Trading Made Simple

I was asleep and forgot to set my alarm for London today.......some days I just need my "beauty rest", I guess. I did not wake up until about an hour before NY.

To anyone who may overlook the attached document in my previous post. I thought it might be useful to read the following extract. This might put the importance of price action into perspective as a important tool in your trading strategy for entries (while using element of TMS as a core method)....


Dr Joe and Trends....

"I respect the traders who can make consistent profits with indicators as it is something I have tried and cannot do. If anyone has an indicator that produces CONSISTENT profits then, please, show us the way. In the meantime, I will continue with what works for me: raw price action using price, volume, S&R, momentum, exhaustion, cycles, time, harmonic analysis, market sentiment with a splash of funny mentals thrown in. With regard to my transition from having indicators up the ying yang on my charts to now with just volume and the 20ema and the 50ema, I need to share my experience with an old time trader, Dr. Joe, which will also show how stubborn I was. Back in the early 90s when I was getting really serious with my trading, I was buying signals via fax. In those days there was no email and no computer trading and we had to either plot our own charts or buy them from a charting service. We then had to calculate our own indicators and then hand draw them on our charts. This really helped in understanding what indicators did (take the data from “n” days ago) and how they worked. One time I faxed my questions back to the signal service and the reply I got back was that I had sent it to the wrong number. Also written on my fax was that I was wasting my money on signals and to contact Dr. Joe. After a few fax exchanges, he sent a handwritten fax saying something like “trading is easy, you don’t need nuthin fancy (he was a good old Texas boy) just buy when it’s going up and sell when it’s going down, that’s all there is to it”.

Dr. Joe used to work for NASA as a nuclear physicist on the Space Program and was a Professor, PhD with just about every physics and maths qualifications there are or you could think of. He got fed up of the bureaucracy and politics at NASA and as a part time investor in stocks , decided to go full time as, in his own words, “the price cycles are just some sort of fancy sine waves with decay and acceleration distorting them and should be real easy to plot and forecast.” Well after over 5 years doing triple integrated, double differentiated Fourier transforms, harmonic frequency analysis, fractal filters and theorems and goodness knows what else that, although I have a PhD, just ran circles around me. He said he got so frustrated that although he could plan and predict space craft trajectories, orbits, landings etc, he could not forecast even one bar of prices into the future. Not one to quit, he decided that there was some external force that he was not taking into consideration and the only place it could be was on the trading floor where the action took place. Through his connections, he eventually got an invitation to the Chicago Mercantile Exchange (CME) and was shown the futures or commodities pit (can’t remember which). His sole purpose of going there was as a spy or detective to find out exactly how things worked so that he could write it into his software. He told me he was “amazed and dumbfounded” at what he saw and heard which forever changed his life. (I had all this written up in my trading notes in my files but I can’t find them so I’m using this post to “replenish my notes”).

He arrived at the pit before opening time and saw all the floor traders congregated together in a meeting. He saw this as strange as he thought they were out and out competitors with each other. What he saw in the first 15 to 30 minutes he would never have believed even if his best friend had told him. At the open, the overnight trades, which were long positions, were put through but he detected the traders entering them were giving signals to the other traders. After the orders were put through there was “nothing” – they just waited to see how the market reacted to those orders. He then observed what he thought were illegal practices but later learned it to be what actually goes on each and every day. During this “dead” time, the floor traders were reviewing their orders in the pipeline and then on a given signal, a group started selling followed by another group. Then when a certain lower price had been reached, another signal was given and the same groups then bought back amongst themselves. He later learned this was called “Running the Stops” and what they had done was found out where all the orders were, which were below lows, swing lows and elsewhere, and just driven the price down to fill them and take them out so that they had a clean order sheet! Not satisfied with that, they then collectively took the price back to where it opened! After this and now with the market moving, orders started to come in and when a large order came in from a bank, fund or other large institution, the trader with the order gave a signal before entering it. After entering it, the traders went quiet again. They were looking to see how the market reacted to that order. When they saw more buy orders coming in, they just bought more and more and kept on buying until a signal from a trader that he had a large sell order. Again the sell order was entered and the traders went quiet as they waited for a reaction from the market. He learned that the floor traders were waiting to see whether the sell order was going to be accepted as profit taking or full blown shorting. He said this went on all day long with the floor traders just “piggy-backing” on which ever way the market moved.

He said he could see no skills or qualifications (other than being a whore – a very rich whore, he said) whatsoever in what the floor traders did. On his way back to Houston, he thought about how to use what he witnessed to HIS advantage. His first action was to throw out all his indicators, forecasts and technical analysis. He told me that there is no analysis, indicator or other program now or in the future, that can analyse or predict human behaviour and specifically, human emotions. He had seen for himself that there was nothing technical or logical in how the floor traders (now better known as Market Movers) traded and therefore any analysis or thinking from “off the floor” was an absolute waste of time. His second action was how to beat “those whores” on the floor as he called them. He said he thought over just about every scenario imaginable and just as he was running out of ideas, it came to him. If you can’t beat, them join them although as a very devout and God fearing Christian, he didn’t think it was ethical. Unable to find another alternative, he decided he had no options left but to try and do, “off the floor” what they did on the floor. From this came his very simple method: Buy when it goes up and sell when it goes down. He went on to make $millions doing this and I subsequently learned he passed away a very rich and contented man knowing that he had beaten the “whores” at their own game. I learned all this in a few telephone conversations with him but he lost his patience with me when I still questioned his method. He wouldn’t answer my calls so I reverted back to faxes. Again, I can’t remember it word for word but I sent a simple fax saying: “How do you know when to stop buying?” On the same fax was his handwritten reply, “When it stops going up.” So I wrote on it, “How do you know when it stops going up?”

