Fail Better

I have no idea what I'm doin'...
Was price accelerating into 1.3 BRN? I took a sell there - im already out with win! (FTa was hit) - or this isnt exactly what wizz was trying to describe in the first pages of this thread?

Cheers,
Stephen

Did you consider trading the SFP in eurusd even though there were to highs (yellow circles) in that area already? If so, where would you have placed your TP?

Guys, check Kiwi. Possible SFP incoming.

So (just as i read it earlier) - since the level was touched many times it wasnt such a great trade. My fta was like 15-20 pips away - though i have no idea where to put my FTa / Tp area in this system. Im a j16 trader - I just checked this thread yesterday cuase people recommended it. I actually didnt came here for the SFP and touch trading - much more like wanted to read some advice from wizzard but i said i can give it a try.

Cheers,
Stephen

Did you take this trade?

I made 10 pips. I bought 8035 and sold 8045. Thanks.

Yes i took it. Actually I am still in it.

Green line is my entry, blue line ist my TP. SL is @ 0,7982.
Ive made two mistakes in this trade.

First, i entered the trade a few minutes too early because i was afraid of losing even more pips in case the H1 closes higher. Thus i even got a worse entry than i originally would have gotten if i had stuck to the plan.

Second, since the entry H1 Bar closed relatively far above the swingpoint, i thought it was a good idea to try to run the trade till the HOD to gain a good R of 1.4. That was way to greedy.

Considering the trade i came up with a few questions you guys may be able to answer.

I placed my SL 20 pips [ATR(20) H1] below the low of the trigger H1 bar. Is that how Tom is doing it? In this trade thats way too big, imo. Ive waisted so many pips and price didnt even come back to the swing point. There must be a more elegant way that enables you to score better R. For example what if I just had placed my SL beneath the trigger H1 Bar?

What about trade management? I imagine closing half the trade at FTA, going BE and try to run the rest as far as possible or something similar is a not too bad idea, or is it?

Btw, there were two more SFPs today in EURGBP und EURCAD which worked out great .

Hi, Dave!
I would say FTA is somewhere around 0,8109. Look at the last SUPPORT previous day and the story behind it!
But price is fighting 0,8082 now. Has to eliminate FIB 50% and recent multylow/close level.
Look chart!

Good luck

toti

And I am out of Kiwi for plus 0.35R.

Maybe someone can share his thoughts regarding the questions i posted above.

Another question (i know it has been asked at least a bazillion times before): Can one of you repeat the SL rules Tom uses when he trades SFPs on H1 ?

Thanks!

The FTA in this methodology is exactly the same as the J16.
It is simply bar highs and lows on the TF you are trading.

Been a long time since I was last on this thread. Learnt some interesting stuff along the way.

One observation I would make is that the more times a level has been touched does not make it an inferior setup, far from it. Its a far better approach to assess the overall context than to base entries on the number of previous touches.

Also blind entries with a tight stop for me are the most profitable overall approach. The strike rate is low but the winners more than compensate for the numerous small losses. You have to get used to taking small losses and breakeven trades though in pursuit of greater gains from larger swings.

So in a nutshell, use less of a rules based approach, trust in the blind entry, use a tight stop, and expect nothing. You might be surprised how profitable it can be this way.

All the best.

Dave,

Your thinking is wrong: "Since the entry H1 Bar closed relatively far above the swingpoint, i thought it was a good idea to try to run the trade till the HOD to gain a good R of 1.4."

By saying that you NEED the market to do something to compensate you for your own entry is illogical.

The market doesn't know what your reward/risk is.

Your only significance to the market is as a liquidity provider. Once you have fulfilled that role by getting in (and placing other orders e.g. a stop and target) you are on your own.

At that point, the market couldn't care less about you as an individual.

I hope I don't sound harsh - I am just trying to inject some realism.

When the market trades into an area where it has a high probability of reversing, get out. If that area is 10 pips higher than where you are planning to get in and you figure your stop needs to be 50 pips then you have to pass on the trade. It's as simple as that.

I also don't understand this concept of "moving to BE and trying to run the trade as far as possible".

Does every trade you get in have to be a runner?

