Making Money Trading

This is a discussion on Making Money Trading within the First Steps forums, part of the Reception category; Originally Posted by trader_dante ... You should also look for the nose to line up with: support/resistance levels (particulary areas ...

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Old Oct 29, 2007, 8:28am   #151
 
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Originally Posted by trader_dante View Post
... You should also look for the nose to line up with: support/resistance levels (particulary areas where the price has flipped between support/resistance) remembering that trendlines also serve as support/resistance.
Although I understand what you mean, there are people out there would who definitely disagree on the fact that trendlines offer "true" S/R, me being one of those. Sorry for the interruption, no further comments Excellent stuff that you are giving away for free here.
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Old Oct 29, 2007, 11:00am   #152
 
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A word of warning if I may: If you take positions on EOD setups, I would advise not to monitor it in the day, if you are even remotely trigger happy in your exits.
Ok, who grassed on me??? LOL

One 'trigger happy' bunny - I now have to switch my trading programme off when I'm in a trade, just so I don't get tempted to exit once I get a couple of pips in profit.
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Old Oct 29, 2007, 11:15am   #153
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pinbar

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Originally Posted by trader_dante View Post
Pin bars are the price action setup I look for at my pre-drawn pivots.

The pin bar is an abbreviation of Pinocchio bar. It was coined by Martin Pring. The reason it is called Pinocchio bar is because it is based on the old European story about the wooden boy, Pinocchio whose nose grew longer the more he lied.

Pin bars lie to you about the direction the market is going in. When we see a pin bar we can take a trade in the opposite direction to one in which the nose is pointing.

Pin bars can occur at market tops. And market bottoms. Once you start looking for them you will see them everywhere. These ones I have circled stand out because our eye is naturally drawn to the highs and lows on a chart. They would have resulted in massive wins.

Hi TD

Just a query, on the chart you market pinbar, i have marked one more on red circle which looks like pinbar on first sight!, Does it qualifies a pinbar?
Thks
Fxbee
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Old Oct 29, 2007, 11:27am   #154
 
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Originally Posted by JillyB View Post
Ok, who grassed on me??? LOL

One 'trigger happy' bunny - I now have to switch my trading programme off when I'm in a trade, just so I don't get tempted to exit once I get a couple of pips in profit.
Many of us have or have had the same problem, JillyB.

I'm going to quote most of a long post I once made in my journal here at T2W (no longer active). Some of you may have read it before:

+++++++++++++++++++++++++

If you are in a situation where the position you have taken is significantly in profit, take a minute to sit quietly and think rationally. You need to focus on the fundamental thing that your position is now telling you.

You have called the market and you are RIGHT.

We know by its very nature that the market goes up and down so when we are losing we hope at some point it will come back and if we are winning we worry that it may turn and that we may give some, or worse, ALL of our profits back.

I quote from memory of another’s work (I forget the source) when I say that we are "taught" from an early age that:

a) If we lose something it will eventually come back (e.g. If you lose your car keys, not to worry, they WILL eventually turn up)

b) If you see something, take it or you might lose the chance (e.g. If you see money lying in the street, pick it up quickly because it may not be there for long)

This translates into our trading. If our position goes against us, we tell ourselves not to worry because nothing goes one way for ever and it must surely come back. If we are winning, we want to get out quickly because if we come back later, all our profit may all be gone.

The reason it is so hard to overcome this is because it has been "programmed" into us. To be a good trader, requires going against what we have had ingrained from an early age. To put it simply, it requires going against human nature - what our heads and our hearts tell us.

It's been repeated so often it’s boring. And yet all traders that don't make it in this game suffer a manifestation of the same problem. They are either not cutting losses early or not letting their profits run.

So how do you overcome this?

Pick a point before you place a trade that, if the market hits, proves you are WRONG in your analysis. If you see, for example, a pin bar at a double top, and want to go short, place your stop a little way above the double top.

I have done this before, shorted at what I consider a top, only to see the market move up through it. Rather than close, I would then move my stop further and further away with the reasoning, this climb cannot go on, its got to fall...it's just a market fake out...it will come down.