His handwritten reply, “When it starts going down.” So I wrote on it, “How do you know when it stops going up and starts going down?” His handwritten reply, “When people start selling.” After going round like this in riddles, I pleaded with him to “just give it to me straight”. He sent a fax saying this would be his last communication with me and that if I didn’t understand how to buy when it goes up and sell when it goes down, I had no business trading. His final paragraph was one which I ignored, like everything else he told me, until a couple of years ago when I realized what a dumb, stupid, arrogant, stubborn idiot I had been: He said I would only be wrong twice using his simple method: “Once when you buy at the top and once when you sell at the bottom.” I just ignored this as a smart – ass answer but still tried to do what he said. Unfortunately, and as Sod’s law dictates, I tried to do it in a consolidation and lost on every trade which had me buying when I should have been selling etc. I tried and lost again and then eventually lost my way in the quest for the Holy Grail in Indicator Land. Now, with all my experience and thousands of lost $ behind me, the light came on!

My understanding of what he was telling me is this: Buy when prices are moving up. Buy each retrace/dip. Keep buying until the last retrace becomes a trend change which is the one trade you lose on. Sell when prices are moving down. Sell each retrace/rally. Keep selling until the last retrace becomes a trend change which is the second trade you lose on. I have not traded like this as I have my own method/style now but on the look backs I have done it works very well. Obviously, the trendier the price, the better it works. In my later communications with other floor traders, I told them about Dr. Joe and what he told me, and asked them if it was true. As you would expect, each and everyone vehemently rejected it as absolute rubbish. Sometimes I wonder if old Dr. Joe was smoking something but then when I see those long legged neutral dojis before a significant move, I know he was right. Thank you, Dr. Joe"

Okay, I've been reading through everything here and have been trading TMS for a few months. I've had ups and downs. I really think I am doing a poor job of picking my trades / knowing when to exit. I trade on the hour charts. Can anyone offer any advice or pointing me down a path that will help me to improve. I know that is a lot to ask, but everyone here seems to want to help and I do like that. I am very interested. I just feel I am missing something. My winning percentages are definitely over 50% but when I lose I lose.

Erol,

Thanks for your kind words.

I am definitely not a SAINT but just an ordinary person who had put in more than 10,000 hour over the past 6 years to learn and practice trading this spot forex market. I have been blessed with several good people traders who mentored me going back the past many years going far back 25 years when I started trading part time in the stock market. One of my mentor encouraged me to start in spot forex market back in 2007 and this was the turning point and I became a fulltime trader.

The five points which you put together in your post above is the structure what I am using for my current system development project. Now that this is exposed, it is not a secret anymore ...

It is important to learn many things to become a trader. There will be many things you will learn and also many of these things you learn not to follow and do. To un-learn is a lot more difficult than to learn. There is no university program that train people to become traders because trading requires a lot of different skills and only the market can teach us how to become proftable traders.
You need to know what the discipline is to trade your own system. You must believe in what you do and follow the discipline which only you can define for yourself to trade your system. When you do not follow your own discipline, the market will discipline you and that will be painful.

To make a consistent income from the market we must be in the market in order to make money. We need to think like traders but we must trade like an investor.
This is one way to grow wealth.

Time to go now. Hope to find time this weekend check-in and answer some questions here for those who post.

Trade Well folks.

regards,
EMMANUEL

Thank you PHx62 for showing your trades, learning a lot from you. You're a master of H1 trading, your posts
and explanations make trading easier.
I completed two ej trades today , one in asia session on h1, and the other on H4 ( I wasn't present at the h1 setup, but your
entry was spot on) both closed for 50 pips profit.

Thank you Emmanuel, this is what i learned from this thread.
By the way, i knew you cannot leave FF. Hope we see you here more often.

Imi,

Your H1 entry is A+++ setup with that H1 Inside Bar breakout.
This is the type of H1 setup what I call Price Action at Support and Resistance, a lot easier to spot and higher probability.

If you had followed this EJ, there was a H4 Inside Bar breakout later, another A+++ H4 setup ... but I had no more money.

Good to see you in this TMS thread. Please stay and help out with the new traders wanting to learn to trade.

regards,
EMMANUEL

Well, unlike you all, I entered the long when I saw the "bounce" on 4h charts. Here's the chart.

I have closed 2 positions on 80pips, leaving the third and final position to tp as the chart shown with stop loss moved to BE+10

Ended BE+6. It wan't a good setup and i didn't expect much anyway.