And what is BE? Is it TRULY where the idea behind the trade is wrong or is just another DEMAND you make of the market?

You probably want to be a trader...

The problem is, you are not thinking about how to trade the market.

You are thinking about how to trade your P&L.

EUR/CHF SFP. I am taking this one.

The NZD/USD H1 SFP from yesterday was a good setup. Here is how I saw it.

The previous swing low is circled and the SFP (which is also a pin bar/hammer) is marked with a green arrow.

The FTA to me is the blue boxed zone and I would usually offer at the last low (pre-breakdown through the area) which would put my target at the red dashed line.

If you enter at the close of the SFP and use an ATR based stop (24 period subtracted from the low of the candle) this would put you with a 15 pip target and a 57 pip stop (assuming a 2 pip spread) which would give you an R of 0.26.

Is this worth trading? Simple answer; Yes if you KNOW you can maintain a strike rate of well over 81%.

Assuming you can't, then no it is not.

In these scenarios, when the wicks are long and the reward to target is too low for me after assuming the risk, one of the techniques I will often use is;

- Wait for a pullback into the SFP - at this point you could (although I DO NOT) go long during the pullback with an ATR based stop.
- When the market has retraced around 50% of the SFP, I put a stop buy in at the SFP close and leave it in for 1 hour only.
- If it triggers then I use a stop of the lowest point of the retracement.

This technique has a fair few advantages for me;

1) If it goes without me, I miss it but the R would have been so low anyway that a positive expectancy in the long run would be very hard to achieve. If it retraces but not by enough to make me want to put in a order to go long and I then miss it, that's just hard luck.
2) If it fails straight off, then I escape taking a loser.
3) If I do get a fill the same hour, we usually have two h1 tails at the point of entry and since I am going with the flow after a second rejection of lower prices the probability of follow through momentum increases.
4) My reward:risk ratio is much more favourable meaning I do not need to maintain such a high strike rate to come out ahead in the long term.

When was the last time you went through all your trades with a fine tooth comb and asked yourself;

What links the winners?
What links the losers?
Based on my last trades how could I have done things better?

Taking the example of the Kiwi in the last post, you SHOULD NOT be saying: "I have to take this trade as it looks great and I don't want to miss it. I think I can get away with putting my stop below the pin giving me a 33 pip stop and since I've been told that a reward/risk ratio of 2 is good, I'm going to use a 66 pip target."

If you find yourself thinking that way then don't pull the trigger because you have no hope. You are not trading the market you are trading your P&L. Go back to the drawing board.

Do research. Look at previous SFP trades and see what the maximum adverse excursion is, where trades run too etc. You need to know probabilities and resulting expectancies. If you don't know these things you are gambling.

The problem that a lot of traders make is they then come on here and say "where do you guys put your stop loss"? The reason being it's easy to get someone else to provide you with the answer.

How do I know that most people don't want to do the work? Because last year I adapted the gap strategy I taught at the beginning of this thread. When some people found out they sounded surprised I've changed it.

Of course I changed it! In the 2012 special webinar, I showed the spreadsheet outlining the three techniques quite clearly and if you are updating it regularly you will KNOW the higher strike expectancy had changed, making it (still profitable but not AS profitable) while the lowest one had stayed the same, bringing it way out in front.

At this point I was thinking; Are people still coming to me to learn to trade or am I now just here to keep them updated of the statistics that they should be gathering themselves?

Forums are excellent places to share techniques and to talk about the business of trading. But you have to be careful that you don't end up strategy hopping.

We all know the dreaded pitfalls of "system hopping" (where a trader tries one system and can't seem to make it work so they search another). You also have "intra strategy hopping". This is where the traders are all trading the same strategy (e.g. SFP's) but constantly on the search for the best entry/stop/target and asking everyone else what they do.

It is largely pointless asking someone else how they approach setups because they will rarely give you all the information that you NEED in order to understand it and trade it profitably.

Firstly you have no idea whether they are making money with it or not and secondly you do not know, even if they are, what the strike rate, R and expectancy is.

If one was prepared to methodically back and forward test it, it could be worthwhile asking others but most are not. They will simply say "right, fx_pip_smashing_pioneer told me he does X so I'm going to try that for a few trades and see how it works for me".

