Making Money Trading

[MrGecko]

Mr Gecko,

Can you (or anyone) recommend any books regarding analysis of the basic bar chart? Can't see much in the Bookstore.

Grant.

anything by Steve Nison should be OK

 

[trader_dante]

Please look at the attached docs. They should all make sense if you read them all.

The candlestick patterns I've shown so far are well publicised. There are perhaps half a dozen patterns that, if understood and utilised, can be engineered to provide multiple entry and exit signals to suit different trade environments and different traders.

Candlestick alchemy, I recommend it.

But to be frank, IMO the use of candlesticks just to fine tune entries and exits is a total waste of their potential. I absolutely believe that they are suited to this, and have applications across most aspects of trading, but there's more to them than that (see docs).

As an aside, I appreciate that the vast majority of posters on this thread are solely concerned with Trader_Dante's pin bar setups - and so far none of my posts have contributed to pin bars or their uses. However, it has been my intention to make new traders aware that pin bars aren't the only way to trade price action. Yes, of course they are a formidable tool to have in your "toobox". Infact they are probably one of the sharpest tools of applied PA available. But there is a whole bunch more to them also; there are plenty of good trades that dont have a pin bar anywhere near them, but are founded on entirely the same principals.

Mr Gecko,

That is an outstanding post. Your breakdown of Eur/Gbp was extremely interesting and I, for one, very much enjoyed reading it.

I have a handful of setups that I like (in particular pin bars and inside bars as shown throughout this thread) but I try and read the price action like you show.

As you say, there is always a conflict going on in the market.

The price is the land that is being fought for.

In real wars, land has natural resources that help SUPPORT armies to defend it. Land has strategic vantage points such as hills that the soliders can use to their advantage. Other areas have problems such as terrain that hinders transport and communication - this prevents armies from defending to the best of their ability - it acts as a RESISTANCE to them. I think of these natural resources as round numbers and support and resistance levels. As fibs and moving averages.

And all the time the soliders are advancing and they are getting pushed back.

They defend key areas and move on to gain more land. Sometimes those areas dont hold, soldiers get slaughtered and land gets lost.

Our job is to join the winning side at any time.

Just repeating things I have heard before but that make sense to me.

As an aside: I am STRONGLY BULLISH on Eur/Gbp. I am not saying that right now is the best time to buy but I am certainly looking to be a buyer.

It could well be in for a short term retracement but BOTH FUNDAMENTALS AND TECHNICALS point to a strong and continued advance. My ultimate target is parity. (1.00)

Hope you are well and thank you so much for the contributions to the thread.

Tom

 

[grantx]

Fiftytwo,

I read it years ago and gave it to a friend. I'll consider buying it again (I spent nearly £100 yesterday on books).

Mr Gecko,

Thanks for the name, will check it out.

Grant.

 

[MrGecko]

Mr Gecko,

In real wars, land has natural resources that help SUPPORT armies to defend it. Land has strategic vantage points such as hills that the soliders can use to their advantage. Other areas have problems such as terrain that hinders transport and communication - this prevents armies from defending to the best of their ability - it acts as a RESISTANCE to them. I think of these natural resources as round numbers and support and resistance levels. As fibs and moving averages.

And all the time the soliders are advancing and they are getting pushed back.

They defend key areas and move on to gain more land. Sometimes those areas dont hold, soldiers get slaughtered and land gets lost.

Our job is to join the winning side at any time.

"And therefore I say; Know the enemy, know yourself; your victory will never be endangered. Know the ground, know the weather; your victory will then be total"

(Sun Tzu, The Art of War, on terrain). Succinctly sums up what PA is all about. Grant, I would recommend this for your cofee table; it's full of hidden gems that can be applied to candlestick analysis.

W.R.T the Euro, I agree that it will strengthen against the Pound. I think the next macro cycle (the next 8 - 12 yrs) will see western currencies depreciate and eastern currencies appreciate, but this is just my opinion.

 

[grantx]

Mr Gecko,

Your posts are always informative however, re The Art of War I must say this is the worst book I've
ever read. But thank you for the suggestion.

I agree about the Euro, certainly over a longer time-frame (+5 years), for two reasons: diversification away from the dollar (although I doubt the dollar will lose it's status); increasing expansion of the EU.

All the former Soviet satellites/Eastern bloc countries will probably need at least 5 years to make the transition from almost third-world economies/Soviet dependency and subsidies to free-standing western economic/capitalist systems. In the interim and beyond, new capital will need to be raised (Euros), former state enterprises will be privatised and listed (Deutsche Borse), Euro-denominated bonds will be issued (Eurex), and new companies created.

Grant Trichet.

 

[grimweasel]

h

Mr Gecko,

Your posts are always informative however, re The Art of War I must say this is the worst book I've
ever read. But thank you for the suggestion.

I agree about the Euro, certainly over a longer time-frame (+5 years), for two reasons: diversification away from the dollar (although I doubt the dollar will lose it's status); increasing expansion of the EU.

