Identifying Market Swings - Medium and Long Term Trading

Hi seaman2,

Glad to see that you are profitable with your strategy, averaging 40% returns per year with a low drawdown is an outstanding performance.

My average returns are difficult to quantify over a year because I will hold positions for several years pyramiding along the way. The positions tend to be quite massive by the time I decide to dump it all. I'm sure as you have already figured out, it's really very simple and quite boring once see the markets for what they really are. The only thing really needed to be very profitable is patience.

Yes, my part in this thread is pretty close to finished, I have no motivation to continue as I'm getting absolutely nothing out of it. But everyone else is free to keep this thread alive for as long as there is interest.

Thank you Nasir, for your very kind words.

I'll be glad to take a few more questions before going into "hibernation"

Wish you all the best in your trading/investing adventures!

Hey Razorjack, Nice thread!

I agree with you - You basically get out what you put in, and the vast majority of people on here can't be bothered to do their research it seems. Having read just a couple of pages on this thread I can see that a few guys have switched from shorter TFs to the Daily (or longer?); I am pleased to say that I have also seen the light!

I had been testing technical strategies for the past 4/5 years on and off and it got me absolutely nowhere. I then realised that to be successful you really have to pay attention to the fundamentals. It seems stupid to me now that I never knew how to quantitatively assess economic news in order to make use of it. However, I've found that a 'strong enough' change from Forecast to Actual USD Unemployment Claims, for example, often results in a big move if the Absolute change AND Percentage change are both above a certain threshold.

One of the most important elements of this method is to open trades at 0800 UTC the following day as this is when the institutional investors and hedgers show up to the party, and liquidity is beefed up as a result.

I'll post some examples if anyone is interested?

Hi burnzmeister,

To paraphrase Jesse Livermore:

THE BIG MONEY IS MADE IN THE BIG SWING.

I can't stress how absolutely true this statement is. Most people have the misconception that they will make more money by scalping or taking chunks out of the daily up and down movements completely missing out on creative trade management strategies, leveraging open profits, engaging the markets with clearer decision making, etc tec.

What you wrote regarding the economic data releases are true, however you can go even further where news/eco data (including NFP) releases are nothing more than events that push the market in your direction or give you the opportunity to add more to your long term positions.

When you have positions that are already 1000's of pips in profit, movements of a few hundred pips up or down don't have much of an impact other then give an opportunity to adjust your overall portfolio

food for thought thread, very enlightening. im surprised why the enthusiasm for this thread is so few compared to the trading system threads. seem most peoples in this forum cant recognize between treasure and trashure. please enlighten us more and more.

best regards

As you grow older, you realize that most people want rewards without responsibilities. They would rather be told what to do, than to figure out what they should do. IMO, this is why everyone is so interested in the latest indicators, systems, EAs etc. This way they can blame losses on the indicators, systems, brokers, market manipulation etc instead of taking responsibility for their own decisions


Ok, here's one more. Very simple concept that is so obvious but completely overlooked because everyone wants to be told what to do instead of figuring things out for themselves:

1. Imagine that a particular pair is in a strong long term trend, up or down doesn't matter which, your choice

2. Now think about the 4 points on a bar/candle: Open, High, Low, Close (OHLC)

3. Now with the trend that you chose, imagine a candle is forming. In which order will the 4 points of a bar/candle form, e.g. which one of the 4 points (OHLC) forms first, second, third, fourth

4. Now that you understand how bars/candles form in a trend, when would be the best time to enter a market during the day/week/month? Rephrased: which part of the day/week/month would give you the most optimum entry timing? When should you not consider entering?

5. If you figured out #4, then think about what is actually happening in the markets, when traders get whipsawed, how psychological price barriers get broken, when news items move the markets, when major economic data is released etc etc

This little exercise will provide different answers for each of you, but hopefully it will open your eyes and give you a few aha moments. The deeper you study this stuff, the more you will see.

By the way, if you learn anything from my posts, please vouch for me so I can finally reach "10+v"

I'd like to finish on a high note! LOL!

t2t

you may be experiencing overconfidence based on your writing. gets to everyone. been there done that just recently. my advise, cut bet size and take profits.

you will thank me later.

Hi Seaman2,

I'm assuming this is directed at me, it is very sound advice.

Overconfidence? Maybe my writing can be interpreted as overconfidence by some, however it isn't intentional from my side.

I don't think I have anything to be overconfident about, I still haven't reached my long term goals yet, some of positions are still in the red as I am trading them through the turns, overall I am in profit but still have a long long way to go.

As for cutting bet size, this is always good advice. In my case, I don't bet, I invest via buying under-priced assets and selling overpriced assets, and I have strict and fairly conservative margin rules, where each order I throw on is UNDER leveraged, e.g. less than 1:1.

Taking profits is not an option yet, there is still a long long way to go, at least 2 years according to my analysis.

Thank you for the reply, it made realize that I have been spending too much time focusing on the markets and need a bit of a break.

