Low Risk, High Reward Trading Experiment

I would like to know how you are working your stops, i know you were using a one minute chart, but you had previously mentioned on your other thread that you contemplated about using hard stops. Have you switched or are you still adjusting your stops?

Hi SirPipsAlot,

In this trading strategy here we are striving for large gains, with relatively small stops, aiming for a 4:1 to 20:1 reward : risk ratio.

In this case the trade is longer term ( one to seven days) so the adjustable stops using our stop adjustment methodology is the prefered method. There is much more give and take to tolerate slightly larger stops to stay in a trade that is just coming up for a second or third top and still will get to our target.

In the other trading system ( $7 to $770 billion in 10 days) the hard stop is the prefered approach. There is really no tolerance there for error, so the stop must be exact. Both strategies are extremely difficult, but the latter one is the hardest possibly.

Perhaps we will succeed in one before the other. Either way, we will become rich if we can crack one of these nuts!

Im a newbie so take it easy on me....but i was wondering why are you posting the entry points six hours later...instead of during the trade...so that others can get in at the same time you do??

Dear Diezed,

Thanks for your comment. I think it is for the most part untrue, however.

We have always posted trade signals before the market moves out of the entry range. Well before. There have only been two or three exceptions out of several hundred cases, and we explained why in each case. We either predict the entry, or post it at about the time it arrives. We don't consider a trade to be active unless there was sufficient time to enter after the trade signal was posted.

Keep in mind that this is only an experiment, so these trade signals are not intended to be implemented by anyone. The purpose of this trade journal is to study, experiment and learn, not to try to make money at this stage of the game. This entire project may turn out to be a dud.

Occasionally we make an error in the date or time, which can cause confusion. We try to minimize confusion, however. This market is confusing enough without adding confused trade signals.

Our effort to post trade signals in a timely fashion has been a discipline to keep us honest, it's not a service intended to help other people trade. It has, however, reduced our accuracy tremendously, because in our haste to post a signal we often spend alot of time designing the specific trade parameters of an invalid trade instead of properly assessing the validity of the trade concept. Only afterward upon leisurely analysis do we realise that the trade signal lacked fundamental validity according to our experimental and evolving trading system.

The effort to generate tradable trade signals with sufficient lead time, though a very helpful discipline to keep us brutally honest, has been the biggest handicap in this experiment. We are considering cancelling the trade signals in favor of emphasising improved analysis with a much higher threshold of approval. We can greatly enhance our performance this way.

This is the point of the process - high performance. In the future we may more often report lead up to anticipated trade set ups, and then the results after the fact.

I think that the next step towards much higher performance will come with better planning, much more thorough analysis with objective approval criteria, a higher threshold of trade approval, and much greater accuracy in determining the exact entry point. The latter can only be done live, and not as a prediction before the mark plays out its patterns. The market often moves on a scale we hadn't expected, and also data releases and world news events have sometimes played havoc with our trades.

Hi Diezed, I hope you are not using these test signals to trade with. That was never Itme's intent. It is purely for testing purposes as is stated at the bottom of the posts...

Scott

Thanks, Scott. I took what you said for granted, but forgot that some people haven't read our introductory statement. The performance of these signals is highly erratic and unstable, as we are in the early development stages of a new trading model. We are making frequent changes to our as yet vague trading system.

Look at our ideas, by all means, but DON'T TRADE THEM! Not without passing them through your own filter or trade criteria first.

We don't!

This is an EXPERIMENTAL TRADE JOURNAL, not a finished product.

Itme,
I admit that the signals get confussing to me...but that's because I'm a newbie. I am desperatly trying to get a handle on all this trade jargon. I have been successful to a point.

Amongst other things, it appears (to me) that you are using some form of the Elliot Wave to perform your analysis. I say some form because I am not completly familiar with EW. If you are, would you direct me to training material on the web or otherwise that in your opinion will help improve my understanding of EW.

In my view "give a man a fish and you feed him for a day. Teach a man to fish and you feed him for life".

Congartulations on your excellent approach to get your message out.

jj/.

