FX Trade Setups, Entries, Management and Exit

eur/usd cancelled limit at 3770. Will review target area if it makes it above the daily R1 level again at 3758.
 
nzd/chf looking for support on weekly and daily pivot points - which are within 2 pips of each other.
 
Purple Brain said:
No, I went for the full cucumber.
Click to expand...

Yes, that was a ranging trade--until we got stopped. :(

It makes me think that I should pick a trade entry, subtract or add the stop difference and enter there.

Its not an original idea but, psychologically, I do not want to miss the boat, so I enter and see the price reverse to the stop level.
 
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There was an interesting exchange last week where I highlighted a piece of research which suggested those who are avid photo takers tend to remember less of the detail of what they are looking at (and photographing) than those who are not. I extrapolated that research onto a similar hypothesis on taking notes in that I tend to abdicate responsibility for taking action on things I note down, finding not writing them down tends to get me to action them that more quickly.

There were a couple of response – one which agreed and one which was diametrically opposite to me view. All good stuff. What stood out for me was the comment that we probably tend to get the result we expect to get from any action we choose to take (or not take). That hit my Underlying Truth bone.

So I physically threw away my hardcopy trading plan. I then deleted it from my computer. I then deleted all my accumulated trading notes. I even went as far as to delete all instances of the same from my backups. I’m nothing if not thorough. I cast a glance at my trading books quivering in their book cases and gave them grace. I’m a bit of a bibliophile and find it really difficult to dispose of old friends. But I suspect even their time has come.

I then deleted the few remaining indicators (moving averages, Williams, stochastics) from my charts.

And took a fresh look the charts.
 
When you have no specific bias as to trend, you have no preconceptions as to ‘likely’ future direction of travel. So you look at each tick of price development as an instance of information in its own right.

What I notice as I scan the chart from left to right is there are troughs and peaks. And within those trough and peak structures, smaller structures of trough and peaks. I’ll avoid using the term fractal as it’s a much over-worked, over-used and oftentimes incorrectly applied to trading from a mathematical standpoint.

But each trough has a bottom and each peak a top. And there is one bar in each that is the top or bottom. I’m thinking of it as a temporal rather than price level pivot point. Rather than the price pivoting around it I see the bars each side of it pivoting around that time or that pivot bar.

For price development which has recently peaked, if the current bar is closing below the body of the bar which is its mirror image bar (as many bars to the left of the pivot bar as the current bar is to the right) then further downward price action is more likely than not. The opposite for a trough. If you consider the logic of what I’m suggesting these are not only shorts and longs respectively– they are also exits to longs and shorts respectively.
 
I’ve also come to a conclusion that serious traders do not get involved in fripperies and side issues on bulletin boards and confine their posts to the business at hand and do so in a professional and serious manner. If they get involved at all.

I do choose to get involved as I’d like at some point to be able to say I have been able to pay back those here who have so generously helped my trading development, by helping others.
 
Basically, whatever indicator one uses, it produces a point of reference for the trader to act upon. A trader is, often, waiting for that "something" to occur. If he is dealing with a naked chart, what point of reference is he using.? I feel that pure price action is fine, as far as it goes, and I use it all the time but it is not enough. A breakout, in my opinion is better when the price is overbought/sold. But overbought/sold to what? The average of how many bars? If I can get a signal once per day, I am satisfied. Some, however, are happy with only one per week--or month--and other unfortunates need a "fix" several times per day.

I think that that is why we need and use indicators.
 
Purple Brain said:
. . .I then deleted the few remaining indicators (moving averages, Williams, stochastics) from my charts.

And took a fresh look the charts.
Click to expand...
Hi PB,
Very bold move - I like it!

Given that you're in 'clear out and start again' mode, can I suggest you do the same thing with the charts themselves? What I mean by that is that most of us have - at some time or another - gone back to square one. However, when most traders do it, they put back up a candlestick chart (if that's what they've used in the past) and then change the colours and background etc. They may change the timeframe too, but pretty quickly return to the one they're used to and like. I'm suggesting that you look at charts that present price information in an entirely different way from the one you're most used to seeing. So, if you've always looked at candlestick charts, try line charts and, most importantly, any non time based chart. As you'll probably have gathered by now, I'm a big fan of Renko and, to a lesser extent, point and figure. 3 line break would serve equally well, no doubt.

If you absolutely must stick to a candlestick chart of sorts, try Heikin-Ashi (H-A). Their great benefit is the one thing most traders criticise them for. Namely, they obscure all the fiddly itty bitty price action that most of us get so worked up about. To paraphrase dbphoenix, a former T2W guru, price action displayed graphically in the form of a chart should be viewed as a movie going from left to right, rather than just focusing on a single still image (i.e. individual candle) at the far right edge. Line charts, Renko and to some extent H-A charts help the trader to do this as they all 'democratise' price action by highlighting momentum, trend and key areas of S&R - without placing undue emphasis on the current price action.

