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Where can I learn more about Price Action like those in James16 charts? 9 replies

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james16 Chart Thread

  • #126,961
  • Jul 26, 2013 7:27am Jul 26, 2013 7:27am
Quoting zamfir
{quote} Hi Viktor, Futures brokers don't use MT4. They will provide their own proprietary trading and charting platform in most cases. you can only trade CFDs with Mt4 brokers. Also note that MT4 is not designed for the centralized Exchange markets , only OTC markets.
Yeah, thank God futures brokers don't use MT4.
  • #126,962
  • Jul 26, 2013 5:56pm Jul 26, 2013 5:56pm
Very quiet day... anway here are my thoughts on usd huf (long postion due to the weekly beob and support line). wont talk your head off.
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  • #126,963
  • Jul 26, 2013 10:46pm Jul 26, 2013 10:46pm
Guys i have a question i came upon while demoing.
Say i have a 10k account, not risking more than 3% per trade.
Say i have 3 trades open with 0.1 lots, each 300pip stoploss. Effectively i'm risking almost 9%?
So should i go down in lotsizes to 0.03 for each trade?
  • #126,964
  • Jul 26, 2013 11:00pm Jul 26, 2013 11:00pm
try not to go over 10% in total trades unless your equity curb looks really good and your planning on using a tail stop / or protecting your protection early to let profits run.
  • #126,965
  • Jul 27, 2013 2:00am Jul 27, 2013 2:00am
That's quite high in my opinion unless you have a large sample set of trades to show consistency with that risk. Its more about your risk appetite which might be a little tricky to gauge on demo (I am not suggesting you do not demo). with 3% per trade you will probably experience a more volatile equity curve that someone risking less. If you are comfortable with that then no worries. I personally am sitting around 0.5% per trade 1% max at any given time, that is my comfort level for now.

Why not start with a smaller risk level per trade of 0.5% and increase as you build confidence in your setups? The advantage to starting with less risk as I see it is you will make mistakes along the way so you can increase risk in line with your trading skills.
  • #126,966
  • Jul 27, 2013 2:30am Jul 27, 2013 2:30am
It smells like gas.
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  • #126,967
  • Jul 27, 2013 5:43am Jul 27, 2013 5:43am
Quoting Mav13
Hi turnip15, I believe that 150 and 365 ema are used just as another source of confluence like fibo retracements, round numbers,... For example 365 ema could line up with a RN and PPZ and give your trade more strength. But not everyone uses ema´s. Just my 2 cents though Mav
I don't like to use EMAs because there are not the same at all time frames. A PPZ or a trend line is the same on all time frames but 365 EMA on 4hr is not the same like 365 EMA on daily.

Also I never undestood why a specific EMA is more important than other. Why 365 EMA and not 364 or another number? I think a specific EMA would be important only if a lot of traders watch it and I don't think this is the case. If you ask different traders what EMA are important they will tell you different things.
  • #126,968
  • Jul 27, 2013 5:58am Jul 27, 2013 5:58am
Quoting baccarat
Guys i have a question i came upon while demoing. Say i have a 10k account, not risking more than 3% per trade. Say i have 3 trades open with 0.1 lots, each 300pip stoploss. Effectively i'm risking almost 9%? So should i go down in lotsizes to 0.03 for each trade?
I think only if they are correlated.

Anybody uses Kelly criterion?

W - L/RR

For instance you have 80% probability to win and 1:1 RR. You can risk with Kelly criterion 80%-20% = 60%.
Of course this may be too agressive but I like to use fractions of Kelly criterion. For instance instead of 60% I may risk 20%.

How about this calculator for risk of ruin?

http://www.automated-trading-system....culation-tool/

This calculator assumes you risk the same amount every time. If you have 80% probability to win and 1:1 RR then if you risk 13% of the initial bankroll you will have risk of ruin of 0.