All the former Soviet satellites/Eastern bloc countries will probably need at least 5 years to make the transition from almost third-world economies/Soviet dependency and subsidies to free-standing western economic/capitalist systems. In the interim and beyond, new capital will need to be raised (Euros), former state enterprises will be privatised and listed (Deutsche Borse), Euro-denominated bonds will be issued (Eurex), and new companies created.

Grant Trichet.

You may also like to study 'WAR' a little further with:

Table of Contents to Clausewitz, On War (1873 translation)

or available from any good bookstore. A Sandhurst Cadet's bible along with Tzu.

I think the £ rot may have started and with all the problems in the US the Euro will probably become the reserve currency of choice?
The Mortgage market is frozen up in this country and as Financials make up a huge part of our GDP, and with their current decline, the case for a strong pound is very limited.

Currency Analyst on Bloomberg the other day was making a strong case for Euro and CHF and for shorting the £. He also said the Yen was too cheap and when the snapback occurred it would be huge and really quick.

Was anyone on board for the US Non-Farms??
I don't get it at times, here we are on the brink of a US recession, 30K more job losses than forecast and the Dow falls a little then manages a rally to fall again and finish where it started more or less? Traders were factoring in another US interest rate cut due to the bad figures so the news reckoned??

As T_D said, news trading is only for the brave. I was up some 60 pips or so then down 80 then back up before finishing the day flat!

I may just stick to Pins, S/R and Fibs with PA as it seems this is where the trader can really learn his trade. It seems that the indicators are built for the, dare I say, lazy trader, hell bent on having something point him in the direction of a trade, other than doing the hard graft and learning the PA?

I still feel slightly lost, wondering what exactly to focus on for my 'edge' to enter and exit the market. The quest continues....

Mr Gecko, excellent reading and explanations, thanks
Grim

 

[trader_dante]

I think the £ rot may have started and with all the problems in the US the Euro will probably become the reserve currency of choice?
The Mortgage market is frozen up in this country and as Financials make up a huge part of our GDP, and with their current decline, the case for a strong pound is very limited.

A combination of a strong fundamental and technical picture both pointing to the same outcome - an appreciating euro and a weakening pound is a PERFECT STORM. This is where money will be made.

Was anyone on board for the US Non-Farms??

I don't get it at times, here we are on the brink of a US recession, 30K more job losses than forecast and the Dow falls a little then manages a rally to fall again and finish where it started more or less? Traders were factoring in another US interest rate cut due to the bad figures so the news reckoned??

I posted chart 1 over on the Dow thread a few days before the figure.

No one that did their TA on Friday would have been caught long EITHER going INTO that figure or AFTER it came out.

If you were looking for a long entry you would have wanted to see the market trade through that very strong pivot. Once it rejected it (see chart 2) trades should only have been made from the short side at least until the bottom of the hourly range...

 

[Spcboe]

Enjoying your posts, Mr. Gecko.

TD, I'll have to check out your Dow post. Thanks for everything.

Bravo to you both!!:clap:

 

[davidnmfarrell]

Is this right? The PB almost touches the 38... I entered last night when the next bar's price broke below, and made about 25 pips.

Any commentary guys? I'd really appreciate the feedback. On reflection, I would have rated this a B/C pinbar as the recent activity was choppy, it's nose wasn't long enough to break the weekly high.

 

[trader_dante]

one last thing --- anyone who refers to such a benign and simplistic thing as trading by reference to a book on WAR, needs to have some parts of their psychology examined -- trading is about as far from warfare as one can get ---- you are not fighting ANYONE but simply making educated moves on a constantly changing game board where success is measured by the number of correct moves you make, but there is no enemy to bloody, no land to conquer, no people to rape, pillage and enslave nor force your religion on them ---- there aint nothing but the satisfaction of a job well done, and the monetary reward !

Those who think its WARFARE had better play a lot more video games, or beat their wives for a longer period of time, cause SOMETHING is certainly messed up !

Excerpt from "Trading for a Living" by Dr Alexander Elder

The only reason there is money in the markets is that other traders put it there. The money you want to make belongs to other people who have no intention of giving it to you.

Tradings means trying to rob other people while they are trying to rob you. It is a hard business. Winning is especially difficult because brokers and floor traders skim money from winners and losers alike.

A man used to go on a battlefield with his sword and try to kill his opponent, who was trying to kill him at the same time. The winner took the loser's weapons, his chattels, and his wife, and sold his children into slavery. Now we trade on the exchanges instead of doing battle in an open field. When you take money away from a man, it is not that different from drawing his blood. He may lose his house, his chattels, and his wife, and his children may suffer.

(italics are Elders - not mine)

 

[1Pipped]

Any commentary guys? I'd really appreciate the feedback. On reflection, I would have rated this a B/C pinbar as the recent activity was choppy, it's nose wasn't long enough to break the weekly high.

I was looking at that very bar myself, decided not to put an order in because it was like you say, not very long. Also I thought its high was a reasonable amount lower than the recent high to the left.