But here is the point: Who cares if it comes down an hour later? Or the next day? Your reasoning is that the double top is the turning point. If the market trades through it, you are WRONG. This is NOT the top.

What if it was only a fake out and the market then plummets? You likely end up frustrated. What if it wasn't and you keep moving your stop back? Well that's a quick way to the poorhouse. And I know which of these outcomes I think is worse.

Remember, the market has a way of frustrating every trader but the greatest traders are flexible. If you are wrong in the short term, close your position and wait on the sidelines where you can see clearly and wait for the market to move in the direction you thought it would.

Timing is everything when you are trying to make a living do this. If your timing is wrong, then get out. Sometimes the market may give you another chance but you can bet the time you need it to most, is the time you will get wiped out.

This may make you laugh but it took me, personally, just over two years to realise this simple truth: You have no control over the market. You cannot influence where it goes. The market doesn't know who you are; it doesn't care who you are, what you have or what you could lose. It goes where it goes and you either ride it or you get carried out.

So, that's how you should cut losses. How about letting profits run?

For me, a key thing to remember is NOT to look for reasons to exit a trade once it is going well.

I did this a few months back with the GBP/JPY. The trend overall was firmly up but it had suffered a rather sharp pullback over a few days. Then it had bounced at an EMA that I use and began making its way back up. So I got in based on this DAILY bar and near the end of the day it was up just over 100 points. Now I became enamoured with this 100 point gain. I had a considerable amount of money on the table and as such I started seeing reasons to exit.

Suffice to say, I found what I thought was a good one - the stochastic was overbought on the HOURLY - it was running along steadily just above the overbought line. So, out I came. Then, in the Asian session, the price steadied and while it did this the stochastic came slowly down to oversold and then began to turn up, even though the price has suffered almost no pull back.

The next morning the market was up strong again and just a few days later it was up 1,000 ticks on my original entry.

For me, the emotional pain I felt at being in it, then exiting and missing the massive move, was the same as, if not worse to just having LOST in the first place.

Remember why you entered the trade in the first place. With price action you can do this by STICKING TO YOUR TIMEFRAME. If you took a pin on the daily, do not get shaken out by a pin in the opposite direction on the hourly.

Sometimes you learn something when you least expect it. I actually had an epiphany of sorts when my girlfriend who knows absolutely nothing about the markets at all said to me: "Everyone has different reasons for doing things - they all play the game a different way."

This is the reason why the market goes up and down. Everyone is buying and selling based on different thought processes. Different strategies. Different methodologies.

But your reason is based on YOUR methodology so forget the other players. Let the market guide you.

In my opinion, a 20 tick pullback in a 100 tick move up is not a sign that the move is reversing. It is natural and it is inevitable. Consider the other market participants. In the short term they may want to scalp a small move or they may be hedging and therefore taking a position for another reason UNRELATED to profiting. These buyers and sellers will cause temporary fluctuations in price but actually exiting a good trade should be done when YOUR reason for entering is WRONG not just because it is suffering a temporary setback.

Aways try and remember – simply being UP is not a consideration for getting OUT.

Some people take signals and close on the FIRST DAY because they have made a killing. Just think for a second - You are trading off a daily bar. You've had just ONE go in your favour. Try this. Look at a massive trend that you would like to have caught. Look at a possible entry such as the double bottom, or any of the many swing highs/lows. Then count how many daily bars made up the rest of the move, from bottom to top. Now consider exiting on the first one that shows a profit.

Of course some people don't like to play this way. They like to take profits or they like to scale out as it moves their way. This is all well and good if there is a valid reason other than "this has gone really far." If you trade with the trend you can capture a very large move simply by not being so quick to exit.

I would add finally, that it is always an eye opener when you read about how other traders have managed positions. If you research some of the best and highest earning traders in the world and follow what they did on the charts you will find as I did that if you took the same position, the moment you would look to exit is usually the moment that they are looking to ADD to their position.

