Circular Trend-Waves

Kambooj , Thank you for ur good words...Honestly I was inspired by your valuable posts (as I said in the first post) , so its really meaninful to receive confirmative comments from you. Here I met some friends who also helped me to improve my perspective with GANN principles , and some of his methods. The basic idea stays still , but for example the 45 degree angles really improved my perspective (thanks to Bluemental for it , I hope he will be back soon) . I do not know how Gann looked at the market , but for sure he had a geometric approach which gave him sharp [Price + Time] coordinates in the future. So we can get him as a reference point that we are on the right path . In other words its possible to make predictions in the future including time and price .

Coondawg71 , that daily projection , I will really be happy if you share it here. To be honest , I cannot make such long term predictions on USDCHF which is in a bearish trend for years. So I cannot decide (for ultra long terms) which pivot to set as my reference point. But it is easier to draw shor term circles on the daily chart...I am sure after writing this message I also will open USDCHF chart and start trying different reference points

Apart from all of these , I want to talk about EURUSD which really surprised me with the retracement without touching the circular resistence. As you can see in the second picture , I was prepared for a retracement , but I was expecting it to start from the green triangle in the picture. And I wud be looking for a bearish candle formation in that zone. But the result really shocked me...

http://img850.imageshack.us/img850/9687/circles.gif

http://img839.imageshack.us/img839/8866/eurusdfg.gif

http://img35.imageshack.us/img35/5840/result.gif

And the result is really different than my scenario , the retracement came so fast and so strong ... even stronger than ı expected. This strength made me doubt the eagerness of the pair to go upwards. Finally the price was blocked by the circular support which offers a nice opportunity to buy this pair from this level. But I will show you another picture from the weekly perspective :

http://img152.imageshack.us/img152/3334/candleb.gif

The bearish enfulging pattern in the last picture confirms the channel resistence. Ok , I shud be more clear-er ... If action is equal to reaction , or if there is a relation between them like Isac Newton said , then we can measure the market by cloning the patterns of action in the market. As you can see in the picture the price went 1,5 times the action and formed a bearish enfulging pattern . This bearish enfulging pattern in weekly chart makes me prepare scenarios for the circular support's breakout. The trend will be changed in case that circular suport (the red circles in the ictures) is broken. Anyway , I have much to say which I cannot express....so I will summarize them ...


As a Summary :

1- There is a bearish candle formation in weekly timeframe. Also the monthly candles seems to be red at the moment which is an overall idea : the market is bearish !
2- The bearish trend will be established in case the circular support is broken. and the candle formation shows that the price is eager and strong enough to do that...we shud be prepared for it...
3- Action and reaction always have some kind of relation.And they are mostly 1x - 1,5x - 2x - 2,5x.... times of each other. And the pair seems to have been stoıpped by the 1,5x the resistence of the action channel
4- USDCHF scares me. It still has the symptoms of a bearish trend which is about to start. When we remember that this pair (USDCHF) is negative correlated to EURUSD and knowing that it is waiting right under the fan resistence (You can see in the post about USDCHF) making preperations for a drop which will pull EURUSD to really upper levels. And when we remember that EURUSD is also sitting on a potential bounce-up level (circular support) is a strong clue that the weekly bearish candle formation is about to fail ... fake (maybe)
5- If we have completed the "reaction" in EURUSD , then the question is where the retracement will stop. We shud measure the completed reaction and locate it in our new formula as the "action" and predict the next "reaction". I know it sounds to be complex...
6- To sum up : we are at a potential bounce up zone for EURUSD (drop zone for USDCHF) . But this theory is rejected when we look at the candles and the reaction methodology...Aah,Tooo many to think about !!
7- God bless you all !

Well...After a weekend full of thoughts : I have come up to a conclusion saying that the weekly bearish pattern will carry the price to deeper levels. After detecting the angle of the present daily trend and drawing the Fibonacci Channel and the circular support I come to a conclusion that the retracement will drop until it reaches 1,3100-1,3150s ... Its just a guess...Time will show the result ...

