right opportunity to present itself.

As a Coffee House Trader, I'm more inclined to want to stay within Daily-4hr-1hr time frames. This gives me more time to converse with my friends online...than being glued to the screen waiting for something to happen.

Regards,

Eric.

EU has dropped back into the Channel that I mapped out earlier. The Channel that I'm awatching...and that Price Action seems to be respecting...has a Top at 1.3022 and a Bottom at 1.2891. If you've never played with ICCE charts before you start by going to a Daily chart, change to a line chart, and then look for a place where price is ranging back and forth over several days in a fairly tight congestion. Apply the ICCE chart and switch back to candles. Place the Top line on the upper closes...and the Bottom line on the lower closes. If you've chosen your congestion area well (sounds like an Indianna Jones line) that area will be respected many time over in the future.

But, the reasoning behind the ICCE chart isn't just to define a Compression channel (ICCE stands for Intake, Compression, Combustion, Exhaust) but to see where price may go in the future. Bemac originally got the idea for ICCE when he noticed that a Compression area tended to occur near the 50% level of a Fibs that you have applied between two extreme points on a chart. Bill decided that if he could find a tight compression area and identify it as a 50% area...then he should be able to calculate and project where the other Fibs levels would wind up. This gives you an indication of where the other Support/Resistance/Stall levels may be in the future. And after you define a channel like this...you can scroll into the past and see where the levels have been respected there too.

And that tends to sometimes raise the hair on the back of my neck. Sort of a "How the heck is this possible?" line of thought.

Here is our current EU daily ICCE chart.

Best,

Eric

Sterling Dollar doesn't always track exactly with Euro, but whenever UChf is bullish GU usually behaves the way you would expect it too.

Here is my current GU Daily ICCE chart. That 1.6006 Price Flip (PPZ) where Price is sometimes seeing it as resistance and sometimes as support seems to be an important level. I put a couple of arrows on my chart where pinbars had used the Top channel line as a support structure. Lately we haven't had any closes below it. This is one of the beauty's of using Daily charts. It gives you plenty of time to decide what you'd like to do with a trading opportunity like this.

Best,

Eric.

Here's a little longer view of EU (last 9 months of Daily moves) on the EU ICCE chart. If you look back and forth across the Channel, you can see areas where Price reacted strongly to the projected Fib level, and the Channel itself. ICCE charts can be either a trade management tool or a trade entry tool. If you want to use them as an entry tool I would recommend that you read up on Jaroo's Price Breaks Through and Closes Above or Below (PBT&CA...PBT&CB). Then when you see a candle break through a level...you'll have an idea as to why it retraced back to that level...almost to the pip...before it continued on. Unlike some Daily Entries where you might be inclined to use a Stop Loss of 75 to 150 pips. Entries with a Jaroo level can be safely done with a 35 pip (or sometimes smaller) stop loss.

Best,

Eric

Seems interesting. Tomorrow I will read it through again, and then I'll have some questions if you don't mind

now as I read your posts i think I'll head back to the beginning - and find out what this ICCE is

Hi LT,
Best way to learn anything about ICCE is to go to the source and read Bemac's thread;
http://www.forexfactory.com/showthread.php?t=162886

Bemac doesn't make many appearances these days, but my friend Aiden (OneDay!) does the heavy lifting on the thread now. The one tip I would give anyone trying to learn ICCE is to apply the indicator and then turn off the Diagonals. The Diagonal lines that appear are guides to help you see where Price is matriculating too...but the chart will be a lot easier to read as a newbie if you turn them off...and just concentrate on the Horizontals. The Horizontal Fibs Projections will be amazing in their own right as they frequently are major Price Flips (Resistances turning into Supports). What the J16 folks like to call a Price Pivot Zone (PPZ).

Best,

Eric.

It's amazing what sort of things you learn in FF. One of the true gems in FF is the TAF thread that fti started. fti was a SuperDealer (read MarketMaker in USD/DM, what EUR/USD used to be) at a Singapore bank. He retired a few years ago and started the TAF (Technical Analysis Fallacy) thread here in FF. The TAF thread is huge! But if you read through the first 200 pages you'll get the gist of it.

Some of things I'm about to say will only make sense if you go ahead and read the thread.

One nice feature of TAF was the Money Management principles. My implementation of that is that I don't jump into the river with the whole body as I used to do...but instead I dip a toe in the water to see if I'm going to like the way the current is flowing. I take the amount of money I want risk in Total (say 3% of the account) divided by my intended stop loss (for sizing) and divide it into 32 pieces. Each piece is a Scout that I can deploy in the field. I can deploy the Scouts in a Fib Skew of 1, 2, 3, 5 ,8, and 13 Scouts. fti didn't trade with a stop loss. But that's one part that I was cautious about.

You can instantly see that if you eventually wanted to deploy 3%, and you did it all at once and found yourself wrongfooted...you'd be hurting.

