Making Money Trading

[grimweasel]

The pin in the Euro chart is not really at a significant swing high or low. Is the S/R level a major one on the weekly/monthly chart as well, or just a short term level? It almost needs to be a 'naked close' type set up where there is a clear display of trade pressure giving way to the other side, not congested in amongst other sideways trading bars. I think that the price action before the pin gives way to some ideas too. There is almost a 'test' of the buying before it re-commences? Also for a better trade the body of the pin needs to be within the body of the previous pin bar. Stringent rules I know, but Master Dante has taught us the rules and his 7 year quest for a sucessful pattern must have been deeply researched to arrive at that conclusion?
Only my opinion..

 

[Splitlink]

I believe this to be completely and utterly untrue.

Sorry,TD, just voicing an opinion. You have made a great thread, here, and I didn't intend to give a negative impression of your strategy.

Regards Split

 

[nunrgguy]

The pin in the Euro chart is not really at a significant swing high or low. Is the S/R level a major one on the weekly/monthly chart as well, or just a short term level? It almost needs to be a 'naked close' type set up where there is a clear display of trade pressure giving way to the other side, not congested in amongst other sideways trading bars. I think that the price action before the pin gives way to some ideas too. There is almost a 'test' of the buying before it re-commences? Also for a better trade the body of the pin needs to be within the body of the previous pin bar. Stringent rules I know, but Master Dante has taught us the rules and his 7 year quest for a sucessful pattern must have been deeply researched to arrive at that conclusion?
Only my opinion..

For the first part I'm not quite sure which chart you refer to as they are all EURUSD. How do you know it's a significant swing high until it has happened? How are you gauging significant? The level? Round number? After the swing, if it swings? The tail of the pin? The first chart on the weekly was an all time high as far as my data goes back (to 2002).

OK, I hear what you're saying and I suppose at brings us the crux - in a strongly trending market such as EURUSD you're not really going to see STRONG, long term S/R. If you go on the weekly, the only area I can see is at 1.2 and 1.3 which means no trades possible on this market? Or am I just not seeing this right?

"For a better trade the body needs to be within the body" - I tend to agree but that's not what has been put forward throughout the thread - what's been put forward is the
body of the pin is near the open/close of the left eye - quote from TDs spreadsheet "Its close is within the range of the previous bar and near to its high or low?" and I'm sure I've seen multiple trades illustrated within the thread where the pin is not as you describe?

Please understand I'm not arguing the toss here but trying to understand where I'm getting it wrong.

 

[trader_dante]

Some good points. I'm going to reply to them later on nunrgguy. If I do it now I might lose my second laptop to my girlfriends hairbrush. -Tom

 

[nunrgguy]

 

[trader_dante]

OK
Here's a few examples
pic 1 & 2 are on the EURUSD. Hourly 29/11/07 01:00 S/R level, pullback. Result - fail.
Pic 3 & 4 EURUSD 13/3/08 09:00 Hourly, possible swing high, also hit bollinger top. Result - fail.

Hi nunrgguy,

A few points to make:

The thing with this strategy is that it will not appeal to everyone - some people are far too impatient for trading once or twice a week when the perfect setup occurs. Others are averse to the larger stops (despite the fact that with correct position sizing the number of ticks in your stop matters little)

Still, that aside, if you find it fits with your individual trading psychology, this method will make you money consistently. I promise that faithfully to anyone reading this.

Now first and foremost, hit rate in terms of number of wins versus number of losses means next to nothing.

It's how much you win when you win compared to how much you lose when you lose, that makes a difference.

And that is due to:

a) how much you wager

b) how you manage trades in terms of cutting losers and running winners

As an example: I've had a win/loss ratio of well over 90% and still wiped an account out but had another account with a ratio of closer to 50% and made money consistently.

Since you are only talking about the ENTRY when you mention the success rate, let me deal with that next.

As I have said before: if you take ONLY the best setups you will rarely lose.