Regards

http://img268.imageshack.us/img268/3929/eurusda.gif

Selym,

Just a quick note for the time being...trust your work, its solid... eventually time will prove it to be correct, the issue is sometimes we tend to be well ahead of the movement with our analysis only to have doubt creep in when current price disproves our thoughts. My biggest issue when I started was being early with my entries. Price will lag your longer term analysis. As of now, Eur/Usd and conversely Usd/Chf have been very quite and choppy...that would tell me that a move is immenant for the larger time frame.

sjc

From this Hourly perspective, the Usd/Chf pair is trending upwards BUT it is a weak trend, vulnerable to reversal in the near term.

Thank you for ur comments. A trader shudnt be emotionally related to his account , maybe thats why sometimes I cannoıt be sure of my analysis. EURUSD really shocked me I was so sure of my scenario and was waiting for a bearish formation to happen after reaching 1,3750s , but it dropped so fast. It really demaged my mood of trading.. I write down every possibility with different perspectives all the time and choose the strongest one all the time. But this time its difficult to decide. If I didnt see the EURUSD chart and if I didnt know that its highly negative correlated to USDCHF then ı wud immediately short USDCHF at a suitable level. But my psychology isnt ready for it yet ...

God bless me !

Regards...

maybe you could trade the Jpy pairs instead, easy money. Nzd/jpy is obviously the cheapest to trade and tends overshoot the overall trend, I see that as opportunity to pick good entry price more easily.

Eur/usd and Usd/chf just are not worth trading in my book, for the time being.

sjc

Thank you very much ...

Honestly I even didnt look at NZDJPY , the only JPY pairs I checked was EURJPY which gives really good pips (as you say) whenever I taka a trade. After that , I will also check NZDJPY and draw handsome circles on it too ... By the way , USDJY is also at a good place at the moment ...

Here is a very easy way to trade the Yen pairs...

1. Use the USD/Yen as your barometer for trend direction...Eur/Yen for that matter too

2. Trade the EuroYen or Nzd Yen pair in the same direction as they are positively correlated but will lag/follow

3. Like I mentioned earlier, the Kiwi Yen will lag the most and will take a little time to play catch up, allowing you to move accordingly, plus it is the cheapest pair to trade

sjc

The way I currently see it, yen pairs are in the first wave of an uptrend breakout on the hourly charts. This would be the first signal for larger time frame up trend. I got in at the bottom on the Kiwi Yen at 77.15 and I am expecting it top out at resistance here very shortly. A second entry point will present itself on the hourly betweeen 77 and 77.50 is my method of thinking for today through tomorrow, in the meantime, I'm riding the wave.

sjc

Closed the KiwiYen for +48. Price hit 10.00% Fib Arc and 61.8% Fib Fan line mark on a one minute chart and broke downwards. Keep an eye on the 7:20 am EST time mark, potential upwards thrust for the second wave upwards and this would be the sign for a true entry point!!! Price I am seeking is 77.45, but could be as cheap as 77.27.

sjc

Hi guys ,

I was not online for a long time due to my positions with 0,64 volume waiting at negative side for long days...ı shud admit that the stress was tooo much. Anyway , the price action last nite proved that the price (EURUSD) wanted to go to deeper levels. ı was expecting 1,31xx as target levels. Anyway, ı realized my EURUSD positions and will get on the trend at the most suitable place at the first pull back.Here is a picture showing the target 1,30s...

Regards...

http://img843.imageshack.us/img843/5789/hedef1.gif

http://img717.imageshack.us/img717/2818/60022828.gif

I'm with you friend, market has been choppy this week, but that is exactly what we expect at major turning points right??? A struggle between the buyers and sellers until someone capitulates. Just like poker, let your opponent tip his hand first, then make our bets. Looks like the bears are finally getting their way for now.

sjc

Yes you are right , I am almost sure about the downtrend and the 1,30ish target. But I realized my short position due to the strong support at 1,33ish zone. If the price pulls back to the neck line then I will enter another short trade. Every pull back shud be seen as a chance to get on the trade (I think). But its still essential to be sceptic and not trust every trade %100 I am really sorry that I didnt answer ur messages on time, I was really too stressed about some kind of formalities I had to do in the tax offices. Here the government is really robbing us !!! Last week I learned that I have to pay an amount because of something which I even didnt know , and I am in the "rich" category which makes the amount a respectable amount

Anyway , it will be nice to escape from here as soon as possible... Some kind of two floored hause with a garden and a hammack in the garden will be nice in a cool country ... Time will show...