Look at the traders that made a killing in the incredible fall that happened in Natural Gas futures. Go and look at a chart of that market. On a daily you wonder how anyone that saw it didn't get rich. It's straight down. But then imagine being actually in it and seeing a sharp two day spike up from all the bargain hunters. Most, if not all of the people reading this, would, if honest with themselves, be long gone, patting themselves on the back for their profit even as the market turns and falls through the floor.

So to sum up: Have the strength of your convictions.

This is not to say that any trader should hold blindly. But try and be logical. Look at price action and let it tell you where the market is going over the time frame. And remember the other participants in the market.

There is always a tug of war in the market but someone is going to win...and if you are patient, that someone may be you.

+++++++++++++++++++++++++

I will show you some very good techniques for helping you hold on to your winning trades. Cutting your losers is down to you.
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Old Oct 29, 2007, 11:36am   #155
 
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Originally Posted by forexbee View Post
Hi TD

Just a query, on the chart you market pinbar, i have marked one more on red circle which looks like pinbar on first sight!, Does it qualifies a pinbar?
Thks
Fxbee
Hi FXbee,

No, this is NOT a pin bar. A pin bar will have the following characteristics.

- A long "nose"
- A small "body"
- The body will be in the lower/upper 1/3 of the candle or bar

Look carefully at that chart with my examples and you will see these characteristics.

You will see MANY more examples of these bars as we go on.

Tom

P.S This is to everyone not just you Fxbee: You will certainly profit from reading up on and studying pin bars. There is much more to them than I can tell you about here. At least in the meantime...

For example, some traders place relevance on the eyes (the bars immediately either side of the pin bar)

I will always try and mention everything that helps me make a trading decision but you should all be aware that some things are so deeply ingrained they are almost subconscious.

I believe this is part of the traders "instinct". It comes from experience (which translates as hours and days and weeks and years of watching the markets).

This aspect will be hard to express to you all. But I will do my absolute utmost

Last edited by trader_dante; Oct 29, 2007 at 11:49am.
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Old Oct 29, 2007, 11:49am   #156
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Reversals

Hi TD,

I am prone to playing the odd reversal here and there, as we speak I have taken a tweezer/pin long off the round number rejection on USD/CHF.
I absolutely abhor playing these falling knives - have you been prone to taking these and if so how do you train yourself not to?

Cheers,

SMB
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Old Oct 29, 2007, 11:56am   #157
 
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Quote:
Originally Posted by firewalker99 View Post
Although I understand what you mean, there are people out there would who definitely disagree on the fact that trendlines offer "true" S/R, me being one of those. Sorry for the interruption, no further comments Excellent stuff that you are giving away for free here.
No apology necessary. Every comment is appreciated. I am not sure what you mean by "true" S/R. I regularly see TL's with multiple touches (a third touch is minimum necessary for confirmation) that result in significant profit each time.

Last edited by trader_dante; Oct 29, 2007 at 12:45pm.
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Old Oct 29, 2007, 12:11pm   #158
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What Is Price

What is Price?
In general terms price is a component of an exchange or transaction that takes place between two parties and refers to what must be given up by one party (i.e., buyer) in order to obtain something offered by another party (i.e., seller). Yet this view of price provides a somewhat limited explanation of what price means to participants in the transaction. In fact, price means different things to different participants in an exchange:

Buyers’ View – For those making a purchase, such as final customers, price refers to what must be given up to obtain benefits. In most cases what is given up is financial consideration (e.g., money) in exchange for acquiring access to a good or service. But financial consideration is not always what the buyer gives up. Sometimes in a barter situation a buyer may acquire a product by giving up their own product. For instance, two farmers may exchange cattle for crops. Also, as we will discuss below, buyers may also give up other things to acquire the benefits of a product that are not direct financial payments (e.g., time to learn to use the product).
Sellers’ View - To sellers in a transaction, price reflects the revenue generated for each product sold and, thus, is an important factor in determining profit. For marketing organizations price also serves as a marketing tool and is a key element in marketing promotions. For example, most retailers highlight product pricing in their advertising campaigns.
Price is commonly confused with the notion of cost as in “I paid a high cost for buying my new plasma television”. Technically, though, these are different concepts. Price is what a buyer pays to acquire products from a seller. Cost concerns the seller’s investment (e.g., manufacturing expense) in the product being exchanged with a buyer. For marketing organizations seeking to make a profit the hope is that price will exceed cost so the organization can see financial gain from the transaction.

