TMS for Newbies Part 2

as LL says always on close - LW keeps saying this is the reason 2 use the repaint TDI - watching the realtime TDI lines going up & down is not a good ting IMO for ur psychology

i spent a lot of time trying to come up wit schemes that would get me in early blah blah ..... none of it worked 4 me ..... wat i discovered was if i tried all this stuff like entering on the LTF when i was trading a HTF then i wasnt really doing TMS but some other system ...... i got my answers from Big E & Phx62 - read posts over and over

IMO momentum can b confusing to describe PA - it would be like a semitrailer truck going flatout for days and then stopping on a dime & turning the opposite way - fx can do this no problem even after a extended trend

IMO focusing on missed pips will get u losing pips in no time

i always look @ the bigger picture .... zoom-out on the H4 ..... wat do u c ..... wat has Davit been talking about for awhile

Implemnt what Big E , Green above Red and a potential TDI bounce or what Phx62 have shown in his books based on MBL trending up, use whatever u like, PA had forms a new structure high or HH, followed by Higher Lows too, while PA was forming Higher Lows TDI green and red were stornly north, so that top that acted as resitence , was only a confirmation of longs trades and based on TDI was meant to be broekn

Sup and Res are meant to be broken too, that dosent mean go trade agaist em, just check if they forms a double tops, triple tops, or they convergence with a trend-line, then with TDI confirmation no longs is taken and follow structure resistance

Ain't that the truth

I cannot understand this sentence:

Sup and Res are meant to be broken too, that dosent mean go trade agaist em, just check if they forms a double tops, triple tops, or they convergence with a trend-line, then with TDI confirmation no longs is taken and follow structure resistance

Could you give a more specific example on what scenario would you consider not taking this long trade?

Thank you.

A little bit about Stop Loss (SL) placement and management. As with most area's of trading, phycology plays a big part. It's not rocket science, but it does come down to the holy grail of patience and discipline.

Ok lets get into it.

Big E (aka eelfranz, aka Eric) used the method of placing the SL below the previous swing low when buying, and placing it above the previous swing high when selling. This is a very 'old school' way to place your SL, and it's a tried and tested method. If, for example, you place your SL below the previous swing low when you enter a buy trade (long trade), then as long as the trend continues...ie the PA is making higher highs and higher lows, then your SL is not going to get hit. If the trend finishes, or has a significant pullback right after you enter then your entry technique might need some work!!

During the course of an up trend, as long as higher highs and higher lows are continuing, then your SL is safe. Same for the downtrend...as long as lower lows and lower highs continue, then your SL above the previous swing high will be safe.

On the H4 chart, the previous swing high / low can be quite a long way off (in pips). Conceivably your SL could be 80 pips or more away. Of course if your 80 pip (or more) SL gets hit, it's going to hurt a little bit. But Big E mentioned that when using this method of SL placement, his SL never got hit.

Why is that? Did he have 100% win rate? We know that he didn't....no one can have 100% win rate. The reason his SL never got hit was he took a manual exit long before the SL was under threat. We'll come back to that point shortly.

After I left the TMS thread, I took much of what BIG E told me along with me, and much of it remains in my trading practice today. What I didn't properly grasp for several years though, was the 'nuts and bolts' of his SL placement. I fell back into the typical ForexFactory mentality of not entering a trade if the the SL was too expensive. I would wait for a trade opportunity that had a smaller SL available. It seemed like a good idea....only enter a trade when the SL is reasonably small so that if it got hit, it wouldn't be too much of a big deal.

How wrong I was.

I thought long and hard about the way that BIG E did it, and I found my 'Eureka' moment!

Lets say we're entering a Sell trade...entering short. We know to place our SL above the previous swing high because that's where it's going to be safe unless there is a trend change and the lower lows and lower highs chain is broken.

Lets also say that the previous swing high is 100 pips away. I know what you're thinking....."I don't want to take a 100 pip hit if the trend changes."

Well who said you had to take a 100 pip hit?

Even if the immediate trend changes it's very unlikely that it's going to rise 100 pips immediately and hit your SL. More likely is that the PA is going to consolidate.....mess around a bit before perhaps starting to rise and head in the direction of your SL.