There doesn't seem to be much interest in this thread anyways, so maybe a post or 2 more then I'm done

Thanks again.

I wish i can vouch you, but with my stats right now I can't vouch anyone yet.

anyway what do i perceived, since last year currency market is becoming nasty asset to hold for long term investment now. how do you anticipate for this kind of uncertainty?

Hi Deadlyhands,

I'm not sure how other long term traders do it, I suspect that there are systematic ways using for example indicators.

For me, the trick is to get in very early in a long term trend change and build a position through the turn.

I'll try to explain how I do this with an example using USDJPY:

1. First it starts with looking at the current situation and history - In 2012 when USDJPY was still in a long term downtrend, it was due to 2 main reasons. The first were the Fed's QE programs, the other was the nearly 2 decade long deflation in Japan, this caused the USD to weaken and JPY to strengthen

2. To get ahead of a trend change I look at what conditions would need to change to shift the fundamental driving force in the other direction. In my earlier posts I wrote how the preferred currency to fund carry trades was the USD due to the QE programs and very low interest rates. With that in mind, USD would strengthen dramatically with the unwinding of QE and an interest rate hike by the Fed. As soon as the US economy started recovering there was talk of unwinding QE, so I buy a little USDJPY @77.50 even though it's in a downtrend, just a small amount.

3. As the US economy starts to recover, we see USDDJPY start to range, then more talk of unwinding QE, better employment numbers etc etc, I buy a bit more @77.00 as the range holds over time.

4. More US economic strength, USDJPY starts to head upwards, I buy a little more @ 77.75, By now it is quite clear that the Fed will raise rates and tighten monetary policy long before the BoJ, this means you can expect USD to strengthen faster than JPY, so I buy a little more @79.00

5. There is a new government elected in Japan that pledges to defeat deflation once and for all, I buy a little more @82.50, USDJPY heads up a bit more

6. A new BoJ governor looks to be appointed (I buy more @85.00) and implements a very aggressive easing (QE) program, twice as aggressive as the Fed on GDP basis. I buy a bit more @92.50 and USDJPY really pops.

7. BoJ governor announces a 2% inflation target for 2015 and unlimited QE until that target is reached. I buy a bit more on a dip @ 93.00 and we're off to the races over the next 2 years. You have to remember that this is a dramatic shift from the timid monetary policies for previous 20 years.

8. Combine the fact that we will see QE in Japan until 2015, the Fed to unwind QE in 2015 and possibly moving into a rate hike cycle long before JPY strengthens and there is a very good chance of a trend lasting for about 5 years.

9. To avoid uncertainty, I need to make sure that I buy only on dips, for example when price bounces off of 50 day SMA and that the pyramid doesn't become "top heavy", e.g. trade management and money management

10. The rest is just hanging on for the long, long ride upwards!

As I mentioned before the trick for me is to build a position through the turn, even while price is moving against me, when I learned to do it right it is a much lower risk then if I waited for a confirmation of a trend change, contrary to what most people think.

This also makes it easier to ride the ups and downs as my average price for the position is around 82.50, and well into profit with the current price in the upper 90s.

Hope this was clear.

EDIT: Oh yeah, I almost forgot, I try to look for extreme areas where price will not come back for years. For example, buying longs BELOW 50/200 day SMAs or major psychological price levels, so when price moves to the other side, I have some major heavy weight support protecting my positions.

Ok gentlemen and ladies,

I feel like my time here is done. I hope all the readers of this thread were able to pick up some ideas and it cuts time off the learning curve. My karma is relieved and I have tried to give back for what I have learned.

I'll be hanging around to browse the news, but no longer in the forums.

Thank you DeadlyHands for trying to vouch for me. I didn't make the "10+v", but that's ok I guess.

Best of luck to all of you in achieving your goals. For those of you who put in the work and manage to succeed with long term profitability, I'll see you over on the "dark side"

Take care and goodbye!

This is by far the best forex thread I have ever read. It saddens me to know that you won't be posting in this thread anymore. Thanks for all the help you've provided and good luck in your future endeavors.

Would someone be able to tell me when Razorjack says 'My initial Stop Loss is 1 ATR (Daily)', what does he mean by '1 ATR'?

Make money even if I'm wrong? Umm yes please!

So my stop loss on a long position is underneath by 1 ATR. What could be the strategic point if it is at 1 ATR? What does he mean? What does this look like?

ATR = Average True Range

Maybe you wanna check your chart platform and look at the indicators, or you may simply open www.google.com and type in "ATR definition", that might also help.

Just 20 days Average True Range (Standard Indicator). 1 means multiple of 1X.

Ok, I thought it might be average true range. I'm looking at USDJPY 10 May and the ATR is 0.954. This is 954 pips? That looks kind of huge.

Are you very new to trading? On a jpy pair 0.954 means 95.4 pips.

Thanks. New to the ATR.