Yes indeed. The traders struggle.

I have all but given up on the exact entry method. I have switched to pivots and am currently trading waves. Finding the approx turning point and entering on signal. risk can be 50-100 pips. reward can be 50-500 pips depending the outcome of the wave. I am not even trying to pre determine the waves target range. I just let it give a reverse signal. Its a brainless system very mechanical with no room for personal judgement or feelings. The trade can last for a day or for 5 or more depending on the trend. My brain cann't take any more overanalising and staring at the charts for hours on end. Plotting wave patterns fibos ect. Trying to figure out wich time frame the current move is running off of. And wich time frame the next move will be running off of. Now its all of one time frame. 1hr.

the KISS method
K,eep
I,t
S,imple
S,tupid

Dave

I don't really look at anybodys threads who gives signals, so I don't cloud my own judgment. But judging by the views.

<hr style="color: rgb(209, 209, 225);" size="1"> Friday July 14 at 2:15 ET

TS #125 Sell GBP/JPY at 213.66

Stop is 214.12

Target is 209.50

Risk is 55 pips

Reward is 407 pips

Reward : Risk ratio is 7.4 to 1

For research purposes only.

Comment at time of posting: This trade signal is issued after the fact, but our system predicted this exactly as presented. This trade signal is as perfect as it can get. All of our system criteria are met perfectly.

Friday July 14 at 2:30 ET

TS #126 Sell USD/JPY at 116.14

Stop is 116.36

Target is 113.13

Risk is 24 pips

Reward is 299 pips

Reward : Risk ratio is 12.5 to 1

For research purposes only.

Comment at time of posting: USD/JPY just rose as expected by Elliot Wave analysis and our other developmental model to the top trend line formed by the two highs on June 27 and June 28 at exactly 116.14, forming a triple top, plus a few pips of overshoot. This is a high probability turnaround point.

Agreed. I see a short here as well... Nice call itme...

Friday July 14 at 3:00 ET

TS #127 Sell USD/CAD at 113.29

Stop is 113.46

Target #1 is 111.25

Risk is 22 pips

Reward is 199 pips

Reward : Risk ratio is 9.0 to 1

For research purposes only.

Comment at time of posting: USD/CAD just rose in an ABC corrective wave, which we expect to rise a little higher, to about 111.30 to 111.35, before it reverses and continues with its downwards trend.

Follow-up Comment at 10:40 ET on Friday: USD/CAD only rose to 111.25, 4 pips short of our entry price. (We missed the entry price on our previous trade also.) USD/CAD is so bearish that it isn't bouncing as much as usual, so our entry prices are being missed. It did fall so far by 130 pips to 1.1255, and seems on its way to descend further.

Friday July 14 at 3:30 ET

TS #127 Buy GBP/USD at 1.8355

Stop is 1.8334

Target is 1.8490

Risk is 25 pips

Reward is 131 pips

Reward : Risk ratio is 5.4 to 1

For research purposes only.

Comment at time of posting:Current update as of Friday July 14 at 3:30 ET:

The trade signal above is delivered late, and is purely for academic purposes. This trade is against the medium term trend, which we don't prefer, and the reward : risk and certainty level are not as high as the trades shorting USD/CAD and USD/JPY. The expected downwards movement of GBP/JPY indicates that the downwards movement of USD/JPY should exceed the upwards movement of GBP/USD.

The upwards corrective wave refered to below was larger than expected, carrying GBP/USD a few pips higher to 1.8445, which formed a double top, before continuing with the downtrend a distance of 90 pips to 1.8356. This is the bottom of the "B" of the ABC Wave 4 upwards corrective wave. The next movement is an upwards "C" wave. The price will now head upwards about 134 pips (.73%) , with a likely target of 1.8490.

