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Low Risk, High Reward Trading Experiment

  • #621
  • Edited 3:36pm Jul 6, 2006 1:36pm | Edited 3:36pm
Thursday, July 6 at 14:10 ET

TS#117 Sell EUR/USD at 1.2776

Stop is 1.2784

Target is about 1.2650

Stop is only 10 pips, including the spread of 2 pips

Risk is 10 pips, Reward is about 124 pips
Reward:Risk ratio is 12.4
Risk Factor is .20
Return on capital is .2 * 12.4 = 2.5 times initial capital
Multiplier of capital is 1 + ( .2 * 12.4 ) = 3.5 times
Estimated duration of trade: 12 hours or less<!-- / message -->
  • #622
  • Edited Jul 7, 2006 1:31pm Jul 6, 2006 1:47pm | Edited Jul 7, 2006 1:31pm
The following is the equivalent trade in the GBP/USD as the above TS#117:

Thursday, July 6 at 14:06 ET

TS#118 Sell GBP/USD at 1.8385

Stop is 1.8397

Target #1 is about 1.8150


Risk is only 15 pips, including the spread of 3 pips
Reward is about 232 pips
Reward : Risk ratio is 15.5
Risk Factor is .20
Multiplier of capital is 1 + (.2 * 15.5) = 4.1 times
Estimated duration of trade: 12 hours or less

Commentary:

Friday July 7 at 14:15 ET<!-- / message -->

This trade was decisively stopped out by the bullish lead up to the non-farm payroll spike, which took GBP/USD up to about 1.8540. The risk was only 15 pips however, if we didn't adjust the stop according to our stop adjustment procedure. This issue of stop adjustment requires further study.
  • #623
  • Edited Jul 7, 2006 12:07pm Jul 6, 2006 3:32pm | Edited Jul 7, 2006 12:07pm
Thursday, July 6 at 16:30 ET

TS#119 Sell EUR/GBP at 1.6958

Stop is 1.6993

Target #1 is about .6860


Risk is 38 pips, including the spread of 3 pips
Reward is about 95 pips
Reward : Risk ratio is 2.5
Risk Factor is .20
Multiplier of capital is 1 + (.2 * 2.5) = 1.5 times
Estimated duration of trade: unknown

For research purposes only.

Commentary:

Friday July 7 at 13:00 ET

This trade looks good so far. EUR/GBP descended to .6920 and seems poised for more decline.<!-- / message -->

<!-- / message --><!-- / message --><!-- edit note -->
  • #624
  • Jul 6, 2006 3:46pm Jul 6, 2006 3:46pm
Quoting itme
Thursday, July 6 at 14:10 ET

TS#117 Sell EUR/USD at 1.2776

Stop is 1.2784

Target is about 1.2650

Stop is only 10 pips, including the spread of 2 pips

Risk is 10 pips, Reward is about 124 pips
Reward:Risk ratio is 12.4
Risk Factor is .20
Return on capital is .2 * 12.4 = 2.5 times initial capital
Multiplier of capital is 1 + ( .2 * 12.4 ) = 3.5 times
Estimated duration of trade: 12 hours or less<!-- / message -->
Ya know, everyone is pretty much short right now on the EUR... so that means we should go long...

Everyone is expecting a huge number tomorrow. I even heard 400K in new jobs...

With that said, I've been short now for hours... heh heh... :
Mr. Trend
  • #625
  • Jul 6, 2006 9:57pm Jul 6, 2006 9:57pm
Quoting Mr Trend
Ya know, everyone is pretty much short right now on the EUR... so that means we should go long...

Everyone is expecting a huge number tomorrow. I even heard 400K in new jobs...

