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  • #21
  • Edited 8:39pm Apr 5, 2016 8:27pm | Edited 8:39pm
Levels

Here is another look at levels

This time NZDUSD, the level is right at the base of that move, now don't confuse potentially great levels with they will always hold because there great levels they dont always hold but this is where probability comes into trading, notice that price accelerated from this level then spent a couple of weeks in a range and now its breaking down and guess where its coming too.

Patience is one of the big threes with trading, as I have already said I have a trade in the market short from 6830 to 6735, why this trade because of these reasons:

1. 6830 is confirmed break of minor level at 6840
2. The market needs orders to be filled, banks have to fill orders so this is where you use what the market has to do and that's come back to this level to get fills, price is going there no doubt about it
3. I don't care what the reaction at 6735 is cause my trade is over by then.

Lets assume the reaction is bullish, price will probably retest it before going higher anyway giving me the chance to get in.

See how this is high probability very low risk
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99% of Traders fail, so don't follow the herd
  • #22
  • Apr 5, 2016 8:42pm Apr 5, 2016 8:42pm
Quoting sweetaction
Levels Here is another look at levels This time NZDUSD, the level is right at the base of that move, now don't confuse potentially great levels with they will always hold because there great they dont but this is where probability comes into trading, notice that price accelerated from this level then spent a couple of weeks in a range and now its breaking down and guess where its coming too. Patience is one of the big threes with trading, as I have already said I have a trade in the market short from 6830 to 6735, why this trade because of these...
Why not the 67 level instead of the 6735 level.
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  • #23
  • Apr 5, 2016 8:47pm Apr 5, 2016 8:47pm
how far did it rally from 67 before it stopped yep not very far,

Q - How much of an imbalance between buying and selling do we have there at 6700.
A - Not very much as the sellers rained it that rally to 6740ish pretty quickly.

Q - How much of an imbalance do we have at 6735
A - 4 times as much as 6700 because price went 4 times further than it did with the rally from 6700

Make sense

Simon
99% of Traders fail, so don't follow the herd
  • #24
  • Apr 5, 2016 8:52pm Apr 5, 2016 8:52pm
That range from 23 mar to 28 mar
6670 to 6700
will have a role to play in this pair in the not too distant future.

once price breaks 6700 to 6735 range watch how quickly price sells through that level

The reason is because of the action of the range (equal amounts of buyers and sellers for that time period) the only orders that will be waiting inside that range are stop sell orders accelerating the price swiftly through it. This is why retail gets killed in this market cause all the retail guys think that this will be support when in fact it will be as flimsy as paper in my opinion.

The trading textbooks all say that 6700 would hold if you put that up in a classroom all the retail guys would say that would hold and all the wholesale guys like me would smile and say thanks for filling my sell order

Simon
99% of Traders fail, so don't follow the herd
  • #25
  • Apr 5, 2016 8:53pm Apr 5, 2016 8:53pm
Quoting sweetaction
how far did it rally from 67 before it stopped yep not very far, Q - How much of an imbalance between buying and selling do we have there at 6700. A - Not very much as the sellers rained it that rally to 6740ish pretty quickly. Q - How much of an imbalance do we have at 6735 A - 4 times as much as 6700 because price went 4 times further than it did with the rally from 6700 Make sense Simon
Again, thank you for sharing and for your time and for the patience for me
  • #26
  • Apr 5, 2016 8:56pm Apr 5, 2016 8:56pm
your welcome
99% of Traders fail, so don't follow the herd
  • #27
  • Apr 5, 2016 10:05pm Apr 5, 2016 10:05pm
Emotion

Lets speak about emotion in trading if you read all the forum posts on FF, how many talk about emotion, talk about money management, talk about stop losses and talk about patience, and generally talk about the real skills as a trader and the answer is very very few. Most will talk about my demo account chock full of indicators and how I am killing it. This is not what trading is about.

I always say to my wife I will never in my life time need to talk to a psychologist because I have the market to take care of all of my emotional needs, if I want to feel frustrated, elated, fearful you name it the FX market can provide that support.

I think of all the traders I have seen come and go I reckon 1 in 100 actually acknowledges their emotion in trading and the role it has to play. I know when I first traded someone else's money I actually had my wife pull the trigger on the trade I told her what SL, what price and what profit, I just couldn't get my head around trading someone else cash that took a lot of emotional work to get it straight in my head that they were more comfortable with the risk than I was.