Thank you for your supportive messages...Take care...

This f**king choppy week has finally ended . I just went outside and walked around to take some fresh air. Anyway , now I am back and I feel as if I really missed looking at the charts. This job is really amazing If you know how to adjust the optimum dosage. Otherwise It becomes so tiring.

Lets come to my real topic ; EURAUD. I didnt share this screenshot before, because I also didnt believe that it wud act so well. As you can see in the picture there are two FiboArcs drawn on the chart with 1 and 1,618 levels. And if you have read the first posts in this thread telling about the basic instict of the created things in this universe : trying their best to be / to look perfect. Maybe its something about the creater who is perfect , and the things he created also want to be perfect. You know inventions can tell specialities of the inventors .

http://img855.imageshack.us/img855/5088/euraud1.gif

The red circle (FiboArc) in the picture first acted as a support , then as a resistence for the price. Later when the red circular resistence was broken I entered a LONG trade targeting 1,618 level of the red circle. Later I just closed the order with an acceptable profit and just wanted to watch wat wud happen and how the 1,618 red circle wud act. Surprisingly the price really was stopped by the 1,618 level , and it was pushed back. Because ???

Because it wants to be perfect !!!!

Well...so as we can see in the chart the price has two alternatives : either to go up and break 1,618 level and reach 2,0 which will be added in the second picture. Or it will pull back until it reaches the red circular support. But ı shud admit that the 1,618 green circle might be a resistence too... So now lets add trhe 2,0 circular resistence and check what is the next target ...

http://img29.imageshack.us/img29/4879/euraud2.gif

I can here you saying "Oh my God !" OK , maybe you wont say that , but its still amazing for me...isnt it ? The 1,618 of the green circle confluences with the 2,0 level of the red circle. Do you think its just a coincidence ? No , definetely its not !!! Everything is harmonic in this universe , we just need the eyes to see that harmony !

Regards ... Have a nice weekend...

Nice work on the charts Selym !!!

No need to worry, price will come to you and you will be ready and capitalize on it.

I look at the this pair occasionally too, so I made a chart, with my style of using the arc in the same manner I have described before. Here in this chart, the main point was to use the arc as vertical lines of time resistance for upcoming turning points. Reason being that where I see price in respect to this daily chart, we have topped out and are in that point of chop (profit taking) and should see some further sellng should be seen. Price is within the 4.236-5.08 range on the fib extension which further proves chop is due to come. As I have mentioned before in previous posts, the Fib Arc vertical time resistance usually help explain/support the occasional Doji candlesticks. The yellow dashed trendline is the Median Line I create by drawing from the center point of the last Major Swing through to the 1.618 candle that has closed OUTSIDE the arc. This yellow median line is proven to be valid IF we allow the trend line to be drawn on the same angle BACKWARDS and it proves to offer support/ resistance...which usually is does or else I wouldn't use it. This becomes my "regression to the mean" Trendline, believing that price will return to this line until we surpass the last major fib arc, which in my book is 7.00 then 14. The price will most like lose its strength and become unpredictable again.

Next week should allow some sensible price action now that some major market players probably had gotten their price targets with all of this unreal stop hunting blowout action.

Two charts, first one is a close up. Second one is from a larger perspective. Had to zoom out in order to get the Fib Arcs and chart axis to scale out properly. That part of Fib Arcs is annoying.

Second chart is uploaded first, check that one out first.

sjc

Hi friends ,

I will show another proof that this market does not move under the shadow of coincidence. But I shud admit that its really difficult to menage the possibilities. Because ther are lots of possibilities while the market is moving. I wonder if there is an exact solution for this , but mostly the intersections of different tools give us energy points (magnets). So here we can be stimulated to focus on the magnets and watch if the price action confirms their dominance on the price.

As you can see in the picture above which I posted some time ago , and later forgot it , because I drew many more different circular wave structures. In other words , yes its almost impossible to know which wave structure will dominate on the price. Maybe it was what Elliot wanted to solve too , he furthermore tried to define each wave structure including their characteristics. He was also a guy who thought that market moved on a measurable ratio basis. After many years with many improvements the theory came to a huge sum of possibilities including time predictions. So we see that , just like GANN , Elliot theory also includes time factor .