________________________________________________

Yesterday's update as of Thursday July 13 at 14:00 ET:

GBP/USD price of 1.8411/17 was not the top, only top of an A of an ABC complex corrective wave upwards. (This is a common mistake we have made in the past, mistaking the top of A for the top of the corrective ABC wave pattern.) The price rose again higher, taking out our stop as it has done many times before, after falling in a Wave B and then rising in a clear Wave C to a probable top of the swing wave at 1.8466 . This was a prime entry opportunity for a short at the top of a corrective upwards swing wave.

The price then fell in the first downwards component wave to 1.8383, then retraced in the second component corrective wave up to 1.8431, which presented a re-entry short opportunity for those who failed to go short at 1.8466.

Friday July 14 at 8:15 ET

Since the trade signal was issued a few hours earlier, GBP/JPY descended 110 pips quickly to 212.60, then bounced most of the way back to where it started. Thus a re-entry opportunity has now presented itself.

TS #125A 2nd Entry Opportunity - Sell GBP/JPY at 213.58

Stop is 213.87

Target is 209.50

Risk is 38 pips

Reward is 399 pips

Reward : Risk ratio is 10.5 to 1

For research purposes only.
<hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message --> <hr style="color: rgb(209, 209, 225);" size="1"> Previous Trade Signal:

Friday July 14 at 2:15 ET

TS #125 Sell GBP/JPY at 213.66
Stop is 214.12
Target is 209.50
Risk is 55 pips
Reward is 407 pips
Reward : Risk ratio is 7.4 to 1

Comment at time of posting: This trade signal is issued after the fact, but our system predicted this exactly as presented. This trade signal is as perfect as it can get. All of our system criteria are met perfectly.

Friday July 14 at 10:30 ET

GBP/USD rose 92 pips from our entry point to reach 1.8447, then seems to have dropped quickly in an unusually strong corrective wave on the uptrend. This would be unusual, as the corrective wave has gone lower than the starting point. This is possible, but not likely. Or, the previous downwards swing wave hadn't finished and neeeded another component wave down. In this case, the downwards wave isn't finished yet, and we will be entering early if we enter now at 1.8340. Since we are not really sure what is going on, to be somewhat safe, we will place the stop a little lower at 1.8312

Re-entry Opportunity TS #127A Buy GBP/USD at 1.8340

Stop is 1.8312

Target is 1.8490

_________________________________________________

Previous trade signal and comment:

Friday July 14 at 3:30 ET
TS #127 Buy GBP/USD at 1.8355
Stop is 1.8334
Target is 1.8490
Risk is 25 pips
Reward is 131 pips
Reward : Risk ratio is 5.4 to 1

For research purposes only.

Comment at time of posting:Current update as of Friday July 14 at 3:30 ET:

The trade signal above is delivered late, and is purely for academic purposes. This trade is against the medium term trend, which we don't prefer, and the reward : risk and certainty level are not as high as the trades shorting USD/CAD and USD/JPY. The expected downwards movement of GBP/JPY indicates that the downwards movement of USD/JPY should exceed the upwards movement of GBP/USD.

The upwards corrective wave refered to below was larger than expected, carrying GBP/USD a few pips higher to 1.8445, which formed a double top, before continuing with the downtrend a distance of 90 pips to 1.8356. This is the bottom of the "B" of the ABC Wave 4 upwards corrective wave. The next movement is an upwards "C" wave. The price will now head upwards about 134 pips (.73%) , with a likely target of 1.8490.

Friday July 14 at 10:45 ET

Exit TS# 116D Re-Enter Sell EUR/CAD at 1.4440 - 1.4450

Temporarily exit this trade at the current market price of 1.4241, for a minimum profit of 190 pips, as a significant bounce is expected.

_______________________________________

This is the earlier trade signal:

TS# 116D Re-Enter Sell EUR/CAD at 1.4440 - 1.4450

Tuesday July 11 9:30 ET
The drop in the Canadian dollar due to a Bank of Canada data release provides another good low risk, high reward short trade opportunity.
TS# 116D Re-Enter Sell EUR/CAD at 1.4440 - 1.4450
Stop is 1.4466
Target is 1.3950

More details here:

http://www.forexfactory.com/forexfor...FCAD#post72909

Friday July 14 at 10:45 ET

USD/JPY dropped 55 pips from our entry price to 115.59, then bounced up to 116.38, two pips higher than our stop.