Anyway we are off the track a little, emotions are important and the way I have learnt to deal with it is confidence instilled by confirmation, you will notice with the trades that I take i mainly wait for confirmation trades, rarely if ever will I play a breakout for example I would rather wait and see the reaction first and then run the stop trade or take the pullback trade, play the range trade, all of these types of setup's are confirmation trades. It depends on how emotional you are and what you will be comfortable with.

Stop loss has a huge role to play in emotions, by working out the stop loss first you are essentially signing a contract with yourself that at the stop loss point what you thought was confirmation is not and this is the only way to look at it. As human beings were have this stupid need to be correct all the time. What the first thing that happens when you have a car accident the other person gets out of their car and blames you for it, inherent need not to be wrong. This is a dangerous mindset in trading you must retire your ego when looking at charts. I know I have a certain arrogance when I look at a chart but this arrogance dosen't come from being afraid to be wrong it comes from years of watching the same behavior over and over.

Confidence instilled by confirmation.

It is quite OK to be wrong when 99% of the participants in the game are irrational, being with the herd is not smart that's saying your irrational and erratic just like them, try and be an independent thinker confirmed by confirmation of price through the actions of a few that matter in the irrational ocean we call FX.
99% of Traders fail, so don't follow the herd
  • #28
  • Apr 5, 2016 10:26pm Apr 5, 2016 10:26pm
Currency Pairs

Like all businesses I have a suite of products that we know as currency pairs, anybody that says they trade any pair any time frame is an IDIOT, you cannot trade something with any sort of confidence if you don't study it.

Question - Most large commercial traders, stick to a currency pair or two, why is that
Answer - because they become an absolute specialist at it, they may not be on first name basis with everyone they are trading against in the market but they know their habits they study them like an opposing team studies its opposition.

Let me also put this out there, if you have a heart problem are you

1. Going to a cardiologist for specialist treatment
2. Are you going to the GP down the road who treats everything from the flu to a sprained ankle

Just like a real relationship in life you have to get intimate with your pairs, for example

- what news affects them the most
- what time is the most active for them
- how volatile are they and the reasons for it, (Crosses are more volatile than majors for example)

this is called getting to know your product suite, you wouldn't buy a car from someone who couldn't tell you anything about it so don't listen to a trader who says they trade everything and everywhere, this is complete BULLSH!T.
99% of Traders fail, so don't follow the herd
  • #29
  • Apr 5, 2016 10:37pm Apr 5, 2016 10:37pm
Trading Plans

Do you need a trading plan, I would say absolutely yes but with conditions, depending on where you are in the trading business a plan will change from trader to trader. I consider myself fairly experienced so my trading plan mainly deals with:

1. Products
2. Working Capital
3. My Profit margin
4. Investors Risk and Return

I don't need at this stage to include things like trade setups, like risk reward ratio, at my evolution of my business this is like second nature I don't need this in my plan.

For a less experienced trader I would say its essential that they map out their strategies, walk yourself through the type of trade setups you want but be very careful with this no chart will ever set up the same way again so any strategy has to be dynamic it can't and shouldn't be mechanical. Have a plan for profit always think about paying yourself first remember your the one doing the hours especially in the early days so in any business plan work out how that business is going to pay you first, how much of a piece of every trade do you need. to make it worth your while.

Simon
99% of Traders fail, so don't follow the herd
  • #30
  • Apr 5, 2016 11:47pm Apr 5, 2016 11:47pm
Live Chart - GBPJPY

Enough of the theory lets have some fun

I look at GJ all the time I rarely trade it these days I really don't know why just happens that way i suppose

1. First things first lets look at a EOD chart, the daily chart shows how bearish this pair is, so whats the thought process here, well I would say try not to long this pair at the moment wait for pullbacks getting in front of this fall is like catching knives your going to get cut.

2. The second chart is the 4h and where do you think the swing back is going to be, nothing goes down in a vertical line its goes up and down, swing high to swing low, so the question you need to ask yourself is when the swing back from the low happens where is it going to be and how powerful is it going to be.

If it reaches 15850's then we can assume a fair degree of shorts bailing out and taking profits this is great sign if you are looking to long it eventually. If the swing point only gets as far as approximately 15730 then the shorts are in control and we are going to see more downward pressure quickly.

There is no magic in this analysis and notice how I didn't use any indicators I used common sense and the mechanics of buy and sell to determine strength. Is there a trade in any of this that I have covered so far for me - NO, all too risky and lacks confirmation I would rather wait, so this brings me to the next part of the analysis

If we see a hard push up to the 5850's then we know there is buyers interested in this pair the price action has to reflect interest it can't just limp to it and then fall we must see genuine interest. If it then come back and tests 5530 then the longs are potentially in play here, again we need to see how to gets to the level to determine the interest level.