A fun test to try on a demo account (definitely not with real money) is to trade just using indicators alone and no price chart of any kind. In my experience, the results are as good - if not better - than trading with price. For me, this highlights my tendency to get tangled up in trying to interpret the current candle with the result that I miss trades or take late entries and exits etc. I suspect I'm not alone and that this is a common malaise for many traders. Price action is terribly overrated IMO and creates at least as many problems as it solves. For that, I blame Steve Nison. His book on candlestick charting techniques is beautifully written and produced but, I wager, over the years has led to the downfall of many more traders than it has helped. The one caveat being that Nison is also credited with introducing the west to Renko and 3 Line Break charts. IMO, for the reasons stated, these are far more noteworthy and a more valuable contribution to technical analysis than candlestick charts.

Tim.
 
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Purple Brain said:
So I physically threw away my hardcopy trading plan. I then deleted it from my computer.
Click to expand...
Is this the moment where Mike Tyson noted:
Everyone has a plan ’till they get punched in the mouth.
Click to expand...
Remember the saying:
The art of fighting without fighting.
Click to expand...

(edit) Anyone can write a plan, but writing a plan doesn't mean it will be a successful one because that plan depends on something else. That something else is not seen with your eyes, it is seen with your mind.
 
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timsk said:
A fun test to try on a demo account (definitely not with real money) is to trade just using indicators alone and no price chart of any kind. In my experience, the results are as good - if not better - than trading with price. For me, this highlights my tendency to get tangled up in trying to interpret the current candle with the result that I miss trades or take late entries and exits etc. I suspect I'm not alone and that this is a common malaise for many traders. Price action is terribly overrated IMO and creates at least as many problems as it solves. For that, I blame Steve Nison. His book on candlestick charting techniques is beautifully written and produced but, I wager, over the years has led to the downfall of many more traders than it has helped. The one caveat being that Nison is also credited with introducing the west to Renko and 3 Line Break charts. IMO, for the reasons stated, these are far more noteworthy and a more valuable contribution to technical analysis than candlestick charts.
Click to expand...
Price action does not have to mean candle stick reading which I agree
is bo11ocks - pin bars, dojis,all the other guff, change timeframe or tick value
and they disappear...

For me, the true value of price is not the OHLC of an individual bar as its
an arbitrary construct to present tape data in a graphical form.

Thats the key - presenting tape data in a graphical form.
Indicators don't influence price.
Price bars of any type do not influence price.
The only thing that influences price are trades.

The only things that everyone who places a trade can see in the exact same light
are time and sales, volume and current price level and previous price / volume
reaction at certain levels.
For me thats the only worth of price action - level reaction.
The only variable is individual interpretation.

Analogy time - petrol prices.
You don't need an indicator or certain way of presenting the data graphically to know that
if a petrol station started advertising petrol at 80p per litre the buying reaction
would be strong...
OK its a massively simplified example, but it does highlight what I mean by
price level reaction.

The main trap for most people with trading stems from the fact that
current and past data can be presented in graphic form.
Probably the most damaging aspect of that is to start presenting that data
with mathematical filtration - indicators.

Graphical processing of price data in trading is a curious phenomenon
that doesn't occur in any other market.
You won't see it happen in a real estate, livestock, antiques or car auctions...
In those settings - perceived value amongst participants and current price
is all that matters.

Future price is unknown - nothing can predict it.
You can have good pointers to future price though.
Going back to the auction example earlier, similar goods will be expected
to react to price levels of other similar goods, assuming supply and demand is constant.

Car auction time.
3 year old Fiesta, similar age and condition to one that has previously gone through.
The expectation of future price is widely known by those that compare it to
previous sales.
Thats like a ranging market in trading - nothing to push price outside of
the generally agreed value (minor fluctuations aside).

Events that would push price outside of the generally agreed value would be
lower insurance / fuel costs for instance.
That would weaken demand for small cars in general at the current
generally agreed value.
So future price expectation is lower.

Financial trading is no different.
Current price, current and previous level reaction and tape / volume if required.
Its no coincidence that the prime focus of most institutional trading is price based.
Whether or not its value investing, tape reading, HFT DOM spoofing,
stat arb and so on, the common foundation is raw price.
 
timsk said:
Hi PB,

I'm suggesting that you look at charts that present price information in an entirely different way from the one you're most used to seeing. So, if you've always looked at candlestick charts, try line charts and, most importantly, any non time based chart. As you'll probably have gathered by now, I'm a big fan of Renko and, to a lesser extent, point and figure. 3 line break would serve equally well, no doubt.

If you absolutely must stick to a candlestick chart of sorts, try Heikin-Ashi (H-A).
Click to expand...

Purple, if i might I don't think I could back up Tim's suggestion strongly enough.
I have at some point done what you did, tore everything up and did in fact come to realise that every book out there is pretty much useless. Except one. Its a book that when I first read it, I couldn't get into it and so put it down and only a couple of years later I picked it up again. It was on Point and Figure.

I'm not saying that P&F is any better than Tim's Renko but its the non time based factor that has been the defining moment for me. I still have strategies trading off typical candles as well as Ichimoku (an ex favourite of yours I believe...again though, HA works so much better!) but I have at the front of my mind what is P&F telling me.

Try one of these if you start again, and by all means let me know if you ever want a hand in this regard, P&F being my favourite among all
 
I think that we are coming back to square one.......again, and it will always be like that. A continual search for a method of trading that is suitable for each individual. Tim and Malaguti seem to have found what satisfies them. I have not, yet, Nothing satisfies me completely and that, probably, is my problem, but a restless mind keeps the brain exercised!
-
 
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