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"Ratios & Harmonics: a Different Way to Trade." Summary 37 replies

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Ratios & Harmonics: a Different Way to Trade

  • #2,301
  • Jan 28, 2013 10:09am Jan 28, 2013 10:09am
Quoting itinerant
I'm confused on this one...
The Advance Pattern Reference Guide seems to show that a bearish butterfly's BC leg should retrace to 38.2 - 50.0 of AB.
But on this chart is seems to show a BC retracement right down to 88.6 of AB?
Don't be I'm his/her trade, I have not covered butterfly patterns yet and that maybe how he/she trades them and that is fine.
If you fail to plan, you plan to fail.
  • #2,302
  • Jan 28, 2013 10:10am Jan 28, 2013 10:10am
Quoting ewgcorp
Mr. Pip, S/R - what does it stand for?
Support/Resistence
If you fail to plan, you plan to fail.
  • #2,303
  • Jan 28, 2013 10:11am Jan 28, 2013 10:11am
Quoting Starry
Excellent, took profit for 16 pips.

Attachment
There you go!
If you fail to plan, you plan to fail.
  • #2,304
  • Edited 11:03am Jan 28, 2013 10:17am | Edited 11:03am
Quoting liemo
Giving GBP/CHF a crack at going long:

Reason:

Daily - ABCD pattern
- PA reached 1.272 fib extension of AB

30 Min - ABCD patternhttp://images.forexfactory.net/misc/thread_attach.gif
- PA reached 1.272 fib extension of AB
- Price reached 78.6 fib of previous swing

SL : 1.4552
Entry : 1.4579
Target : 1.4850 (618 fib retracement of Daily AD minus 20 pips)
Risk : 27 pips
R:R : 1:10

Am I too ambitious?

Considering to take partial profits @ completion of first ABCD pattern on 30 min...
Too early to tell but looks like it may continue lower if it can get past this support area.
Attached Image (click to enlarge)
Click to Enlarge Name: $GBPCHF (30 Min) 1_28_2013.jpg Size: 76 KB
If you fail to plan, you plan to fail.
  • #2,305
  • Edited 10:54am Jan 28, 2013 10:38am | Edited 10:54am
Mr pip,
for an abcd whose cd leg extends to below the 127 line, without any other confluence, how do you draw the prz? Do you include the 138 in it too?

edit: nvm i see in your chart you drew it including the 138

Attached Image (click to enlarge)
Click to Enlarge Name: prz3.jpg Size: 142 KB
  • #2,306
  • Jan 28, 2013 11:00am Jan 28, 2013 11:00am
Quoting Starry
Mr pip,
for an abcd whose cd leg extends to below the 127 line, without any other confluence, how do you draw the prz? Do you include the 138 in it too?

edit: nvm i see in your chart you drew it including the 138

Attachment
Anything below the 127 is not something I'm willin to trade because you are trading into potential support of the swing high which is right there. Find the confluence it is there and lots of structure.
Attached Image (click to enlarge)
Click to Enlarge Name: $EURUSD (233 Tick) 1_28_2013 2.jpg Size: 90 KB
If you fail to plan, you plan to fail.
  • #2,307
  • Jan 28, 2013 11:16am Jan 28, 2013 11:16am
Quoting Mr. Pip
Anything below the 127 is not something I'm willin to trade because you are trading into potential support of the swing high which is right there. Find the confluence it is there and lots of structure.
would you have traded that without the pin bar confirmation? my chart didnt have a pin bar, it just went down.
  • #2,308
  • Jan 28, 2013 11:27am Jan 28, 2013 11:27am
Bearish Gartley on EURUSD 1M retraced to just shy of the 61.8 mark, tying up nicely with the conclusion of the ABCD pattern.

For that reason, I considered that the exit for the trade.

Would others have carried on?
Attached Image (click to enlarge)
Click to Enlarge Name: EURUSD.jpg Size: 83 KB
  • #2,309
  • Jan 28, 2013 1:04pm Jan 28, 2013 1:04pm
Hi everyone!
First of all I want to thank Mr. Pip for opening this thread. I really appreciate your kindness to share your methodology. I'm also an harmonic trader (novice) and your posts were/are very useful. I have almost finished reading the entire thread and I have a few questions about your smooth MM that I'm not sure I've understand, since english is not my first language:

1) What do you think about this kind of Money Management:

