trading by price, wasp stylee

I have had numerous requests regarding how I trade and what I look for in my trading and rather than sending a hundred emails, or, writing a book, I am going to get the jist of it here so questions can be asked and I can hopefully shed some light on what I do.

First...

1. This is all in the 'first steps thread' by FTSEBeater 8 years ago, and what I learnt on 14 years ago, its nothing new or exciting or complicated.

2. I will NOT be making live calls, posting P+L or talking about my trading day in and out.

a) Humility is a great attribute
b) I left my ego at the door a looooong time ago
c) I really couldn't give a solitary **** whether you think I have the minerals

3. This is not rocket science, nor a holy grail, don't expect miracles

4. I trade the GBPJPY and nothing else, so take it when I post, I talk of that market!

PS: I will ask mods to remove the BS and the whole thread if it goes too far off topic, I'm all for banter but I can go the pub for that.

Framework

Just to start off...

Trading is a marathon, not a sprint. A successful trader is likely to make thousands of trades in their career, so think of the overall ROI%.

The Tortoise and the Hare - Wikipedia, the free encyclopedia


These are the backbones of my trading, and all a TA/PA trader needs IMO.

Supply
Demand
Trend

These have all been covered numerous times on these boards, so start here*. I will progress later/next week.

*http://www.trade2win.com/boards/first-steps/4629-basics-trading.html

Dave, a market stall owner sold fruit. He sold a lot of oranges. When he first started trading, he sold them for 5p each. They sold better than whisky at an alcoholics anonymous meeting. He put them up to 10p, still sold... 20p, 30p... Obviously good oranges.

At 30p the sales started slowing down, he dropped them to 25p and they were selling again. Dave, being a greedy bugger went to 35p and business was okay. Jumped up to 45p and only a few went here and there. Things started to peak. He dropped back down to 40p, then 35p... business was still slow... He went back down to 30p, things picked up and he saw all his old customers come back. He kept them there for a little while, then as things stayed constant, he started to push prices up again. The same thing happened at 45p as they were again, too expensive.

This time, a stall opened next to him with even juicier oranges. Dave had to drop prices to 30p again but still no good, he had a bit of interest.. but he had to go back to 25p...

Economists and bloomberg analysts said after the event that it was the new stall, the fact it started raining oranges and something else to do with America probably, technical analysts looked at the stats in a chart, saw key levels sat at 25p, 30p, an 45p.

Supply, demand, support, resistance. Call it what you will and view it through FA or TA, but at the end of the day, TA always works.

First up

(My/the) market is moved by the herd. No one particular group, no one particular bank and therefore we are trying predominately to see the same things as the guys at the Investment banks, the central banks and the hedge funds. (Not in that order).

These are those responsible for all the movements, and FX is global, so we aren't just concentrating on one countries viewpoints, we need to blend the views of The Brits, Japs, and the Yanks. We have to consider the economies and rates from each country and remember all will relate.

Whilst fundamentals are the overall cause and reasoning behind market movement, no retailer has all the information at his fingertips fast and readily enough so imo, we only have the charts, and it is all there.

Unlike on forex factory, I am going to assume the majority here realise the MACD doesn't change the market direction, nor does a slightly lower figure in NFP to last month answer all the questions and thus the market must go one way or another.

So here we are, left with the knowledge of news announcements at normally 9:30 and 13:30 (GMT) but also know there is much more news in the background we don't know about from options expiries to fixing times, so the chart is it.

Unlike exchange traded products, there is no volume, so one would think we are fishing in the dark, but no....!

As aforementioned, we have supply, demand, and trends. We know who and why, so next we need to make sure we are strong hands, not the weak hands.

You just can't trust them oranges.

Risk:Reward

This is business. A cold cut, clinical ruthless one worth trillions and you want to survive in the jungle, so before you open a position, RISK before reward.

I will go into detail on the charts later but feel this is more important than anything. Always, always consider risk before reward.