Do you think a win rate of 80% it's possible with an average RR of 1:1 or it's too much?
  • #126,969
  • Jul 27, 2013 9:41am Jul 27, 2013 9:41am
Quoting OzzieMatt
That's quite high in my opinion unless you have a large sample set of trades to show consistency with that risk. Its more about your risk appetite which might be a little tricky to gauge on demo (I am not suggesting you do not demo). with 3% per trade you will probably experience a more volatile equity curve that someone risking less. If you are comfortable with that then no worries. I personally am sitting around 0.5% per trade 1% max at any given time, that is my comfort level for now. Why not start with a smaller risk level per trade of 0.5%...
awesome post Matt

I think it's always better to start low and build then start high and potentially really beat down ones ego

Open risk is important to note but one might have 3 open trades as well and have locked in profit on some, stops moved etc. So it does come back to risk appetite as Matt said too

TO open 3 new trades at once at 3% risk does leave you open for actually MORE then a 9% loss. Because if each trade is equal in lot size(position sized at the time based on closed equity). If all 3 lose technically you will take over a 9% loss

I am ALWAYS thinking about what I can lose

I think starting at a 1/2 to 1% risk per trade is more common and even on demo will give you a better handle on what your method and risk might be. If you notice for instance you take lots of small losses and and get your stops moved quick raising your risk could be just fine with the types of swings you are comfortable with. Someone who takes more losses could see some drastic swings at a 3% swing per trade. It's part of learning ones method finding where their risk tolerance is. As I have gotten more picky over the year I have wanted to see less drastic swings as well as in turned raised my % risk per trade. I HAVE given up profit in order to accomplish the 2, but it's well worth it in my view

Best
Mike
  • #126,970
  • Jul 27, 2013 3:08pm Jul 27, 2013 3:08pm
Quoting baccarat
Guys i have a question i came upon while demoing. Say i have a 10k account, not risking more than 3% per trade. Say i have 3 trades open with 0.1 lots, each 300pip stoploss. Effectively i'm risking almost 9%? So should i go down in lotsizes to 0.03 for each trade?
Do you risk fixed amounts ($300 every time) or 3% from your current account?

If you risk fixed amounts you can open 3 trades in the same time (assuming they're not correlated). It doesn't matter mathematically if you lose 3 trades in a day or you lose them in a week or 2.

If you risk a % from your current account, you can risk for the first trade $300, then for the second trade you assume your first trade will be lost. 10 000 - 300= 9700. 3% from $9700 is $291. You must open 0.09 lots in order to not risk more than $291. Then for the third trade you assume your first and second trade will lose. 10 000 - 591 = 9409. 3% from $9409 is $282. You must open 0.09 lots in order to not risk more than $282. Of course maybe you will win the first trades but if you are pessimistic you will reduce your risk of ruin. Since you can't open the exact number of lots for your risk (you can't open 0.097 lots), you can open 2 trades with 0.10 lots and one trade with 0.09 lots (for a total of $870 risk) instead of one trade with 0.10 lots and 2 trades with 0.09 lots (with a total of $840 risk).

In my calculations I assumed a pip value for 0.1 lots is $1.
  • #126,971
  • Jul 27, 2013 3:42pm Jul 27, 2013 3:42pm
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  • #126,972
  • Jul 27, 2013 9:34pm Jul 27, 2013 9:34pm
I am sure, J16 will saddened by this news.
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  • #126,973
  • Jul 28, 2013 6:26am Jul 28, 2013 6:26am
Quoting str8
{quote} I think only if they are correlated. Anybody uses Kelly criterion? W - L/RR For instance you have 80% probability to win and 1:1 RR. You can risk with Kelly criterion 80%-20% = 60%. Of course this may be too agressive but I like to use fractions of Kelly criterion. For instance instead of 60% I may risk 20%. How about this calculator for risk of ruin? http://www.automated-trading-system....culation-tool/ This calculator assumes you risk the same amount every time. If you have 80% probability...
I usually don't post, but when i see posts like these , it simply shocks me.

probability wise, THERE IS ALWAYS 50-50 CHANCE. There is no such thing as 80% or 90% or any thing near to 100%. No matter how good the setup is ,the best probability a trade has is 50%. period.

Now think about your risk/trade when you always have 50% probability.This is a fact and like most people you want to ignore this fact and take trades , that's your call.