If on the other hand we get a weak push to 5730 then I am not interested this will tell you that the sellers have complete control and sooner or later with a fall this steep its going to snap back hard and I don't want to be short when that happens.
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99% of Traders fail, so don't follow the herd
  • #31
  • Apr 6, 2016 12:03am Apr 6, 2016 12:03am
Backtesting

Many many people are not going to like this but backtesting is

Complete Bullsh!t

Why, I am glad you asked

1. Back-testing has one fatal assumption that every trade sets up the same, they don't and never will.
2. That every system you use to identify trades is mechanical in nature and rigid.
3. Back-testing has no account for sentiment, what I mean by this if something comes into the market that's unexpected I might get stopped out of a trade, that doesn't mean it was a bad trade just a trade with unexpected consequences, back-testing is rigid and will call this a failure.
99% of Traders fail, so don't follow the herd
  • #32
  • Apr 6, 2016 12:18am Apr 6, 2016 12:18am
Quoting sweetaction
GBPUSD Its time for a chart this is an upcoming trade but may be a week or more away, so now is the perfect time to speak about it. The first chart is where we are now and where we are heading, the second chart is where the level to trade might be. You will notice that GU has been really all over the place up and down and no where in between, very hard to read, when a pair behaves like this the edges are the only place to trade, forget the middle you get your fingers burned off trying to pick this, so with his in mind lets talk about the first chart:...
Mr. Simon, please correct my understanding. if i am not mistaken, for this pair, is it better to wait for the downward movement to the area of 1.3925, and if it will happen then it is the sign to take long for 80 pips, right Sir ?
so it is better to wait for that, and do not take any position on this pair, right ?
thanks Mr. Simon.
  • #33
  • Apr 6, 2016 12:29am Apr 6, 2016 12:29am
I would wait till it reaches 13925 and look for the reaction it gets, reaction to a level tells you everything:

1. If it approaches slowly and then hangs around at the level then safe to say , probably going to break lower unlikely to get a bounce upwards of any significance.
2. If its approaches quickly and retreats quickly then on a pullback towards this initial touch is your best oppportunity for low RR long trade. Confidence instilled by confirmation of buyers present.
3. You could also trade the first touch but this can be risky as it requires you to have some faith that buyers will be there

I will have plenty to say around the time price gets there so we will work together on here with it, don't worry if its not super clear yet, safe to say that the underlying message of every candle on every chart is a measure of two things

1. The balance or imbalance of buyers versus sellers, when they are in balance then we see range trading, when they are out of balance we see huge moves in price.
2. The places that those huge moves in price occur from is where we want to look for our entries the very first time price arrives back at this level, or on pullbacks towards this price as long as its quick. That does not mean that we take every trade blindly it means that there is a higher probability that this level will hold and allow you to trade it.

Simon
99% of Traders fail, so don't follow the herd
  • #34
  • Apr 6, 2016 1:00am Apr 6, 2016 1:00am
Quoting sweetaction
I would wait till it reaches 13925 and look for the reaction it gets, reaction to a level tells you everything: 1. If it approaches slowly and then hangs around at the level then safe to say , probably going to break lower unlikely to get a bounce upwards of any significance. 2. If its approaches quickly and retreats quickly then on a pullback towards this initial touch is your best oppportunity for low RR long trade. Confidence instilled by confirmation of buyers present. 3. You could also trade the first touch but this can be risky as it requires...
luckily i think i start to gain basic understanding about the system, will have to wait and learn about the price behavior when it touches the level.
and the other thing, is that when we use the system, we need to watch over many pairs, meanwhile i tend to focus only on gbp usd, but the system gives more time as i think it tends to be a more long term trading style ?
Sir do You have any criteria which distinguish between the good and fake imbalance ? such as 45 degree without any range for a period of time, or else ?
thanks Sir
  • #35
  • Apr 6, 2016 1:47am Apr 6, 2016 1:47am
A very good analysis.