More later on that.

Okay, so we can safely assume when a central bank needs to offload a few mill, they don't do it from a 1minute chart. top down is the way to go but as I am a day/swing trader, I view the 240m then 60m, then 30m to fine tune and get the stops in tight as can be.

So here is the start of 2009 for GBPJPY. Blank... annotations soon!

Weekend prep:

240m : All recent only S/D areas carried over (orange)
60m : same (blue)

I do this for about a 1000p range as preparation means ease during market hours.

These levels, IMO, are the ones that will be watched 90% of the time by 90% of the participants and will cause one of 2 things...

1) A reversal
2) New S/D areas

These are then adjusted and carried over during the week. When price breaks through an area, and continues, I cut the line and when price is next in the area, look for more recent levels, as, unless on the daily charts, what happened in August, doesn't matter for a day trader.

This will work the same on a daily/240m combination or 15/5 minute (which helps with stops which I'll get to shortly).

I feel like bleedin' Rolf Harris atm though, ''can you tell what it is yet?''

They say.....

Don't try and pick tops and bottoms
Don't trade over the news

etc... 'they' say alot but its all bolIocks imo.

For me, over the years, an entry has become an exit and an entry an exit..........

I also don't believe in predicting the future as well, it hasn't happened for a start, also, yes, certain areas may hold, and some not, but its far better business practise to wait, see what happens, assess and then act, rather than watch it run through your 'target' and add 200 pips to your move whilst you where still trading 'babypips 101'.

Also, predictions lead to opinions, opinions lead to emotions and ego, and that should never be included in this business.

So here we have a framework of key levels that may or may not be areas for a direction change.

I'm not personally interested in a larger framework so if the 240m and dailies have switched from LL and LH to HL and HL, good for them, I'm interested in NOW and the next 4-5 hours.

Chart annotations explain further...

Wow!
A thread to teach things about trading on Trade2Win!
From someone who has, by all accounts, won at the game.
You just might make 5 stars yet. Maybe even have earned one or two of them!
My hats off to you sir.
I'm sure it will be nothing new, as there has been nothing new in trading for a long time now, but coming from your point of view it will most like hit home for some folks who just didn't get IT before.
I do believe it's time well spent!

Jason

chris

Hope this is not a diversion as you draw the picture, but:

1. You don't seem to draw your lines from extremes, but from close of bar? Any reason for this?
(maybe it it representing a zone rather than a definitive price)
2. How far does price have to go before you consider your line broken?

good trading

jon

Price DOESN'T move in a straight line

Now, between these key areas, price will push up, drop back a bit, then push up some more (more often than not)... These occurrences will happen with bounces off S/D and can produce basis for a trendline or 2.

I have just copypasta'd over charts from my journal to thus give examples of how I combine the above, with a trendline or two, to equate to the swings back and forth that, thanks to being a 24hr market, happen all week every week (nearly).

this leaves just one last step (for C_V!)

barjon said:

1. You don't seem to draw your lines from extremes, but from close of bar? Any reason for this? (maybe it it representing a zone rather than a definitive price)

Click to expand...

Answered your own question there! Wicks are more like 'feelers' imo, testing the waters for strength in buyers/sellers, and occasional stop hunting or IB's filling orders at higher prices, but its the zone to pay attention to as not everyone sees the same chart as you.

barjon said:

2. How far does price have to go before you consider your line broken?

Click to expand...

If we are in an uptrend, a recent level is surpassed and then a short setup appears above, and is taken in its own merits, then that level has become defunct and only a new trailing S/D level. If it were to surpass it, then drop back over the next hour, that level would have acted as S/D or broken BUT, that new high is now the most recent key level, making the line again, defunct and void.

great stuff. im a fan. i've read ur journal 2 times over.

because ur s/r levels are based on price closes. What if u needlessly get stopped out by wicks? What would u do? Do u ever reenter and what is the criteria for that?

Stops... should be as tight as a virgin on prom night

Good old stops...