With that said, I've been short now for hours... heh heh... :
i have noticed that contrainism seems to work amazingly well. i just cant figure out how it works.
  • #626
  • Jul 7, 2006 2:27am Jul 7, 2006 2:27am
TS#117 stopped out
  • #627
  • Jul 7, 2006 2:50am Jul 7, 2006 2:50am
This is my first time posting on this thread so when i read short 12776 it made me feel somewhat happy that others have the same hunch that i do. However im not gonna get out of this trade quite yet this market has been rather range bound from 2760-90 so im gonna let this ride for a little while.
  • #628
  • Jul 7, 2006 3:04am Jul 7, 2006 3:04am
I have shorts from 127.30, I think I will book loss and come out before NFP release. If it comes down by than; than I will move my stoploss point to breakeven.
  • #629
  • Jul 7, 2006 3:06am Jul 7, 2006 3:06am
We have a procedure for adjusting stops which I outlined here:

http://www.forexfactory.com/forexfor...ment#post58572

The stop in this trade #117 shorting EUR/USD would, according to this procedure, have been raised to 1.2796, 9 pips higher than the recent high that was struck.

On the GBP/USD, the stop would have been adjusted to 1.8392, which is 8 pips higher than the recent high.
  • #630
  • Jul 7, 2006 3:13am Jul 7, 2006 3:13am
Itme, That is a nice stop procedure... Thanks Scott



Quoting itme
We have a procedure for adjusting stops which I outlined here:

http://www.forexfactory.com/forexfor...ment#post58572

The stop in this trade #117 shorting EUR/USD would, according to this procedure, have been raised to 1.2796, 9 pips higher than the recent high that was struck.

On the GBP/USD, the stop would have been adjusted to 1.8392, which is 8 pips higher than the recent high.
  • #631
  • Jul 7, 2006 6:57am Jul 7, 2006 6:57am
Thanks, Scott

Of course, the procedure is simplistic, but it is nevertheless valid much of the time.

Six pips above the trendline is, on further analysis, probably too little. It also depends on the currency pair, as well as on the time of day. But in general, I think ten pips above the trendline would be about right for the GBP/USD, and perhaps eight pips for EUR/USD. Maybe even that is cutting it too close.

EUR/USD just went up to 1.2791, so the previously indicated stop held.

GBP/USD went up to 1.8423, which is 31 pips above the indicated stop of 1.8392.
  • #632
  • Jul 7, 2006 8:02am Jul 7, 2006 8:02am
Now both are stopped out... EURJPY looking good though (and your other JPY short calls).

Quoting itme
Thanks, Scott

Of course, the procedure is simplistic, but it is nevertheless valid much of the time.

Six pips above the trendline is, on further analysis, probably too little. It also depends on the currency pair, as well as on the time of day. But in general, I think ten pips above the trendline would be about right for the GBP/USD, and perhaps eight pips for EUR/USD. Maybe even that is cutting it too close.

EUR/USD just went up to 1.2791, so the previously indicated stop held.

GBP/USD went up to 1.8423, which is 31 pips above the indicated stop of 1.8392.
  • #633
  • Jul 7, 2006 8:04am Jul 7, 2006 8:04am
I would rather have a 10 pip stop than a 100 pip loss... thanks scott



Quoting itme
Thanks, Scott

Of course, the procedure is simplistic, but it is nevertheless valid much of the time.

Six pips above the trendline is, on further analysis, probably too little. It also depends on the currency pair, as well as on the time of day. But in general, I think ten pips above the trendline would be about right for the GBP/USD, and perhaps eight pips for EUR/USD. Maybe even that is cutting it too close.

EUR/USD just went up to 1.2791, so the previously indicated stop held.

GBP/USD went up to 1.8423, which is 31 pips above the indicated stop of 1.8392.
  • #634
  • Edited 12:32pm Jul 7, 2006 12:15pm | Edited 12:32pm
Friday July 7 at 13:00 ET

TS# 116B Re-Enter Sell EUR/CAD at 1.4270

Stop is 143.13

Target is 1.3910

Risk is 53 pips including spread of 10

Reward is 350 pips

Reward / Risk ratio is 6.6 to 1

This trade looks very good from a variety of perspectives. The stop is a little big, but the reward is high. Probability of success, according to our models, is quite high. To improve the trade, and to reduce the risk, one could put an entry order in to sell EUR/CAD at 1.4300. If it makes it to there, then the reward will increase by 30 pips, and the risk will be reduced to only 23 pips. The reward : risk ratio will increase to 380 : 23 = 16.5 to 1. There is a chance that the price won't reach 1.4300, but the reward for waiting would be significant.