If you take only the setups that have minimal supporting evidence then you will get a much lower hit rate.

How do you measure how good the setup is? That comes with experience. The strategy is very discretionary and the more you demo it the more you will get a feel for it. What I can tell you is that the more supporting evidence you have, the high probability of the trade working.

Let me look at the setups you mention above:

The first one is important because the level that the pin bar hits is a support level it is NOT a PIVOT. There is a big difference. We are looking for areas where previous resistance has turned into support and vice versa. There is very LIMITED EVIDENCE of that here. The fact that it is a support level which has been hit repeatedly would worry me when taking this because support and resistance levels get ERODED. Sometimes they end up holding but the more they are hit the higher the probability that they are being weakened.

Secondly, you will remember I talk about always planning the trade and a very important part of that plan is identifying the PROBLEM areas. The first PROBLEM area here is where the blue rectangle is since price has recently rejected this area TWICE. Since the R:R is very low you would most likely have wanted to pass on this trade and if you had not, you would almost certainly have wanted to get out for breakeven when price hit it and rejected it for the third time.

Lets look at your other setups.

The second one which is a pin bar at a swing high on the hourly with no supporting evidence is asking for trouble. The higher the TF the more reliable. These types of trades on the hourly TF are not advisable.

I take a lot of these types of trades on the daily TF after extended run ups and these are usually the trades that bring my WIN/lOSS ratio down because many of them fail. So why do I still take them? Because when they work they really go and you can easily cover many losses in one trade.

The one you took on the weekly was a fair enough trade in my opinion and as it happened it didn't work out so I'll give you that one

I really appreciate all comments - even the negative ones. If someone thinks this strategy is complete BS then tell me!! I'm not going to cry. I know it works for me and I am teaching it to more and more people who are telling me it works for them but if it doesn't work for anyone reading this then I firmly believe there are two reasons:

Either you are taking setups that are not high probability enough (and then not running your winners enough when you get them)

OR

The strategy doesn't suit you e.g. perhaps you tend to over trade and take average setups because of a need to be in the market etc

If you maintain prudent risk management, take only the best setups with the discipline to exit when they dictate you are wrong and maximise the profit by running winners, you cannot fail to make a huge amount of money with this method.

 

[nunrgguy]

Many thanks TD - I can see that I need to be more stringent in my analysis in certain areas, as correctly stated I've been looking purely at entry, I manage position size based on account size, account risk and R:R: probably the same as everyone else and wouldn't have traded the second bar due to poor R:R (if I'd have noticed the recent rejection - which I didn't, doh) - I suppose the ideal is to really swing down into the pin rather than go slightly flat and then into the pin as the flatness shows weaker buyers at that level in the illustrated trade.
Going back to the trending market question and a lack of pivots rather than S/R, is a pullback to MA with a fib or S/R enough for a probable continuation of the trend in your opinion?

 

[mp6140]

MP -- what is risk/reward and why pay attention to it ?

honestly, I dont understand what it is, what its supposed to do or why anyone would even think of trading with what sounds like an "accounting" approach !

how many "risks" does one take for a reward, or how many rewards before its too many risks ?

someone who REALLY knows please, as my head swims with too many answers

mp

 

[trader_dante]

I suppose the ideal is to really swing down into the pin rather than go slightly flat and then into the pin as the flatness shows weaker buyers at that level in the illustrated trade.

Spot on!

Going back to the trending market question and a lack of pivots rather than S/R, is a pullback to MA with a fib or S/R enough for a probable continuation of the trend in your opinion?

It certainly is.

 

[black bear]

Question

:?:

Read Firewalkers post above

Boy am I glad you guys are here helping me

If you are new to this, forget about the lower timeframes. The higher the timeframe the more reliable the signal.

The only two timeframes I use are daily and hourly.

These two timeframes allow me to trade whilst in the constraints of a 9-5 office job.

You don't need to give up work and be a day trader to make a lot of money in the market.