Finally, while product pricing is a main topic for discussion when a company is examining its overall profitability, pricing decisions are not limited to for-profit companies. Not-for-profit organizations, such as charities, educational institutions and industry trade groups, also set prices, though it is often not as apparent . For instance, charities seeking to raise money may set different “target” levels for donations that reward donors with increases in status (e.g., name in newsletter), gifts or other benefits. While a charitable organization may not call it a price in their promotional material, in reality these donations are equivalent to price setting since donors are required to give a contribution in order to obtain something of value.
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Old Oct 29, 2007, 12:12pm   #159
 
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Originally Posted by smbtnt View Post
Hi TD,

I am prone to playing the odd reversal here and there, as we speak I have taken a tweezer/pin long off the round number rejection on USD/CHF.
I absolutely abhor playing these falling knives - have you been prone to taking these and if so how do you train yourself not to?

Cheers,

SMB

SMB,

Look at the last three candles on your chart.

The first one is a doji - it represents indecision and not a firm rejection of a bottom.

The second one is also a doji but this time it has a range expansion. This means the bulls and bears are playing a little more actively now. Volatility is increasing.

The third is a pin bar. It is a pin bar at a double bottom (you cannot see this on the chart you posted. Zoom out and look left).

However, I like to see the nose poke out to create its own space away from the other bars. This is an important element in playing these bars, for me.

As such I would most likely not have taken this setup.

If I had, I would be quick to get my stop to BE on this as I don't consider it an A great setup and 1.1650 (which it is now testing) is first area of difficulty in my opinion.

I will take a reversal against the trend if I feel there is a strong reason to do so.

I never sell because something is too high and I will never buy because it can't go any lower. The market will go where it wants. The only person that can ever be wrong is the trader.

I take many of the factors already outlined in earlier posts into consideration in the rare times that I trade against the trend. Trading against the trend can be very profitable but it can also result in the downfall of a trader. And it is important to remember that it is a very different game to trading with the trend and as such it has different rules.

More on this will develop over time.

Last edited by trader_dante; Oct 29, 2007 at 6:46pm.
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Old Oct 29, 2007, 12:23pm   #160
 
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Originally Posted by hanzam View Post
What is Price?
hanzam, while this is fascinating, I am not 100% sure what the relevance is...that may just be me though.
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Old Oct 29, 2007, 12:33pm   #161
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SMB,

Look at the last three candles on your chart.

The first one is a doji - it represents indecision and not a firm rejection of a bottom.

The second one is also a doji but this time it has a range expansion. This means the bulls and bears are playing a little more actively now.

The third (at least on my chart) is a pin bar. It is a pin bar at a double bottom (zoom out and look left).

However, the pin's nose doesn't poke far enough out from the other bars on my chart (and is a tweezer bottom on yours) This is something that I like to see and as such I would most likely not have taken this setup.

If I had, I would be quick to get my stop to BE on this as 1.1650 (which it is now testing) is first area of difficulty in my opinion.

I will take a reversal against the trend if I feel there is a strong reason to do so. I take many of the factors already outlined in earlier posts into consideration when I do. Trading against the trend can be very profitable but it can also result in the downfall of a trader. And it is important to remember that it is a very different game to trading with the trend and as such it has different rules.

More on this will develop over time.

It's difficult for me to post chats whilst at work but when I get home I am going to show you all an absolute stunner of an entry on AUD/CAD 1hr.
Thanks for your prompt reply TD, I look forward to engaging in live debate with yourself.
As we speak my first scale-out target has been hit just above the round number 1653. A case of trailing the rest for today's daily p/l target. 1670 is potential s/r zone on my charts.

Thanks

SMB

Last edited by smbtnt; Oct 29, 2007 at 12:36pm. Reason: addendum
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Old Oct 29, 2007, 12:38pm   #162
 
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trader_dante started this thread Quick note to all: I have a dreadful habit of editing all my posts as long as it will let me do so. This is because I frequently re-read what I have written and think of better ways to say things or important things to add.