Quoting sweetaction
....1. Look at the acceleration off that level last time around that takes serious cash to achieve that, the market will be piling up buyers there 2. The safe play here is to let it touch and watch the reaction, see how many buyers we have and then if its good wait for a pull back into the area, many many times this will be the one to get as the first move tests the water and the second move is what the market waits for to confirm it especially when the pair has come down a lot. A really good example of this is to look immediately left of the this...
Do your homework, follow the footprints of smart money
  • #36
  • Apr 6, 2016 2:05am Apr 6, 2016 2:05am
Quoting goldtime
{quote} luckily i think i start to gain basic understanding about the system, will have to wait and learn about the price behavior when it touches the level. and the other thing, is that when we use the system, we need to watch over many pairs, meanwhile i tend to focus only on gbp usd, but the system gives more time as i think it tends to be a more long term trading style ? Sir do You have any criteria which distinguish between the good and fake imbalance ? such as 45 degree without any range for a period of time, or else ? thanks Sir

no i dont have a pattern nor something like that for imbalance

simply put an imbalance is either

1. where you have more buyers than sellers this will result itself as large push upwards on the chart
2. Where you more sellers than buyers so the opposite applies here

where this occurs the point of origin is the level that's where the orders will be the first time it tested as long as there has been a good enough time gap as an example 1h chart might be a couple of weeks between tests.
99% of Traders fail, so don't follow the herd
  • #37
  • Apr 6, 2016 2:15am Apr 6, 2016 2:15am
Try this

Think about your charts the way you would if you were selling gasoline. What happens to price if supply is low, yep its goes up, so what happens when their is an oversupply the price drops, and for the rest of the time prices are stable because supply is meeting demand nicely so lets put this theory to the test in FX

- assume the majority of the market is short so supply is low what eventually is going to have to happen to price it will go up and not just a little bit violently, forcefully and sustained
- assume everyone is buying is long so supply is high, what eventually is going to have to happen to price it will go down and not just a little bit violently, forcefully and sustained

so at the points where this happens we have an imbalance and the next time the price gets near it the market will test it to see if the orders are still there because for the market to remain viable it must know whether it is balanced or imbalanced.

make sense

don't believe me look on the charts everywhere the imbalance occurs its like a magnet for testing, breakouts, continuation and reversal this is where the high probability low risk trades are.

Simon
99% of Traders fail, so don't follow the herd
  • #38
  • Apr 6, 2016 2:21am Apr 6, 2016 2:21am
Quoting sweetaction
I would wait till it reaches 13925 and look for the reaction it gets, reaction to a level tells you everything: 1. If it approaches slowly and then hangs around at the level then safe to say , probably going to break lower unlikely to get a bounce upwards of any significance. 2. If its approaches quickly and retreats quickly then on a pullback towards this initial touch is your best oppportunity for low RR long trade. Confidence instilled by confirmation of buyers present. 3. You could also trade the first touch but this can be risky as it requires...
Nice work there, I would say I use the same approach, but you have quite refined one. Really appreciate the work and effort you are putting it.

Edit: I was looking at GJ as well, should have gone over the previous posts, see you have already covered it, will go over that and come back with any doubts if I have. Thanx.
  • #39
  • Apr 6, 2016 2:32am Apr 6, 2016 2:32am
EURNZD

There is a nice trade setting up, I have upload the 1h chart. I have a level 16813 and I am looking for that to coincide with 6735 on NZDUSD, if this happens then we could get a nice rebound off 16813.

The high probability factors:

1. Price has been to this level on the 10th Mar and multiple times over 15 & 16th Mar and couldn't get through the shorts beat it back.
2. The last swing high fell short by 50 to 60 pips, which is not much on this pair but enough for the market to deduce that buyers are running out of steam
3. Look at the chop to the left of price from the 30th Mar onwards all of those little buys and sells soaking up every single order it can along the way, when this falls its going like a stone of a 20 story building in my opinion.
4. Very small stop loss 40 or 50 pips max anything above 16860 with any sort of force and its done this trade, the gain could be all the way back to 16300 no real resistance here its already soaked up and baked in (remember patience is key)

maybe not today but will keep an eye on this.

Simon
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99% of Traders fail, so don't follow the herd
  • #40
  • Apr 6, 2016 2:44am Apr 6, 2016 2:44am
GJ Lesson on Price Action

Check out the 1h chart on GJ, have a look at that candle formation for the last hour or the start of the european session, are you looking at that and thinking yep nice wick looks like we have buyers, probably going up

WRONG

I could be wrong but I have seen this crap a thousand times they chuck a whole lot of buys at it right near the top of the hour before the candle closes then London opens and we get all these retail guys filling their long orders.

Here is a clue if this is so bullish why isn't it going up

A - Because the big shorts are being filled by retail longs if the big boys wanted this to go up it would of by now.

Its a trick of the eye used perfectly to fool the unsuspecting. This is also the reason following a candlestick pattern trading system dosent work.

Warren Buffett said it best when he said its only when the tide goes out do you see who has been swimming naked, and the excellent thing about FX is that all the big boys have so much cash and their orders are so big that they are naked all the time they can't hide in the pack when they trade you know it.
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99% of Traders fail, so don't follow the herd
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