A) Decide how much you're willing to loss for each Pattern and this value must be constant, independently from the time frame or from the amount of Equity. For example 10$
B) Individuate the possible pattern (ABCD, Gartley, Bat, Butterfly, Crab) and the relative PRZ zone
C) Calculate Targets of profit (0.382, 0.618) and stop loss, in order to have a risk/reward = 1:2
D) Open 2 position, and adjust your lot size, in order to loose max your 10$ at the stop loss (in this case 5$ for each position), wheter it is 1 30M, a 3M or a 4h Chart
E) Close the first position at 0.382 and set the second at breakeven. Then close the second at 0.618. Total reward = 20$ or higher (in the best case)
F) 3-4 Patterns a day

2) This is my interpretation of your spredsheet Smooth MM: when in the spreadsheet the Contracts to trade = 1, I risk max my initial value, in this case 10$ (for each pattern); Contracts to trade = 2 , Max risk = 20$; Contracts to trade = 3 , Max risk = 30; and so on. Is my interpretation correct?

Appreciate for comments of anyone

Regards,
Dimitri
  • #2,310
  • Jan 28, 2013 1:10pm Jan 28, 2013 1:10pm
Quoting Starry
would you have traded that without the pin bar confirmation? my chart didnt have a pin bar, it just went down.
Yes the pin bar is one candle one candle does not signal a reversal. Price action is not about one candle. Multiple candles speak louder than one.
If you fail to plan, you plan to fail.
  • #2,311
  • Jan 28, 2013 1:14pm Jan 28, 2013 1:14pm
Quoting itinerant
Bearish Gartley on EURUSD 1M retraced to just shy of the 61.8 mark, tying up nicely with the conclusion of the ABCD pattern.

For that reason, I considered that the exit for the trade.

Would others have carried on?
Well done, remember that even fibs are a zone a tight one but still a zone. Price will not always hit it to the pip. You have to give a tolerance on the 1M 1 or 2 pip should be valid. And confluence even better.
If you fail to plan, you plan to fail.
  • #2,312
  • Jan 28, 2013 1:23pm Jan 28, 2013 1:23pm
Quoting dibo90
Hi everyone!
First of all I want to thank Mr. Pip for opening this thread. I really appreciate your kindness to share your methodology. I'm also an harmonic trader (novice) and your posts were/are very useful. I have almost finished reading the entire thread and I have a few questions about your smooth MM that I'm not sure I've understand, since english is not my first language:

1) What do you think about this kind of Money Management:

A) Decide how much you're willing to loss for each Pattern and this value must be constant,...
I don't think this is the best way to handle the stop placement. This method will often place your stop in an unfavorable place (within structure) increasing risk. You have to taylor your position size to the approximate stop distance and not the other way around. Maybe I misunderstood.
If you fail to plan, you plan to fail.
  • #2,313
  • Jan 28, 2013 1:41pm Jan 28, 2013 1:41pm
Quoting Mr. Pip
I don't think this is the best way to handle the stop placement. This method will often place your stop in an unfavorable place (within structure) increasing risk. You have to taylor your position size to the approximate stop distance and not the other way around. Maybe I misunderstood.
Sorry I explain it badly. The stop loss is based on the pattern, in it not depends form the target of take profit. However most of the time the r/r is approximately 1:2
  • #2,314
  • Jan 28, 2013 2:07pm Jan 28, 2013 2:07pm
Quoting dibo90
Sorry I explain it badly. The stop loss is based on the pattern, in it not depends form the target of take profit. However most of the time the r/r is approximately 1:2
Dibo,
One suggestion. All my testing and as already stated in this thread (I will have to get the post), taking partial profits usually reduces total profit. It is akin to trading scared. When you do, you end up taking full losses and if the ultimate target is reached, it is with partial positions. I once thought partial profits were a great idea until I realized it just meant I was trading scared.

I would suggest moving to B/E when appropriate (38.2%), then let it run. Your R:R will be much improved and your win rate will not suffer as much as you would expect. And if it does, the market is telling you something "Your target is too distant!".

My humble two cents (whilst I sit here out of the market due to 9-to-5 commitments).

Cheers!

Edit: This is the post (http://www.forexfactory.com/showthread.php?p=6396049#post6396049). You are essentially arguing the opposite of this post. Net-net, both are valid ways of trading. The only way to know which is best is to keep copious, detailed notes about trades until you compile sufficient data to determine statistically better methodologies. My statistics generally show scaling out inferior to just holding or scaling in.
  • #2,315
  • Jan 28, 2013 2:35pm Jan 28, 2013 2:35pm
Quoting BroncoCap
Dibo,
One suggestion. All my testing and as already stated in this thread (I will have to get the post), taking partial profits usually reduces total profit. It is akin to trading scared. When you do, you end up taking full losses and if the ultimate target is reached, it is with partial positions. I once thought partial profits were a great idea until I realized it just meant I was trading scared.

