Origin:
Well enough said of the so-called "most popular" thread on forex factory. A big premise of their analysis which is based on their so called PVRSA is to an institutional investor what is called the "car" theory. Today I see a green car, tomorrow I wake up I might see a blue car, another person might even call it a red car. They believe that the FX market is so rigged, that Market Makers can push prices and sucker in ppl before they launch some super duper knock down punch. (must be high on something to think that way).
The way the spot FX market operates is most trades are done via ECNs or via OTC (corporates doing their FX with banks). Even when the corporate inform their banks of their transactions, most of the banks will then trade with other players on the ECN. News that are released each day will have impact on the FX market to varying degrees and BANKS do have their research departments to show them their own forecasted numbers and directions it will go if there are any surprises.
Bank FX Traders mostly, CANNOT TAKE DISCRETIONARY TRADES. Meaning they cannot take on board risk without permission. MEANING THEY CANNOT push prices up or down just to trigger buy sell orders. UNLESS of course during the course of the day, the FX dealer has a client who wants a position in say LONG AUDUSD, thus the trader will have to balance his books and systematically using a VWAP order or a TWAP order and SHORT AUDUSD to make himself neutral market risk. Or if the size is small, he/she can just do it right on the spot. IF THE ORDER is TOO LARGE, he/she thinks he/she cannot execute it efficiently enough in a day, he/she will then hedge it with Interest RATES contracts to be neutral RISK and roll over to the next day. ( THIS COMMENT IS SPECIFICALLY FOR THOSE SONIC BELIEVERS THAT BELIEVE MM CAN TAKE ON SHIT LOADS OF RISK AND PUSH PRICES WHENEVER THEY WANT ) Only people trying to push/chase/create momentum are hedge funds and CTAs and these guys are not what is described as MMs in the PVRSA pdf.
So Im starting a thread here to continue with the 1-2-3 reversal system without the PVRSA bullshit.
Premise of the trading idea:
Similar to the 1-2-3 reversal theory that has been widespread. This is the only strategy i back-tested with confidence which if you take every single trade, will not lose you money in the long run and will make roughly 2% a year UNLEVERAGED in the long run. Duration of backtest : 2005- 2013. (Please note back test is only on Daily Data) .Attached a PDF on this post. Ive taken this from Forex Factory but cant seem to find the thread again (so I cant credit the owner, I am sorry ;( ). Forget about the MACD and other indicators and just follow the price. See also post #15 for reversal and non-reversal (breakout) definition of price action (Credits to lucariga)
Time frames used for analysis should be based on your own comfort zone and leisure
As guidance,
15m chart - Looking to scalp 5-15 pips confidently. Win pips / Stop Loss pips must be at least 1:1
1 hr chart - Looking at least 30-50 pips. Again Win Pips/ Stop Loss Pips must be at least 1:1
1 day chart - This is the best signal for me. Look at at least 2:1 reward to risk ratio. Back test results are on Daily chart. New traders should start with this.
Risk management - Stop Loss pip = 1 % of account. No more No less.
NOTE : Never add on to a losing trade. There are some on the Sonic System that adds on to their losing trade and wait for it to retrace. This is very dangerous and is the "Mom and Pops" mentality. If you are a trader in a Bank/FI (financial institution), no one will let you ride a drawdown of a thousand pips before you can win a thousand pips. (there are exceptions but only in certain strategies) If your trade is stopped. Move on and enter a new trade when it presents itself. No emotions and detach yourself from thinking "the price will move back in my favor". REFER to POST #3 for what one should NEVER DO.
Missed a trade ? - Forget about it, opportunities will always keep coming. Never chase a trade
Will add more
Start Date: 16 Apr 14 (took a break last 2 weeks of April and first week of May)
Current pip standing : plus 15.2 pips
No of trades closed or stopped : 3
Well enough said of the so-called "most popular" thread on forex factory. A big premise of their analysis which is based on their so called PVRSA is to an institutional investor what is called the "car" theory. Today I see a green car, tomorrow I wake up I might see a blue car, another person might even call it a red car. They believe that the FX market is so rigged, that Market Makers can push prices and sucker in ppl before they launch some super duper knock down punch. (must be high on something to think that way).
The way the spot FX market operates is most trades are done via ECNs or via OTC (corporates doing their FX with banks). Even when the corporate inform their banks of their transactions, most of the banks will then trade with other players on the ECN. News that are released each day will have impact on the FX market to varying degrees and BANKS do have their research departments to show them their own forecasted numbers and directions it will go if there are any surprises.
Bank FX Traders mostly, CANNOT TAKE DISCRETIONARY TRADES. Meaning they cannot take on board risk without permission. MEANING THEY CANNOT push prices up or down just to trigger buy sell orders. UNLESS of course during the course of the day, the FX dealer has a client who wants a position in say LONG AUDUSD, thus the trader will have to balance his books and systematically using a VWAP order or a TWAP order and SHORT AUDUSD to make himself neutral market risk. Or if the size is small, he/she can just do it right on the spot. IF THE ORDER is TOO LARGE, he/she thinks he/she cannot execute it efficiently enough in a day, he/she will then hedge it with Interest RATES contracts to be neutral RISK and roll over to the next day. ( THIS COMMENT IS SPECIFICALLY FOR THOSE SONIC BELIEVERS THAT BELIEVE MM CAN TAKE ON SHIT LOADS OF RISK AND PUSH PRICES WHENEVER THEY WANT ) Only people trying to push/chase/create momentum are hedge funds and CTAs and these guys are not what is described as MMs in the PVRSA pdf.
So Im starting a thread here to continue with the 1-2-3 reversal system without the PVRSA bullshit.
Premise of the trading idea:
Similar to the 1-2-3 reversal theory that has been widespread. This is the only strategy i back-tested with confidence which if you take every single trade, will not lose you money in the long run and will make roughly 2% a year UNLEVERAGED in the long run. Duration of backtest : 2005- 2013. (Please note back test is only on Daily Data) .Attached a PDF on this post. Ive taken this from Forex Factory but cant seem to find the thread again (so I cant credit the owner, I am sorry ;( ). Forget about the MACD and other indicators and just follow the price. See also post #15 for reversal and non-reversal (breakout) definition of price action (Credits to lucariga)
Time frames used for analysis should be based on your own comfort zone and leisure
As guidance,
15m chart - Looking to scalp 5-15 pips confidently. Win pips / Stop Loss pips must be at least 1:1
1 hr chart - Looking at least 30-50 pips. Again Win Pips/ Stop Loss Pips must be at least 1:1
1 day chart - This is the best signal for me. Look at at least 2:1 reward to risk ratio. Back test results are on Daily chart. New traders should start with this.
Risk management - Stop Loss pip = 1 % of account. No more No less.
NOTE : Never add on to a losing trade. There are some on the Sonic System that adds on to their losing trade and wait for it to retrace. This is very dangerous and is the "Mom and Pops" mentality. If you are a trader in a Bank/FI (financial institution), no one will let you ride a drawdown of a thousand pips before you can win a thousand pips. (there are exceptions but only in certain strategies) If your trade is stopped. Move on and enter a new trade when it presents itself. No emotions and detach yourself from thinking "the price will move back in my favor". REFER to POST #3 for what one should NEVER DO.
Missed a trade ? - Forget about it, opportunities will always keep coming. Never chase a trade
Will add more
Start Date: 16 Apr 14 (took a break last 2 weeks of April and first week of May)
Current pip standing : plus 15.2 pips
No of trades closed or stopped : 3
Attached File(s)
1234_forex_system.pdf
41 KB
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3,856 downloads