So.....are you going to sit there like a muppet and watch your SL slowly but surely become threatened? Are you going to sit there and say "shit....it's going to hit my SL....just look at it?"

If you answered 'Yes'.....then you deserve to lose you 100 pips!!

Long, long before your SL is under any sort of threat, you should have done your analysis and realised that your trade is not going to work and *manually closed the trade.*

Having closed the trade for perhaps a 20 or 30 pip loss, you can now re-evaluate to see whether you can reverse the trade and perhaps make back you loss...or part of it.

This is why BIG E never had his SL hit. He did his analysis of the current situation and when he realised he was wrong, he took the manual exit.

This is what I do too...but it took me a long time to realise that this is the best way to handle the situation.

Our hypothetical 100 pip SL is NOT there to 'save the trade'.....it is there to *save the account!*

Think about that for a moment. We have seen how the SL should never get hit because we're not muppets. We're focussed on the job in hand and we realised that we were wrong, and the trade is not going to work, so we took the manual exit. Perfect.

The SL is there to protect the account. If there is a sudden spike which goes against our trade due to (say) market intervention, an earthquake somewhere, and act of terrorism or whatever, and the market runs 500 pips in a few minutes, our 100 pip SL is going to get hit. This sort of event doesn't happen often, but they do happen from time to time. That's when the SL does it's job. Sure, 100 pips hit is going to hurt a little bit, but we can make that up over the next few days...it's not the end of the world!!

So...the purpose of the SL is to save the account from major damage in the event of some disaster. It's purpose is not to save your trade...that's YOUR job!!
BIG E knew this and he was comfortable with it. He took the manual exit when his trade wasn't going to fly rather than sit there like a muppet and wait until his SL got hit. But if there was a major disaster and the market suddenly ran the other way, his account would be saved.

This is a far better method than having a SL 20 or 30 pips away that gets hit 4 times out of 10 or more. It's almost like having the freedom to trade with no SL all, but having a back stop in place to save the account if disaster strikes.

And that's exactly the purpose of the SL...to be a back stop if disaster strikes. It's not there to manage your trade....that's YOUR job!

Of course this isn't the only way to place your SL, but it's the way I do it

Have a great day......

Clear and straight forward. Well explained

Hi Lastingwell,

Thanks for the making life easier for newbie. I am trying to find info on how to read the LFL-ATR indi but could not find it. Can you guide me how it works?

Great post on SL that most veteran traders take for granted. I wrote once that the stop loss is not meant to be hit, but this gives details to the beginners that they need. To add to this, with the TDI, you have the flat, and the hook, exit. You know right then the trade has lost momentum, and you should just hop out. You won't miss too much because after a hook or flat, if you do not get a reversal cross, you will get a bounce, and you just get back in. Hopefully the fear of missing out on a trade will be relieved.

EN H4 - all out - waiting 4 close is like mega important 4 me ..... i find it hard 2 trade any other way cause its hard to read PA

Ooo, a cross! Should we take it?

brilliant! .... just a brilliant post RJ - this is core TMS that is missed by so many IMO - i am like so glad we have this thread now - otherwise noobs wouldnt even have a chnce 2 know this

GU +50.

Entered as price bounced upwards after closing gap created overnight.

H4/H1 TDI and stoch in tandem.

Closed at BRN.

Same

Bounce trade.

Hey JMN Got a question about your chart. How do you get the news in the lower corner to show up and the H4 ends in 3:30 is that just something offered by your broker?

Really nice post mate

If we know how to Identify trend and take trade with the trend, using as you have said a SL below low/high then because of the way trends are formed with LH, LL and HL HH etc we should rarely get stop out.

New trader Pls Read and Study this post is it gold!!! Back test and see for yourself will give you confidence GL

Answer would be no I know two reasons but Im sure there are more. Stoch is not in agreement....candles are very small......and its a consolidation area?

Thanks for post like this!!

After candle close, if the bias won't change, I am going to be in EURNOK short trade. It looks promising in my opinion.