Well if you think like that, you might as well stop now.

I know someone that has been playing these SFP's over hundreds of live trades and uses a particular technique (based on a fib retracement entry of the SFP bar, a fixed pip stop below the low and a fixed R target, across just FX.

I am not prepared to give his actual parameters on a public forum because he spent a long time learning from his journal but at least you now have an idea of how he approaches it.

This person has been making money consistently. In my live room he actually explained his technique a while back and I still don't know another trader of those that heard him that is making the same returns. How can that be?

Because they don't know exactly how it works.

Here are just two of the pitfalls of this persons particular strategy:

- It will lose as often as it wins (the strike rate fluctuates around 50% on the setup)

This means the uninitiated trader could easily get multiple losers in a row and with no idea that it works in the long term other than the word of a trader on a a forum, loses faith and moves on.

- It will miss MANY setups that look beautiful but simply don't retrace.

There is nothing newer traders hate worse than missing moves - once or twice they can cope with it but when they start missing huge winners, they will soon start changing things.

In a nutshell; without the stats to back it up long term (which means sticking to ONE technique constantly and analysing it), most will have no confidence it will keep working.

And confidence is key because draw down is as guaranteed as death and taxes.

I wanted to do a breakdown of a setup.

As some of you will know, I have been particularly vehement in saying on Twitter I am bearish equities. They have made a topping pattern very similar to a pattern that has called the start of several bear markets including Wheat (2008), USD/JPY (2012) and Silver in 2011 which I actually called as the top to many of you in my free Sunday webinar.

Since the S&P500 has barely sold off yet I cannot say that the belief has turned out "right" but the point of gaining the best entry is to afford you the opportunity of being WRONG without losing money. E.g. If you predict a bigger move (via a day type or pattern as bias) and you nail the entry you can usually go far enough into profit so that if it doesn't run, you have plenty of opportunity to get out for profit.

I am going to show you an example from the FTSE 100 Future.

Let's keep this simple.

The weekly FTSE broke prior weekly highs (marked with the red line) and formed a cross bar (SFP and Pin).

This is the first big clue that all is not well.

The daily timeframe exhibited the classic "day bias" ; the infamous "pin bar".

We expect the market to move lower . The FTA is the purple dashed line at 6479 (enhanced by the D1 and W1 bearish action)

Now many traders are taught to place sell stops beneath the pin bar with a stop above the high and once filled, to shoot for target.

What actually happens, time and time and time again, is that once they are short, the market initially moves lower.

Then, at the point that it has moved by a decent enough amount to allow (and encourage) those traders that shorted the pin bar low, to move their stops to breakeven, the market comes back to take them out.

If you are genuinely not aware of this phenomenon whereby the market comes back to the trigger point of pins and then trades in the direction of them again, you haven't studied the market enough.

It is one of the most consistent phenomena I have ever seen.

I have pointed this out numerous times on threads where people trade these pins this way and I am usually ignored. Such is the power of the "free trade" mindset. (Which isn't a free trade at all - if it comes back to BE you've just lost money)

But that's cool because we can use them to get a fill.

So note that yellow line. That is where the shorts will be OUT of their "free trade" for zero profit.

This is the H1 chart.

The blue zone is the logical place to sell blind (marked with the tick). The stop goes above the thrust candle that broke this level (marked with the red dashed line).

Why the blue zone?

- It is previous support lows (marked with the green arrows)
- This support lines up with the 61% fib retracement of the down move.
- The blue dashed line is the ATR on the day (we are over it which means we get a high probability of mean reversion at the next good level)
- The yellow dashed line is the point at which the breakevens are taken. This almost always gets hit.

That is how you pick a high probability trade.

And if the trade goes to target?

You are looking at a 20R.

Not sure I agree with BE being a bad thing.
I often use what I call a virtual be. Where, I will close a percentage of a trade that has potential to move past an FTA for a bit of a run.
For example. closing two thirds of the trade and I do not move the stop to the physical entry point, because I took two thirds profit, I am still going to be at BE+ even if it comes back on me before getting a chance to move to the physical BE.
I feel at the FTA we have to take some measures to protect our investment and not try and hope it will break through the FTA.

Just my humble opinion.