I would suggest moving to B/E when appropriate (38.2%), then let it run. Your R:R will be much improved and your win rate will not suffer...
Excellent
If you fail to plan, you plan to fail.
  • #2,316
  • Jan 28, 2013 2:57pm Jan 28, 2013 2:57pm
Quoting BroncoCap
Dibo,
One suggestion. All my testing and as already stated in this thread (I will have to get the post), taking partial profits usually reduces total profit. It is akin to trading scared. When you do, you end up taking full losses and if the ultimate target is reached, it is with partial positions. I once thought partial profits were a great idea until I realized it just meant I was trading scared.

I would suggest moving to B/E when appropriate (38.2%), then let it run. Your R:R will be much improved and your win rate will not suffer as...
Thanks for the reply BroncoCap,
it's true, I must eliminate fear from trading. My notes tell me that in the last 8 trades(7 wins, 1 loss), in all 7 the price reaches 0.618, so statistically you are right. I will use only one position from now, after all a B/E trade si one of the best thing in trading
  • #2,317
  • Jan 28, 2013 3:26pm Jan 28, 2013 3:26pm
Quoting BroncoCap
Dibo,
One suggestion. All my testing and as already stated in this thread (I will have to get the post), taking partial profits usually reduces total profit. It is akin to trading scared. When you do, you end up taking full losses and if the ultimate target is reached, it is with partial positions. I once thought partial profits were a great idea until I realized it just meant I was trading scared.

I would suggest moving to B/E when appropriate (38.2%), then let it run. Your R:R will be much improved and your win rate will not suffer...
Do you have some statistic concerning the number of trades where the first target is hit at 61,8 % and/or the first target is hit at only 38,2 % ?
All my testing stated that it depends on the time frame : on lower TF like 233 ticks or 7 range bars, the price can easily reach the 61,8 % but on time frames like 1 hour or 4 hours or more, there is often a 38,2 % or 50 % but no more....
Of course, when your targets are on an AB leg of a gartley formation, it will go until 61,8 % but gartley on 240 mn is not present every day ;-)
Entry is a science, exit is an art.
  • #2,318
  • Jan 28, 2013 3:38pm Jan 28, 2013 3:38pm
Quoting 4xf
Do you have some statistic concerning the number of trades where the first target is hit at 61,8 % and/or the first target is hit at only 38,2 % ?
All my testing stated that it depends on the time frame : on lower TF like 233 ticks or 7 range bars, the price can easily reach the 61,8 % but on time frames like 1 hour or 4 hours or more, there is often a 38,2 % or 50 % but no more....
Of course, when your targets are on an AB leg of a gartley formation, it will go until 61,8 % but gartley on 240 mn is not present every day ;-)
Forthcoming on my thread, but I can share results here.

I spent much of the weekend designing my system and the variables I want to test. I will be running a simple ABCD pattern system based primarily on the 15min, but allowing for other time frames. I will attempt to collect data for 50 trades then evaluate.

To simplify things, and multi-task with my 9-to-5 job, I will be writing an automated trade handling script where I just need to enter the A and B levels and it will track the rest. I will likely share this, but we shall see.

I hope to have trades going by the end of the week. It is a bat-crap crazy week, so maybe next week.
  • #2,319
  • Jan 28, 2013 3:40pm Jan 28, 2013 3:40pm
Quoting dibo90
Thanks for the reply BroncoCap,
it's true, I must eliminate fear from trading. My notes tell me that in the last 8 trades(7 wins, 1 loss), in all 7 the price reaches 0.618, so statistically you are right. I will use only one position from now, after all a B/E trade si one of the best thing in trading
Awesome and good to see you are tracking your trades. In all honesty, I read Mr. Pip's thread then started trading ABCD's willy nilly. It made it very difficult to determine what was systematic and what was luck. I got a bit excited, but am getting down to business now. We shall see.

Keep it up and keep sharing, this thread has been great about working together, using each other's strengths and weaknesses to improve the group's abilities as a whole.
  • #2,320
  • Jan 28, 2013 5:08pm Jan 28, 2013 5:08pm
Hello Traders, I came accross this and wanted to share it with you.
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If you fail to plan, you plan to fail.
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