Just don't blame anyone or any trading method if you lose.

As always , nothing personal against you or anyone. I m just reminding people of the facts, that are mostly overlooked.

Happy weekend!!
  • #126,974
  • Edited 8:18am Jul 28, 2013 8:02am | Edited 8:18am
Quoting zamfir
{quote} I usually don't post, but when i see posts like these , it simply shocks me. probability wise, THERE IS ALWAYS 50-50 CHANCE. There is no such thing as 80% or 90% or any thing near to 100%. No matter how good the setup is ,the best probability a trade has is 50%. period. Now think about your risk/trade when you always have 50% probability.This is a fact and like most people you want to ignore this fact and take trades , that's your call. Just don't blame anyone or any trading method if you lose. As always , nothing personal against you or...
If this would have been true then on any trade you should aim for a RR bigger than 1:1 since for 50% probability 1:1 is the break even point. This is one of the biggest myths in forex trading, that you need at least 2:1 RR to be profitable. Also you didn't said anything in your post about risk reward ratio. When you say 50% probability it means every trade has 50% chances to reach take profit and 50% chances to reach stop loss. If what you said would be true, I can always aim for a RR bigger than 1:1 and make EVERY TIME a +EV trade since there is always 50-50 chance. Sorry, but your post doesn't make any sense to me. It's impossible to know the probability to win, you can only make an estimation.

However I think it's not possible to win 80% of time with 1:1 RR. I think 60%-65% is the maximum which you can win with 1:1 RR. Maybe the good traders from this thread can correct me if I'm wrong. If someone is very picky about his trades maybe there are possible bigger win rates, I don't know. I mainly trade daily charts, and until now I wouldn't have losed any trade if I would have entered at the start of Europe session instead of at the start of Asia session which means win rate much bigger than 50% (I admit I don't have a big sample though). Also if you have 30% win rate, 60% break evens or trades that didn't trigger and 10% lose rate your true win rate is 30/40 = 75% , not 30%. If you want to apply Kelly criterion or a calculator for risk of ruin you should write a probability around 75%, not around 30%.
  • #126,975
  • Jul 28, 2013 8:54am Jul 28, 2013 8:54am
R/R ratio has nothing to do with the probability of the next trade. Why do you link them?

All i am saying is that every next trade you are going to take has a probability of 50%, like flipping a coin.

About R/R. The best you can do is only control the Risk part , you cannot or have any control over the reward. Depending on where the FTA is , you can get 1:1 or 1:2 or more. Reward depends on FTA.

I hope i m clear this time.
  • #126,976
  • Edited 10:03am Jul 28, 2013 9:38am | Edited 10:03am
Probability to win a trade (winning means price has reached your take profit which can be a bigger or smaller fraction of your stop loss) has many things to do with risk reward ratio. If you want a huge RR, you won't win very often. Maybe you will win only 10% of time. Conversely, if you want to only win 2 pips and you have a 200 pips stop loss you will win over 90% of time (of course you won't be profitable with this ridiculous small RR even if you win over 90% of time). Those who want higher RR will have lower win rate and those who want higher win rate will have lower RR. You can have a big win rate and be a loser because you won't win enough when you win and you could have something like 20% and be a winner, the risk reward ratio combined with win rate tells you if you're a winner or not, one of them is not enough without the other.

If every trade has a probability to win of 50% no matter of RR ratio (because you said RR has nothing to do with the probability of next trade) every one could choose random buy or sell and put the take profit a little higher than the stop loss and make every time a +EV trade. Of course this is not true since 95% of traders are losing. You said I can only have control over the risk part. If I reduce risk (if I put my stop loss at the left eye of the pin instead of at the other part of the pin) automatically my RR will be higher, but also my win rate will be smaller since the stop loss will be reached more often. There are also some traders that don't care about minor FTAs and want bigger rewards, they will have smaller win rates.
  • #126,977
  • Jul 28, 2013 11:41am Jul 28, 2013 11:41am
Quoting str8
Probability to win a trade (winning means price has reached your take profit which can be a bigger or smaller fraction of your stop loss) has many things to do with risk reward ratio. If you want a huge RR, you won't win very often. Maybe you will win only 10% of time. Conversely, if you want to only win 2 pips and you have a 200 pips stop loss you will win over 90% of time (of course you won't be profitable with this ridiculous small RR even if you win over 90% of time). Those who want higher RR will have lower win rate and those who want higher...