As a conclusion , while analyzing market trends we shud include time factor in our analysis. While writing such things I just stop sometimes and think "Am I looking for the holy grail? Does it exist?" ... Anyway , I do not think or believe that it exists. Its just the capability of menaging many different possibilities at the same time. But on the other side its really fun to decode the art of the great artist who rules everything in this universe , and his signature is : 1,618 ...


Regards ..


Here is the up to date EURUSD chart with the same circles after so much time...

EDIT : the colour of the circles are changed from green to blue , and 2,0 level ARC has been added which also acted as a perfect resistence ...

http://img502.imageshack.us/img502/5996/uptodate.gif

Thank you Coondawg ,

Your charts really look interesting. Honestly its the first time I heard a term as "vertical time resistence" ... I look at those charts with admiration. But I want to ask something about the FiboArc levels ... the Fibo ratios you use in the arcs , are they really effective? I always thought that Fibonacci ratios lost their effectiveness after 2,618 ... but as I see there are people who use even higher ratios Oh my God ... there are many things to learn !

Regards...

I really like how his brain works ...


If A is success in life, then A equals x plus y plus z. Work is x; y is play; and z is keeping your mouth shut.

Gravitation cannot be held responsible for people falling in love. How on earth can you explain in terms of chemistry and physics so important a biological phenomenon as first love? Put your hand on a stove for a minute and it seems like an hour. Sit with that special girl for an hour and it seems like a minute. That's relativity.

Imagination is more important than knowledge...

The important thing is not to stop questioning. Curiosity has its own reason for existing. One cannot help but be in awe when he contemplates the mysteries of eternity, of life, of the marvelous structure of reality. It is enough if one tries merely to comprehend a little of this mystery every day. Never lose a holy curiosity.

Science without religion is lame, religion without science is blind.

Insanity: doing the same thing over and over again and expecting different results.

At any rate, I am convinced that He [God] does not play dice.

Albert Einstein

The thing to always know is this...Fib Levels are ALWAYS in play from time in the past. There are many levels of players in all markets, not just bulls and bears, but the heavy weights alllll the way down to the tiny retail trader right? The heavy weights carry more weight in price action from different levels so those fibs from 1, 2 5, 10 years prior are always in play. I tend to do some things in a unconventional way in an effort to see what taking place that is not visible to our naked eye. So in that regard, you will see some ratios that are not neccesarily Fibonacci Ratio related but numbers that do carry importance, such as Pi and Square Root, or even some Astrological Ratios. It can clutter a chart at times but at least I am aware that they are present and DO matter. Those numbers matter in any and all fashions, Fib Arc, Fib Fan, Fib Channel, Pitchforks etc. So in conclusion, just because a tool is offered by the charting package as a "Fibonacci" tool, I input the additional levels.

sjc

Taken from : http://www.dailyfx.com/forex/educati...ders_Make.html

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Summary: Traders are right more than 50% of the time, but lose more money on losing trades than they win on winning trades. Traders should use stops and limits to enforce a risk/reward ratio of 1:1 or higher.

Big US Dollar moves against the Euro and other currencies have made forex trading more popular than ever, but the influx of new traders has been matched by an outflow of existing traders.

Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through amalgamated trading data on thousands of FXCM live accounts. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately.

Why Does the Average Forex Trader Do Wrong?

Many forex traders have significant experience trading in other markets, and their technical and fundamental analysis is often quite good. In fact, in almost all of the most popular currency pairs that FXCM clients trade, traders are correct more than 50% of the time:

http://img845.imageshack.us/img845/2985/graf1z.png

The above chart shows the results of a data set of over 12 million real trades conducted by FXCM clients worldwide in 2009 and 2010. It shows the 15 most popular currency pairs that clients trade. The blue bar shows the percentage of trades that ended with a profit for the client. Red shows the percentage of trades that ended in loss. For example, in EUR/USD, the most popular currency pair, FXCM clients in the sample were profitable on 59% of their trades, and lost on 41% of their trades.

So if traders tend to be right more than half the time, what are they doing wrong?

http://img844.imageshack.us/img844/3661/graf2p.png

The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite bring right more than half the time. They lose more money on their losing trades than they make on their winning trades.