RISK always comes first and thus, you are at your own devices when deciding on leverage, risk appetite, goals, requirements, etc... All personal.

Stops on the other hand, are well, this is written better than I could...

The single most important thing you have to concentrate on is limiting losses.

You do this by using stops.

As you become more proficient at picking winning moves you have to tighten your stop loss policy.

Limiting losses to the absolute minimum is the key. All else is peripheral.

Now that is a simple statement.

If everyone did this, everyone would survive long enough to eventually become proficient.

But very few have the self discipline to persist in this way.

I strongly suggest you follow the lead I have just given you.

Without going into deep details I explained that efficient traders use very tight stops because efficient traders get it right many many more times than they get it wrong, that is why they are efficient traders, OK ?

Therefore efficient traders are surprised and shocked when they get it wrong. The fact that they use very tight stops immediately limits losses.

Inefficient traders are apt to use wide stops and some blighters none at all !

They now begin to argue, yes argue, that to use a wide stop is the right thing to do because it allows a position to "breathe" and other nonsenses. When it is pointed out that wide stops used by inefficient traders who get it wrong often and really ought to fiercely control losses, they get abusive, or, begin to argue.

That is why I have so many posts under my belt. I have tried in the past to illustrate lots of ideas. These ideas are immediately recognised by a few who go on to use them beneficiallly which pleases me enoromously. The great majority see fit to argue and argue and do not progress.

One starts at the beginning and finishes at the end. You cannot start at these levels when you are a beginner. It is a matter of refining and reviewing and of self mastery through adversity by sheer dint of will. But anyone who aspires to eventually overcome can do it, it is a matter of determination and focus, and of a burning desire to succeed.

Tight stops DO NOT mean you can only get a small return.

Tight stops mean not only are you more proficent, but it means unlike the next guy who reduced his size to account for his larger stop, you are still large and will make more.

Tight stops can be placed and you can catch 10 pips or 10'000, concentrate and read the price action, and they can be as small as you like.

Attached is the first trade of the year as above, with possible entries.

So yeah... thats about it....

Supply, demand, trends, strength and weakness...

I never feel I could explain it all in words and there is a LOT that is ingrained in my thick skull that would never cross my mind nor I have the time to write it all down but KISS.

Its all pretty obvious and basic simple stuff. Just repeat and repeat and keep risk low and buy a lot of good books because end of the day, its a pretty boring job.

Anyhow, off out now so back 10pm Sunday to do it all over again...!

wasp said:

............Answered your own question there!.......... .

Click to expand...

exposing myself there then, just wondered if you thought along similar lines.

good trading

jon

Oh! and if anyone thinks that explaining your work on an open forum is going to change the way a central bank moves money around is a muppet!

teojh said:

great stuff. im a fan. i've read ur journal 2 times over.

because ur s/r levels are based on price closes. What if u needlessly get stopped out by wicks? What would u do? Do u ever reenter and what is the criteria for that?

Click to expand...

hey.. u missed my qns.
I also have been meaning to ask. in a clear triangle formation. How would u know which way price can break. It's like a 50/50 whenever i see it. Theres really no clues because the each successive highs is lower and each successive lows is higher. And its really 100% u cant tell whether its going to break or get rejected by the trendline and break the other direction.
And the previous trend direction doesnt affect in most of these cases. So its not always a continuous breakout triangle.

thanks

wasp said:

So yeah... thats about it....

Supply, demand, trends, strength and weakness...

I never feel I could explain it all in words and there is a LOT that is ingrained in my thick skull that would never cross my mind nor I have the time to write it all down but KISS.

Its all pretty obvious and basic simple stuff. Just repeat and repeat and keep risk low and buy a lot of good books because end of the day, its a pretty boring job.

Anyhow, off out now so back 10pm Sunday to do it all over again...!

Click to expand...

You've lost most of your audience now, no holy grail of flashy indicators, just KISS!

Good stuff