I'm looking at the NZD/USD for a possible cross in the next hour. Would I be wrong to enter a trade if there is a decent TDI cross?

Hi Verouchi,

If you say when you lose you lose - how wide are your stops? are they in range with the ATR for the pair you are looking to trade?

Read the three pdfs dedicated to PHX62's posts. You'll find them in the attachment section. This should help somewhat if you trade 1hr.


I found myself in your situation last month after trading this system jumping in feet first. I soon realized I was trading with luck on my side most of the time because i wasn't really trading to a specific plan, rather a multitude of plans & not adhering to proper rules. I had to take a step back because after trading a small sample size of trades I came out even. What turned the light bub on was that during this sample I was up over 100% then down 100%. I was f'd off that I let myself get into this situation. I had to be honest with myself and take a step back and assess my trades and the situation I was getting myself in. I was risking way more than 2% of my account with no real plans in place. I had the exact same thought process - something is missing here! I took a step back and decided to do this properly and not cut any corners. So I trawled through every pdf post on Big E & compiled a word doc on Emmanuels posts ( i trade 4hr due to work commitments) I have already learnt so much from actually spending the time to go through the posts and make notes rather than cut corners. I am now back to trading a smaller account @ 10cent a pip with a proper plan & strategy with specific rules and goals to increase my account/equity i invest as I become more consistent & can hit my monthly targets.

But before I did this I had to look myself in the mirror and ask myself the following questions did i have definite answers to some of the questions below...no (the list is a lot bigger though and forms the basis of most of my trading plan) so what did i have to do but swear to myself not to cut corners and get definite answers!

General questions:

Have you read the thread from start to finish and taken notes?
Have you got a trading plan?
Do you have specific entry rules
Do you have specific exit rules
Do you trade around PASR and if yes do you trade the break out or reversal?
Do you trade with the TOK 5H in mind?
Do you look for PA or TMS signals to confirm trade direction/entry/exit criteria?
Do you trade when liquidty is high or low in the market?
Do you put stops in place that are at Swing Highs or Lows or correspond to the ATR?
Do you trade at specific times in the day?
Do you get the chance to look at your charts every H or 4H period?
Do you have weekly/monthly goals?
Do you have a Risk management strategy?
Do you Take profit or do you let the trade run?
Do you try and get into a risk free trade situation using R multiples
Do you trade with the trend?
Do you know how to manage a trade when its in progress?
Do you have a Plan A,B&C
Do you trade with the trend?
Do you counter trend & will this be a different set of rules for entry/exit if you do?
Do you trade specific pairs?
Do you conduct a Big picture analysis on the weekends?
Do you use MT analysis
Do you use a ME/ME approach
Do you know what the following points are telling you before you get into a trade:

1. PriceAction
   
2. Trend
   
3. Multi-Timeframe
   
4. Momentum
   
5. Support and Resistance
6. Continuation
   
7. Volatility
   
8. Market Strength
   
9. Range
   
10. Timing

Post trade analysis

Are you documenting your trades (noting what went well, what didn't go well, where you entered (early/late), what the entry signals were, what the exit signals were, did you trade when news was released) these are just a few questions you should be asking yourself in your post trade analysis to help you identify what is going well and what isn't to further expand upon your edge.

Hope that helps a little. I'm sure PHX62 & Emmanuel will give you some wise words of wisdom.

Thank you Erol. I am going to do my best to start from the beginning and work on this. I really like this system and would love to make it work for me and increase my profits.

No problem Verouchi! A quick tip from starting from the beginning is to click on the printable version of the thread (top right corner of page) and expand the posts to 40 posts per page (option on the printable version) then use CTRL+F to search through the thread for specific people (i.e Big E, Emmanuel, PHx62, SnarlyJack, etc...)

will be posting a condensed version of Emmanuel's posts on TMS within a week or two to give people the foundations of Emmanuel's advice based on what I have read and deem important for my trading notes.

hope to see you posting on TMS soon again.

Erol

I maybe asking a super dumb question but how to calculate the previous day's low

Excellent.....keep up the good.....keep it simple and you will succeed.......

You can get indicators to show you automatically or go to the daily candle and hover over the candle, look at the price of the low and mark it on your chart.

Ask and ye shall receive

EURUSD watchlist:

Those of you watching EU H4 charts, what do you see now just before Frankfurt open in 10 mins.

Do you want to be seller or buyer for 4H swing trading?

Fx Light,

Many thanks once again for this script. Could I have the mq4 version of these. I would like to customize it to my needs.

Thanks,
FxPP

Edit: Nevermind, I found another and customized it.

"super dumb question" ... come on.

yesterday I posted that there are no dumb questions. ... and today you added "super" to that...

OHLC = Open High Low Close .... this Day OHLC is there everyday on your charts , there is no need to calculate anything.

questions are good because they show you want to know and to learn. never if you think your questions are dumb ones.

this thread may not have all the answers to all your questions, but the more you ask, the more answers will be provided.

Have Fun!