For research purposes only.
____________________________________________________

Previous trade signals and comments:

Thursday July 6 at 6:00 ET

TS# 116 Sell EUR/CAD at 1.4200


Stop is 1.4212
Target #1 is 1.3950
Risk is 22 pips
Reward is 240 pips
Reward : Risk ratio is 10.9 to 1

For research purposes only.

This trade signal is late arriving, but it is clearly given by our trading system, so I will include it for research purposes. It is a very favorable, precise, high reliability trade. The entry point is the intersection of three targeting lines. The pattern is unambivalent. Enter at 1.4185 or as high as possible.

Commentary:

There were two opportunities to enter this short trade of EUR/CAD at 1.4193, just 7 pips short of the recent high and ideal entry price of 1.4200.

It is very common for the market to put in a double or triple top, providing multiple entry opportunities to a desirable trade.

Thursday July 6, 1:00 ET

There is an opportunity right now to short EUR/CAD at 1.4205. This is an ideal low risk / high reward trading opportunity. The stop would only need to be about at 1.4216. With a target of 1.3950, the reward / risk ratio is very high. ps - the stop needs to be a little higher, at 1.4223
<!-- / message --><!-- edit note -->
  • #635
  • Jul 9, 2006 1:02pm Jul 9, 2006 1:02pm
Hey itme,

I just wanted to say great job in your thread. Welcome to the 40k+ views range. At this rate you'll have me passed in no time.

again great job

Dave
  • #636
  • Edited Jul 10, 2006 11:01am Jul 9, 2006 9:28pm | Edited Jul 10, 2006 11:01am
Thanks, xxDavidxSxx

I have certainly given this thing a whirl, and made a few good predictions, but it turns out that predicting the long range trends with a narrow tolerance is much harder than we expected. It is very easy in one's enthusiasm to "catch an endpoint of a trend" to interpret data to favor one's prejudice and ignore contradictory evidence. In retrospect, we need to be much more skeptical of seeming opportunities and raise our standards much higher. As a side effect of this, we must be willing to miss many more opportunities.

One of the problems is that in non-trending markets, one needs to be nimble and jump in and out of the market more frequently. Once one has adjusted to this, the market starts trending, in which case the need is to hold onto the trade and enjoy the benefits of the trend. Once one has psychologically and methodologically adjusted to the trending market, it ceases trending, and starts oscillating in a narrow range. At this time one needs to make another major psychological and methodological shift. So one needs to recognise whether the market is consolidating or trending, or shifting between the two, and adjust one's trading methodology accordingly.
  • #637
  • Edited Jul 10, 2006 1:23am Jul 9, 2006 10:18pm | Edited Jul 10, 2006 1:23am
Sunday, July 9 at 23:15 ET

Commentary on TS# 115 Sell GBP/JPY at 212.30 - 212.47

This trade has progressed quickly about 200 pips down to 210.25, and is due about now for a corrective rebound.
___________________________________

Previous Trade Signal:

Wednesday July 5 at 12:30 ET


TS# 115 Sell GBP/JPY at 212.30 - 212.47
Stop is 212.61
Target #1 is 208.50
Risk is max. 40 pips
Reward is min. 371 pips
Reward : Risk ratio is min. 9.3 to 1

For research purposes only.
<!-- / message -->
  • #638
  • Edited Jul 10, 2006 1:24am Jul 9, 2006 10:30pm | Edited Jul 10, 2006 1:24am
Sunday, July 9 at 23:30 ET

Since we made the following comment on Thursday, EUR/JPY has fallen rapidly about 225 pips to 145.44. Its fall was driven not by a fall in EUR/USD, however, as this pair went up and back down. The cross was pulled down instead by a strong drop in USD/JPY starting at 15:00 ET on July 5th. We think EUR/JPY is due for a bounce about now before it carries on with its downward trend.