What fti introduced was using a tiny amount of your capital as a Scout, and then if you needed to rescue the Scout...you'd still have troops in reserve that you could do that with. fti was reaveraging the price during a rescue with more troops than he started with as price went against his position. fti was watching on multiple timeframes but mainly trading on 5 minute. The MM principles are useful no matter what timeframe you are working on.

Best,

Eric.

Hi Eric.

I understand what you mean about switching off - there are a lot of lines to watch But having said that, if you get a good fit, then it is surprising how price will wrap around them, as in the images below...

Back in 2010...



And now...

Oh yes, definitely if you get a good fit.

And you will want to use those diagonals and even the mid-diagonals eventually. But, for the newbies to ICCE it's a lot to absorb as you're trying to wrap your head around the ICCE fib projections ideas.

Kinda of like the old question...is your mind floating around inside your brain...or is your brain (and you) floating around inside your mind? Okay, enough metaphysics for the day.

And once again our friends at the FED believe that their invested cash (loaned to ECB and the PIIGS) is best served by printing cash...sending the USD down and the Euro back up. Another intervention that increases volatility and opportunities for us.

PIIGS = Portugal, Ireland, Italy, Greece, and Spain.

Regards,

Eric.

Watching the 3 Kingdoms has been a hobby of mine since I first listened to what fti was talking about in the beginnings of the TAF thread. The 3 Kingdoms (as I undrstand them) are EUR, GBP, and JPY, and their inter-relationships with USD. Basically if you're watching EUR/USD, GBP/USD, and USD/JPY...and USD is being bullish...you would expect EU and GU to be trending lower and UJ to be trending higher. That's the normal thing. If USD is behaving bearishly, then EU and GU should be trending higher, and UJ should be trending lower. That's a normal thing.

But occasionally...something a bit abnormal creeps in...and EU, GU, and UJ are all synched up in the same direction. When this happens, the markets have just handed you a pretty present tied up with a nice bow...and it's called EUR/JPY. If you go back and look at the Daily time frame for each market...and pay attention to the really big moves in EJ...scan back and look at what EU and UJ were doing on those days. Most often they were moving together. And when that happens trading with the trend is a fun thing.

Best,

Eric.

The best use of the ICCE indicator is that it helps you to look for future Price Actions in Great spots. If you can define a Congestion or Compression area as a Channel that has a Top and a Bottom...that are being used as both Support and Resistance lines...then I think you've got something.
I tried to explain this to Stephen (LamerTrader) in a PM, but I don't feel like I did a very good job of it. ICCE is something that can take a little while to assimilate. But it was built as a collective of several really great traders (including Bemac) who played with it as they were actively trading. They started out by developing a standard Fib retracement tool and turning into a Fib Projection tool along the ideas that Bemac laid out.

One of the members of the original thread (Kihl) set out some additional levels that could be used in replacement of the original levels;
1 - 52.78 %$
0 - 47.22 %$
2.622 - 61.80 %$
0.5 - 50.00 %$
-1.622 - 38.20 %$
5.248 - 76.40 %$
-4.248 - 23.60 %$
9.493 - 100.0 %$
-8.493 - 0.00 %$

The 52.78% ratio and the 47.22% ratio are what Bemac came up with on either side of the 50% level that is right in the middle of a standard Fib retracement. I'm probably repeating myself here, and I hope I'm paraphrasing this correctly...Bill's original idea was that if you could identify a tight congestion area on a chart (doesn't make what difference the time frame)...and bound it with a Top and Bottom level near the 50%...you should be able to use that to find where the other Fib levels will wind up, between 0% and 100%.

A picture is worth a lot of words. I took one of my Fib tools and applied the original replacement figures to it. Then used that on a plain green and black EU Daily chart. The one addition I made was to put a 92% level on it...and that's a personal choice of my own experiences. A lot of times Price will turn at a 92% level before it tries to test the 100% level. The value of 92% is 8.053 in the fib tool. If anyone wants to read about how they originally put all of this together go here;
http://www.forexfactory.com/showthre...73#post2662173

I have been lucky enough to have Bemac and One Day! (Aiden) to talk to over in the James 16 Group Private Forum area. I count Aiden as a good friend and I was proud to vouch for him.

I put a blue box around the area on the chart that I saw as a possible congestion area. Then applied the Icce Fib tool that I constructed around it. I did this as an example. Anyone can take an indicator and chart and make it look like you did something extraordinary with it that shouldn't be possible...like predict the future. I have to say that ICCE does a pretty good job of that without any extra tweaking all on it's own.

I invite anyone to read up on this a bit...re-craft your existing Fib retracement tool as an ICCE Fib Projection Tool...and go try it on your favorite time frame. See if you can scare yourself with the possibilities.

Best,

Eric.

Not everyone trades the Daily time frames. I like to see the trends from the Daily, but then drop down to the Hourly to see where the potentials for the upcoming week may be. Once you have Price Actions wandering around inside a tight channel...it's the breakout of that channel back into a trend (an impulse move) or in ICCE parlance...a Combustion that can make you a wee bit of Cargo.