Of course, our stop would have been raised 4 pips higher, to 116.40, according to our methodology, so we wouldn't be stopped out according to our system as it just came up to the short term trend line plus 8 pips.

USD/JPY apparently needed one more component wave up to complete the upwards swing wave. If necessary, we would recommend re-entering the short position at about 116.30 to 116.40, and place the stop at 116.66.

Re-enter TS #126 Sell USD/JPY at 116.30 to 116.40 if necessary

Stop is 116.66

Target is 113.13

An alternative, safer approach is to sell USD/JPY at 116.56 if it gets there, and keep the stop at about 116.66. This trade would have a much better reward : risk ratio if it materialises.
<hr style="color: rgb(209, 209, 225);" size="1"><!-- / icon and title --><!-- message -->
Friday July 14 at 2:30 ET

TS #126 Sell USD/JPY at 116.14

Stop is 116.36

Target is 113.13

Risk is 24 pips

Reward is 299 pips

Reward : Risk ratio is 12.5 to 1

For research purposes only.

Comment at time of posting: USD/JPY just rose as expected by Elliot Wave analysis and our other developmental model to the top trend line formed by the two highs on June 27 and June 28 at exactly 116.14, forming a triple top, plus a few pips of overshoot. This is a high probability turnaround point.

Friday July 14 at 11:30 ET

Update on TS# 114 Sell EUR/JPY at 147.30 to 147.50

Since we made the comment " 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" on July 6th, EUR/CAD plummeted 218 pips to 145.00 on July 10th, then bounced up to 147.17.

For those not in a short position, we recommend shorting EUR/JPY at 147.17

The stop is 147.42
<hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --><!-- message --> Previous comments:

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.

More details can be found here:

http://www.forexfactory.com/forexfor...FJPY#post72416

I like the new style he is using with all blue/red colors.

According to the following signals, our system advised selling GBP/CHF on July 10 at 2.2660, a bit too early. We narrowly missed being stopped out on July 12. The price has gone down and up twice, and has finally come to what we believe is the end of the upwards swing trend, or near to the end. On July 12 we stated "Re-enter short position if necessary if it rises again to close to 2.2690. New stop should be 2.2711." This morning the price rose to 1.2710.

For safety, we recommend shorting GBP/CHF only if it rises once more to 2.2715. Place stop at 2.2736. This will be an excellent trade if it materialises.

TS #113C Re-Enter Sell GBP/CHF at 2.2715

Stop is 2.2736

Target #1 is 2.2175

Risk is only 36 pips

Reward is 525 pips

Reward : Risk ratio is 14.6 to 1

For research purposes only.

_____________________________________

Previous trade signals:

Update on TS #113B Sell GBP/CHF at 2.2660 <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message --> Wednesday July 12, 2006 2:45 ET

The following trade signal to short GBP/CHF was triggered, when the price rose to 2.2678, missing the stop by 8 pips. The price then fell quickly 85 pips to 2.2593. The price then bounced back up to 2.2660. We think it will be heading south again now.

We interpret this downwards and upwards move to be Wave 1 down (impulse) and Wave 2 up (corrective) of the beginning of a new downwards trend.

Wednesday July 12, 2006 at 7:00 ET

GBP/CHF rose to 2.2690, 4 pips past our stop. According to our stop adjusting procedure, the stop should have been adjusted to 2.2698, which is 8 pips above the new high. GBP/CHF then fell quickly to 2.2645. Re-enter short position if necessary if it rises again to close to 2.2690. New stop should be 2.2711. It was due to an error in executing our analysis that the original entry was too soon.

__________________________________________________ ___

Monday July 10, 2006 12:45 ET
TS #113B Sell GBP/CHF at 2.2660
Stop is 2.2686
Target #1 is 2.2175
Risk is 40 pips
Reward is 470 pips
Reward : Risk ratio is 11.8

http://www.forexfactory.com/forexfor...FCHF#post73024