Let’s use EUR/USD as an example. We know that EUR/USD trades were profitable 59% of the time, but trader losses on EUR/USD were an average of 127 pips while profits were only an average of 65 pips. While traders were correct more than half the time, they lost nearly twice as much on their losing trades as they won on winning trades losing money overall.

The track record for the volatile GBP/JPY pair was even worse. Traders were right an impressive 66% of the time in GBP/JPY – that’s twice as many successful trades as unsuccessful ones. However, traders overall lost money in GBP/JPY because they made an average of only 52 pips on winning trades, while losing more than twice that – an average 122 pips – on losing trades.

Cut Your Losses Early, Let Your Profits Run

Countless trading books advise traders to do this. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. Conversely, when a trade is going well, do not be afraid to let it continue working. You may be able to gain more profits.

This may sound simple – “do more of what is working and less of what is not” – but it runs contrary to human nature. We want to be right. We naturally want to hold on to losses, hoping that “things will turn around” and that our trade “will be right”. Meanwhile, we want to take our profitable trades off the table early, because we become afraid of losing the profits that we’ve already made. This is how you lose money trading. When trading, it is more important to be profitable than to be right. So take your losses early, and let your profits run.

How to Do It: Follow One Simple Rule

Avoiding the loss-making problem described above is pretty simple. When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “risk/reward ratio”. If you risk losing the same number of pips as you hope to gain, then your risk/reward ratio is 1-to-1 (sometimes written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 1:2 risk/reward ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades.

What ratio should you use? It depends on the type of trade you are making. You should always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Generally, with high probability trading strategies, such as range trading strategies, you will want to use a lower ratio, perhaps between 1:1 and 1:2. For lower probability trades, such as trend trading strategies, a higher risk/reward ratio is recommended, such as 1:2, 1:3, or even 1:4. Remember, the higher the risk/reward ratio you choose, the less often you need to correctly predict market direction in order to make money trading.

Stick to Your Plan: Use Stops and Limits

Once you have a trading plan that uses a proper risk/reward ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper risk/reward ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor).

http://img407.imageshack.us/img407/8318/graf3.png

Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading.


Does This Rule Really Work?

Absolutely. There is a reason why so many traders advocate it. You can readily see the difference in the chart below.

http://img33.imageshack.us/img33/2185/graf4.png

The 2 lines in the chart above show the hypothetical returns from a basic RSI trading strategy on USD/CHF using a 60 minute chart. This system was developed to mimic the strategy followed by a very large number of FXCM clients, who tend to be range traders. The blue line shows the “raw” returns, if we run the system without any stops or limits. The red line shows the results if we use stops and limits. The improved results are plain to see.

Our “raw” system follows FXCM clients in another way – it has a high win percentage, but still loses more money on losing trades than it gains on winning ones. The “raw” system’s trades are profitable an impressive 65% of the time during the test period, but it lost an average $200 on losing trades, while only making an average $121 on winning trades.

For our Stop and Limit settings in this model, we set the stop to a constant 115 pips, and the limit to 120 pips, giving us a risk/reward ratio of slightly higher than 1:1. Since this is an RSI Range Trading Strategy, a lower risk/reward ratio gave us better results, because it is a high-probability strategy. 56% of trades in the system were profitable.

In comparing these two results, you can see that not only are the overall results better with the stops and limits, but positive results are more consistent. Drawdowns tend to be smaller, and the equity curve a bit smoother.

Also, in general, a risk/reward of 1-to-1 or higher was more profitable than one that was lower. The next chart shows a simulation for setting a stop to 110 pips on every trade. The system had the best overall profit at around the 1-to-1 and 1-to-1.5 risk/reward level. In the chart below, the left axis shows you the overall return generated over time by the system. The bottom axis shows the risk/reward ratios. You can see the steep rise right at the 1:1 level. At higher risk/rewards levels, the results are broadly similar to the 1:1 level.

http://img9.imageshack.us/img9/1452/graf5.png

Again, we note that our model strategy in this case is a high probability range trading strategy, so a low risk/reward ratio is likely to work well. With a trending strategy, we would expect better results at a higher risk/reward, as trends can continue in your favor for far longer than a range-bound price move.

Game Plan: What Strategy Should I Use?

Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher

Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for 1:2 or more when trend trading. Then you can choose the market direction correctly only half the time and still make money in your account.

The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same risk/reward ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away.