I know traders that trade only daily bars and they do very well. They concentrate on FX majors and once they have drawn their levels in, they may only "work" for a few minutes a night as they scan the charts for price action and place any corresponding orders. This is the great secret in trading - the holy grail if you like: You do not have to go through hell and give up your life to make money. There is no need to spend hours poring over charts or assessing fundamentals. Price action works. You can make money trading it.

I am lucky in that I can access my charts at work and look at them frequently.

I set my charts up as follows:

1. I will go through and mark all the areas of S/R as I have shown you on the daily TF. I will drawn in any trendlines too. I sometimes draw in the fib levels before hand but sometimes put them in only if I see price action otherwise the chart can end up looking like some kind of nightmare.

2. I go onto the hourly TF and I mark off the S/R levels that I see on that.

I will give you an example in due course but remember: only draw in the significant levels. If you draw in every minor S/R pivot you are going to likely end up with a whole lot of lines that are very close together and little confidence to trade because of fear that the market has nowhere to move before it runs into another line.

Once I have done this, I then pull up the charts every hour and look to see if price is reacting to any of my pre-drawn lines. I then look what is happening just before/after the close of the session.

That means for commodities, I usually have a look at what price action is on the daily TF at around 7.30pm. I scan the bonds/interest rates and the indices at 9.15pm and I scan all the FX pairs at Midnight. All times are GMT.

Hi Td

good post above td

pages 10 - 30 ish quality imho and you do in fact point out that it is most important a trader waits for the market to come to them

Q: How often do you re-draw your S & R lines in hour tf td

or come to think of it days to

When do you remove them and under what circumstances

db describes S & R as a wider area than a line which to be honest I think is more correct and of more use

to me anyway

what do you think :?: not a trap question = just your thoughts would be appreciated

 

[trader_dante]

honestly, I dont understand what it is, what its supposed to do or why anyone would even think of trading with what sounds like an "accounting" approach !

how many "risks" does one take for a reward, or how many rewards before its too many risks ?

someone who REALLY knows please, as my head swims with too many answers

mp

Mike,

I see it like this:

If you take a setup and your stop loss is 50 ticks away, then you would EXPECT to get at least 50 ticks profit on the trade.

Of course you can never tell what the market is going to give you but I believe that trading with an eye on R:R is very valuable.

If you play with a 50 tick stop and continually take 10 ticks profit you are going to have to have one hell of a good win/loss ratio to come out on top.

In the same tune, let's say you offered to play me a game of heads and tails.

We flip a coin and if it comes up heads you will pay me $1 and if it comes up tails I will pay you 75 cents.

We will play for a few hours straight.

Would you play?

If you have what I believe to be a conservative attitude to risk you would most likely turn me down. And probably using some rather coarse language, too!

 

[nunrgguy]

honestly, I dont understand what it is, what its supposed to do or why anyone would even think of trading with what sounds like an "accounting" approach !

how many "risks" does one take for a reward, or how many rewards before its too many risks ?

someone who REALLY knows please, as my head swims with too many answers

mp

The idea is to maximise your reward on a trade to the amount of risk you are taking with your account.
If spreadbetting, your potential total risk on a long trade on a share trading at £4.00 at £1 per p would be £400. Now, depending on where you place your stop, that's the monetary risk you are taking (but always bear in mind your total potential risk - your stop could be missed and the company goes bankrupt overnight for example).
In a pin trade you know where your stop is going to be and you know where your entry is going to be - giving you the potential loss on the trade. That potential loss should be less than the % level of your account you are prepared to risk - some will risk 1%, 2%, 5% etc - it depends what you deem acceptable. The number of pips you could lose and the % of your account you are prepared to risk will allow you to calculte your position size. You also need to look at the potential gain for the trade - where do you view the trade leading? - The first 'problem area' will give you a level where the trade may fail. Divide the potential gain by the potential loss to get R:R. Again you set your rule for what is acceptable but you must have a positive expectancy so you want a R:R of at least 1 otherwise stay out of the trade.