Sometimes I just like to play with the spacing - I am convinced the way words/sentences appear is crucial to how we understand them and the impact they have.

Everyone would be advised that if they have asked me a direct question, to have a quick re-read of my answer an hour or so after it appears - I just added to your reply SMB.

Thanks,
Tom
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Old Oct 29, 2007, 12:54pm   #163
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Hi FXbee,

No, this is NOT a pin bar. A pin bar will have the following characteristics.

- A long "nose"
- A small "body"
- The body will be in the lower/upper 1/3 of the candle or bar

Look carefully at that chart with my examples and you will see these characteristics.

You will see MANY more examples of these bars as we go on.
Hi TD,

Do you wait to form the full eyes (bars on both side of pinbar) and trade on break of high/low of pinbar (Bcoz i think only on seeing full formation we can realise its a perfect pinbar)?

Also in drawing your fibs, (in uptrend we draw from bottom to top), i believe you dont mind in using the previous / after bar to the swing low/swing high to match the confluence? [I hope we get this habit once when we are used to on looking at the charts]


Fxbee
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Old Oct 29, 2007, 1:10pm   #164
 
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Do you wait to form the full eyes (bars on both side of pinbar) and trade on break of high/low of pinbar (Bcoz i think only on seeing full formation we can realise its a perfect pinbar)?
Hello again forexbee. No, I don't wait for the right eye to form fully.

The left eye is the important one for me. I like to see the open/close of the pin bar itself, within the range of the left eye. Whether it HAS to be I am unsure. This is just what I look for. Once I see this I play a break of the high/low of the pin bar. This means I enter on the right eye if it triggers my order.


Quote:
Originally Posted by forexbee View Post
Also in drawing your fibs, (in uptrend we draw from bottom to top), i believe you dont mind in using the previous / after bar to the swing low/swing high to match the confluence? [I hope we get this habit once when we are used to on looking at the charts]
When I draw fibs I use the EXACT bar of the swing high/low.

I never TRY to create confluence.

If it exists I act. If it does not exist, I move on.

Draw your fib levels and S/R levels on the chart and wait for the market. I cannot emphasise this enough.

If you do not there is the possibility that you may be "fitting" areas to your pin (sometimes subconsciously) as in you find yourself saying: "right let's draw a fib down from this high...hmm no it doesn't line up very well....now lets try this high....hmmm no that doesn't work either, price is between the 38 and the 50 in no mans land....now let's try this high area...ok fair enough it's not really the high its more like a high within consolidation but hey it lines up wonderfully with the 61....yes this looks good".

I found myself doing this with S/R in the early days of learning price action (really only this time last year) Of course I didn't do it intentionally but it's hard to prevent your eye from being drawn to the nose of the pin and then looking left and seeing a line or a zone where there perhaps isn't one...

Never look for a reason to trade.
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Old Oct 29, 2007, 1:17pm   #165
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Originally Posted by trader_dante View Post
Hello again forexbee. No, I don't wait for the right eye to form fully.

The left eye is the important one for me. I like to see the open/close of the pin bar itself, within the range of the left eye. Whether it HAS to be I am unsure. This is just what I look for. Once I see this I play a break of the high/low of the pin bar. This means I enter on the right eye if it triggers my order.

When I draw fibs I use the EXACT bar of the swing high/low.

I never TRY to create confluence.

If it exists I act. If it does not exist, I move on.

Draw your fib levels and S/R levels on the chart and wait for the market. I cannot emphasise this enough.


Never look for a reason to trade.
Hi TD,

Great, very quick reply. thanks

i have tried using the indicator for pinbar thru FF forum. But i prefer to point it myself rather using a indicator as it gives good experience to feel the market... Sometimes i see the pinbar identified by the indicator doesnt brings profitable trade...Is it worth to use it and learn finding the pinbar? Your views & opinion on this is highly appreciated for newbies

Cheers
Fxbee
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