UJ was showing a 20 pip high compression early in the week and then broke out of that channel and expanded upwards. Price sometimes gets into a balance at the end of the NY session after Frankfurt and London have gone home for the day. Price will range inside this 20 pip high area until Tokyo and Singapore come online and decide to move things out of the Channel. If you're the type of trader that likes a slow grinding...low volatility environment, the NY afternnoon-early evening session may be just your cup of tea. Oanda has excellent excellent spreads on UJ and sometimes trading the range can pick you up some money. Just don't be in a hurry.

Since I first learned of ICCE, I've always thought of this Compression area as an IcceBox. I use it frequently to see when it's safe to trade into rising or falling momentum. Little spikes that go 5 or 10 pips above or below it could be fakeys. Once you get a close outside the Box...a retrace-test back to either the Top or Bottom of the IcceBox is usually a safer high probability-low risk entry. The other safer high probability-low risk entries are when price has penetrated one of the plotted fib levels has done a retrace-test back to the Fib levels before moving back into the trending direction.

This all has a very Jaroo-like flavor to it...as these are really a Price Breaks Through & Closes Above...or Closes Below setup. Jarro has discussed these setups at length before. Usually he uses them with Weekly or Daily High Close of Resistance or Low Close of Support line. The trouble with the Jaroo HCR/LCS isn't that they work..they usually do. My trouble with them is, which HCR/LCS is the important one that I should be watching? And is it going to penetrate-retrace-test when I happen to be watching it? Using the ICCE plotted Fib levels takes a little bit of the guess-work out of the equation. Fibs work because millions of other traders are watching them too...and expect them to work. The Pygmalion effect and crowd psychology in action.

Good Fortune,

Eric.

Doesn't look like a Jarroo level to me.
Why start this thread when you could further your study of both Jarroo's methodology and Bemac's in their respective threads?

Well, you're right that (0.9266) is a Jaroo level. That's not the only one this week where PBT&CB. It also broke through 0.9216 (that I had on my original chart as a HCR)...and then retraced back to it almost to the pip...before continuing on down. Jaroo gets high marks in my book for showing us how we can profit on high probability/low risk entries.

Thanks for showing me a LCS that I should have been paying attention too. I could have been in the trade 50 pips earlier.

Best,

Eric.

In defence of One Day's idea that having the diagonals left on is a good thing...

...I did another UJ chart on the 1hour time frame and left the diagonals turned on. The Blue lines running up towards the upper right are Bullish Defensive Lines. And the Pink lines running down towards the lower right are Bearish Defensive Lines. If you have a chance to go back and read the "ICCE. Bemac's Fib. Reverse Engineered" thread, the group of folks who participated in the development of the diagonals discovered some cool things. When the High of price encounters a Bearish line...it either breaks though it of follows it downwards...depending on which forces are in control of the auction market at that time. If it breaks through it...price will very often retrace to it, and start using it as a support. This essentially makes the Diagonals a PPZ (what J16 calls a Price Pivot Zone).

When the Low of price encounters a Bullish line...it either follows it or breaks through it...again depending on who has control of the auction at that time.

The Golden Diagonals that cut through the Channel box that is created have a special significance as price likes to wrap around these as the auction either breaks out of the Channel to the Upside of the Downside. This is very much a process of discovery

You may have to stare at this hourly UJ chart for a while following the story of the USD/YEN auction before you start making any discoveries of your own. This may be the hardest part about using an ICCE chart. It's not a simple "...okay, just follow this indicator and when it does this, go short and make a ton of money!" sort of thing. People look at ICCE for the first time and if you don't see something cool in it, they leave it and go looking for their next Grail. If you do sort of get it...it kind of grabs you by the throat and raises the hair on the back of your neck...all at the same time. Kind of a OMG sort of emotion.

If UJ is following this Golden Diagonal and the auction is proceeding in a Bullish way...and EU is following suit (as the ECB and the FED want it too)...I'll bet you can guess where where EUR/YEN is going, can't you?

The ICCE isn't just useful for the Weekly/Daily/4Hr sort of time frames. When Bill (Bemac) was trading EU with ICCE he was trading it on the 5 and 1 minute time frames. He would set up his Channel based on the Compression area that follows the end of the NY Session trading going into the Asian Session. Then he would follow the price as it rode along on the Diagonals as it broke out of the Channel, and headed towards an ICCE fib farther away.

I set up this Channel Box on the UJ Hourly, and then set-in another Channel based on my customized Fib retracement tool enclosing the Compression area from the Friday Closing area. The Main Channel 83% and the 2nd Channel 61% are acting in confluence with the Hourly J16 PPZ and the Jaroo Hourly HCR/LCS in that same area as a heavy resistance area for the auction.

A bounce higher would support a Buy...back towards the Golden Diagonal.

A break below and test-retrace would support a Sell.

Best,

Eric.