It could perhaps be explained better but...it's fairly easy to set up a spreadsheet so you can plug the numbers in and also calculate your values including spread etc and use a few If statements for if the trade is long or short.

 

[nunrgguy]

Beat me to it.
What he said.

 

[mp6140]

Mike,

I see it like this:

If you take a setup and your stop loss is 50 ticks away, then you would EXPECT to get at least 50 ticks profit on the trade.

Of course you can never tell what the market is going to give you but I believe that trading with an eye on R:R is very valuable.

If you play with a 50 tick stop and continually take 10 ticks profit you are going to have to have one hell of a good win/loss ratio to come out on top.

In the same tune, let's say you offered to play me a game of heads and tails.

We flip a coin and if it comes up heads you will pay me $1 and if it comes up tails I will pay you 75 cents.

Would you play?

If you have what I believe to be a conservative attitude to risk you would most likely turn me down. And probably using some rather coarse language, too!

=============================================

ok, FIRST real problem here is I dont use stoplosses, so it appears to me i dont have the variables to plug into the equation to determine "risk". The SECOND fly in the ointment is that I never see "risk" when I take the trade --- it will go to my tp point, and thats that !

OK, while it appears not to apply to my "unusual" style of trading, at least i understand what it means, how its computed and thnx for the answer

gl

mp

 

[trader_dante]

:?:

Hi Td

good post above td

pages 10 - 30 ish quality imho and you do in fact point out that it is most important a trader waits for the market to come to them

Q: How often do you re-draw your S & R lines in hour tf td

or come to think of it days to

When do you remove them and under what circumstances

Running out of time again so I am going to have to be brief.

I wouldn't say I can answer this with any EXACT time for how often I re-draw the lines but I would say that I try and look at only the most recent levels on the hourly as this will be most likely what the major market participants are concentrating on. They want to know how the market is acting TODAY. Is it breaking recent levels to the upside or downside?

With that in mind I zoom out so I have around 2 weeks of data on my screen for the hourly TF and have only the levels that are appropriate for that data, deleting any other levels that are the result of previous price action.

For the daily TF I would say at least 1 year is key and for the really big levels I go back longer. Mostly 2 years will do but it never hurts to go back to the contract inception to look at all time highs/lows if the market is in an extended bull or bear phase.

db describes S & R as a wider area than a line which to be honest I think is more correct and of more use

to me anyway

what do you think :?: not a trap question = just your thoughts would be appreciated

I agree with db somewhat in that S & R can appear over a wide area. Often I view it as more of a zone. However, I have seen several examples where it will come down to a line. Where the previous highs and lows match up to the tick and it is these areas where you have a very definite point of reference.

 

[black bear]

thanks for answer td have a good week

yeeeee agree often comes right down to the last pip, amazing how it just stops right there

 

[trader_dante]

I am very particular when I trade and like things to look just right.

As I have said before, I like levels to be CLEAN and for price action to test them to the tick.

Have a look at these two charts of the euro on the hourly TF:

Many of the people I teach this strategy too would take BOTH pins.

But I see it differently. For me, only one of those is a high probability setup in light of what I have said above.

Can you tell which one it is and WHY?

 

[mp6140]

k peoples --- got it !

not what i do but understandable finally.

mp

 

[trader_dante]

How about now?

 

[grimweasel]

Godd Stuff guys!
How much can the market makers manipulate the market in their favour to take out 'pin lurkers'?

Not that I'm suspicious or anything, but if this strategy takes off, then, on pin formation at key levels, can the big players take advantage of that fact and sell to pin bar lovers only to reverse their positions sell a big chunk into that market and then have thier buy orders below the pin where most people will put their stops?? I guess this could happen on shares will a low NMS but I would imagine it being very hard to manipulate the FOREX pairs?
Grim