It's always hard to narrow trading down to percentages in such a general way

comes down to method. While I think what Z's point is that each individual trade while it should be based on an edge we know we have historically once you click buy/sell we Never know for 100% sure where price is going to do. Instead what we know is that based on our methods in the LONG run we have an edge so we trade and go with that.

It's entirely possible to have 90% + winning trades and be both a winning or a losing trader.

Too many people wrongly focus on both win % and R:R without actually having a proper method. It's nice to say I want an 80% winning method with 1:1 but your method still must provide it. Often it's sort of a reverse man hunt for it. Instead I think one should learn to trade right and see where that lands them. Make small tweaks over time


For example I pay NO attention to R:R before a trade for the most part. This to me has no bearing on taking a trade. It's a combo of too many things. I call it dynamic R:R ratio. I have many trades that start off where my risk is technically higher than my reward but I will end on having a reward higher than my risk as the trade progresses and I manage my risk.

Just be careful with playing with numbers, it's all good on paper but it can also be distracting and cause you to chase things that are necessary. Focus on your charts and trading right. Analyzing your specific data and making tweaks that are logical along the way. I feel like time is much more well spent that way.


I say this from my own experiences of playing with numbers and trying to make illogical or more likely conclusions that I could not replicate. Once I focused on trading smart and building from that foundation it made all the difference in the world

Hope that helps
Mike
  • #126,978
  • Jul 28, 2013 11:56am Jul 28, 2013 11:56am
Good discussion on ratios/win rates etc. I kept a spread sheet that illustrates some of the points quite well......

1. Our first trader has a great win rate...90% in fact.....he was doing so well he thought a couple of his trades could be managed by moving stops, or leaving a big stop, or simply he was not watching.........2 trades loss against 20 trades total and he LOST his profits and is down on the month.

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2. Our second trader scans the charts for choice trades...and adheres to strict rules regarding risk/reward....his win rate is lousy at 30%, but because he knew eventually his choices would pay better than 1/1, he rode his winners to strong returns...the result only 6 wins out of 20 and he is now enjoying a good return on the month.

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  • #126,979
  • Jul 28, 2013 1:22pm Jul 28, 2013 1:22pm
Quoting mbqb11
{quote} It's always hard to narrow trading down to percentages in such a general way comes down to method. While I think what Z's point is that each individual trade while it should be based on an edge we know we have historically once you click buy/sell we Never know for 100% sure where price is going to do. Instead what we know is that based on our methods in the LONG run we have an edge so we trade and go with that. It's entirely possible to have 90% + winning trades and be both a winning or a losing trader. Too many people wrongly focus on both...
Good points Mike. After observing your trading style and method for the last few years here and in the PF I must say you have a built in R:R What I mean by this is that your tolerance for a trade going against you is not only very low but you also know exactly where you will get out - no ifs, ands or buts about it. In your live trade vids you always talk about reducing your risk ASAP. Also you talk about how even though your initial stop is generous (to prevent spike stop outs) that you would probably rarely take a "full bar" loss. So although you don't talk numbers with respect to win % or R:R your risk averse trading style takes care of it
  • #126,980
  • Jul 28, 2013 1:24pm Jul 28, 2013 1:24pm
Quoting Swede
Good discussion on ratios/win rates etc. I kept a spread sheet that illustrates some of the points quite well...... 1. Our first trader has a great win rate...90% in fact.....he was doing so well he thought a couple of his trades could be managed by moving stops, or leaving a big stop, or simply he was not watching.........2 trades loss against 20 trades total and he LOST his profits and is down on the month. {image} 2. Our second trader scans the charts for choice trades...and adheres to strict rules regarding risk/reward....his win rate is lousy...

Nice charts Swede. Just shows that you can't trade solely on method nor on R:R. You need both.
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