Thursday, July 6 at 13:30 ET

Since selling at 147.40, EUR/JPY has fallen 80 pips to 146.62 and then bounced up 55 pips to 147.18. Now that several days have been spent in this 75 pip range, EUR/JPY is probably nearing the time for a big break either up or down. Our bets are on down, drawn down by a big fall in EUR/USD.
________________________________

Previous Trade Signals and commentary:

Thursday July 6 at 8:45 ET

TS# 114 Sell EUR/JPY at 147.30 to 147.50

___________________

7/3/2006 1:15 ET

TS # 114 Sell EUR/JPY at 147.00 - 147.17

USD/JPY is rising in the form of a retracement of the recent 260 pip decline up to an expected 38.2% + retracement level of 115.10 to 115.50. Meanwhile, EUR/USD is completing an upwards bounce after the first leg of its new downward trend.

This has brought EUR/JPY to a high level. It is likely to rise one more time only to about 147.00 - 147.15, which will be the beginning of a long downwards trend.

Sell EUR/JPY at 147.00 - 147.17
Stop is 147.23
Target is 143.00

For research purposes only.

Commentary:

Tuesday, July 4 at 10:15 ET

EUR/JPY fell to 146.50 at 8:00 ET this morning, and looks as if it will rise again to about 146.85 to 147.00 as USD/JPY rises to 115.15 to 115.25 in a retracement wave, before EUR/JPY resumes its downwards trend.

Tuesday, July 4 at 21:00 ET

As predicted, EUR/JPY rose from 146.50 to a high of 147.27. driven by a strong rise in USD/JPY while EUR/USD marked time. We expect a strong movement down now.

Wednesday, July 5 at 11:45 ET

As predicted, EUR/JPY proceeded down strongly from 147.27 down 72 pips to a low of 146.55 on July 5 at 4:00 ET and then reversed back up to exactly 147.27 once again, from which we expect it to fall strongly once again. Our target is 146.56.

Thursday, July 6 at 13:30 ET

Since selling at 147.40, EUR/JPY has fallen 80 pips to 146.62 and then bounced up 55 pips to 147.18. Now that several days have been spent in this 75 pip range, EUR/JPY is probably nearing the time for a big break either up or down. Our bets are on down, drawn down by a big fall in EUR/USD.
  • #639
  • Edited 10:15am Jul 10, 2006 1:20am | Edited 10:15am
Monday, July 9 at 2:15 ET_

As predicted, AUD/CAD reversed at .8220 and rose to .8380. It is once again in a perfect sell position.

TS #108B - Sell AUD/CAD at .8370 to .8380

Stop is .8408

Target #1 is .8200

Target #2 is .8120
__________________________________________________
Previous Trade Signals and Comments:

Tuesday July 4, 13:00 ET
TS #108A - Exit Sell AUD/CAD at .8225 to .8235
Our latest analysis indicates that this currency pair has a medium probability of reversing at the current price approx. and rising to a target of .8350 to .8375, for a profit of about 115 to 160 pips.

Exit and consider entering a long position.

More details here:

http://www.forexfactory.com/forexfo...2FCAD#post70230

For research purposes only.

Commentary:

Monday July 10, 2006 10:45 ET

AUD/CAD rose to .8425, taking out our stop at .8408. The upwards trend looks complete now, so our model indicates a re-entry of a sell position at .8410 to .8425

TS #108C - Sell AUD/CAD at .8410 to .8425

Stop is .8441

Target #1 is .8200

Target #2 is .8120

Last edited by itme : 07-05-2006 at 14:24. <!-- / edit note -->
  • #640
  • Edited 8:44am Jul 10, 2006 8:26am | Edited 8:44am
Monday, July 9 at 9:15 ET

TS#120 Buy GBP/USD at 1.8390 to 1.8400

Stop is 1.8373

Target is 1.8550 to 1.8600


Risk is max. 31 pips

Reward is min. 146 pips

Reward : Risk ratio is min. 4.7 to 1

For research purposes only.

Commentary:

Monday, July 9 at 9:45 ET

This trade was quickly stopped out by a fall to 1.8367.

This lower price looks like the bottom of the downwards trend. Our model indicates re-entry at 1.8365 to 1.8375, with stop at 1.8348.
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