 

[trader_dante]

Any commentary guys? I'd really appreciate the feedback. On reflection, I would have rated this a B/C pinbar as the recent activity was choppy, it's nose wasn't long enough to break the weekly high.

Hi davidmfarrell,

That pin bar doesn't appear at a high probability turning point in my opinion.

Firstly, the body is near to the LOW of the previous bar rather than its HIGH.

Secondly, there is no strong S/R pivot. There is an approximate "zone" indicated by the white line but I prefer prices to reject at levels that are more DEFINITIVE.

Thirdly, the R:R is not in your favour when trading this setup. You have approximately 140 pips risk (pin bar low to high) and only around 85 pips until that ascending TL comes in.

The fact you made some money on this at all shows you that even the weaker pin bars can work out but that is hardly the point.

Take only the strongest setups no matter how long they take to appear.

 

[MrGecko]

my thoughts on this bar to follow...

 

[MrGecko]

Any commentary guys? I'd really appreciate the feedback. On reflection, I would have rated this a B/C pinbar as the recent activity was choppy, it's nose wasn't long enough to break the weekly high.

See attached.

In the commentary, I mention looking at the USD/JPY chart. Comparing to two side by side gives an indication of how the dollar had eroded with demand for the carry trade, infact the charts are nearly identical. I mention it to help with the issue of timing; there are interesting setups on both the USD/JPY dailies and hourlies right now, a sign that the dollar may well be due to weaken again soon.

h

Currency Analyst on Bloomberg the other day was making a strong case for Euro and CHF and for shorting the £. He also said the Yen was too cheap and when the snapback occurred it would be huge and really quick.

Grim

see above.

 

[MrGecko]

Firstly, thanks to all those that have comented on my posts.

grim - I used to live in Calne!

Those who think its WARFARE had better play a lot more video games, or beat their wives for a longer period of time, cause SOMETHING is certainly messed up !

Don't take analogies out of context.

your happy economic historian cum trader

In my experience, economists make lousy traders, and vice versa. Economists have famously predicted 8 of the last 3 recessions. The only economics a trader needs to know is

1) Phillips curve
2) Economist.com
3) Nash equilibrium
4) Monetary Policy (even though Its Mostly Fiscal)
5) Economic indicators (Non farms etc...)

In ten words or less, my view on currencies are:

USD Bearish; there isn't the demand for it anymore

GBP Bearish; inflation, inflation, inflation. Absolutely everything is expensive.

CHF Bullish; I, like others, want my money somewhere safe.

JPY Bullish; carry trades have made it massively oversold.

EUR Bulish; in less than 10 words? re-read 1) - 4).

Ceteris Paribus, I am pleased you are happy.

I may just stick to Pins, S/R and Fibs with PA as it seems this is where the trader can really learn his trade. It seems that the indicators are built for the, dare I say, lazy trader, hell bent on having something point him in the direction of a trade, other than doing the hard graft and learning the PA?

Don't even dream of using indicators if you can help it. New traders too often confuse correlation with causation, with indcators only re-packaging a small amount of the information contained within price, and then delivering it late.

By using indicators, you end up trading the indicator and not the price - e.g. long/short on an MACD crossover (or such and such..). Traders see that MACD is due to rise, and so take a long position in price to try and capture some of the MACD move - the complete opposite of what their P/L is measured by.

The only way to profit from indicators is if you can find someone to take the other end of a CFD or spread bet with the indicator as the underlying, not price. And the things are cyclic and range bound, so who is going to make a market in them?????

As a trader, I have never understood economists OR indicators, but I accept that there are those who do very well out of both.

 

[MrGecko]

I forgot to mention the parity issue with USD/CHF. Yet another reason to be flat.

 

[autoromeo]

Hello to you all

Fantastic thread TD.

Just trying to work my way through it on page 60 ATM so slowly getting there . Some really intresting points regarding price action and the psychology of trading, really useful insight. Many thanks

Hope to be able to contribute once I catch up

Andy

 

[smbtnt]

Recently we've seen price move back and forth between support @ .9750 (ish) and resistance @ 1.033 - it looks like a pretty stable flag pattern. The trouble I have with picking an entry now (either long or short) is that we are slap bang in the middle of it; the trade would'nt be made with price moving off support or resistance, but rather towards it. A long or short trade now would have an R:R of 1:1 as we are approx equidistant from the .9750 and 1.033 levels we're keeping an eye on.

an R:R of 1:1 isn't so much of a problem, its that we're at a point where we don't have enough information to tip the odds of picking the right direction in our favour (because we're not moving off any S/R levels).

IIRC you mentioned going long on a pullback; my *largely qualitative* view is that we have two resistance levels looming close above our heads, which will take some steam out of our long momentum (even if its only temporarily). And with no additional supporting long factors to help us out until .9056, and a glance at the weekly chart, it seems to me that the Sum of the "short" factors is greater than the sum of the "long" factors; this is what i mean when I say the trade - currently - is left wanting.

All of this is assuming stops and targets are placed at existing support and resistance. I rather think the way to play this pair will be;

Support @ .9750 fails to break and we trade the flag ranging pattern (long)

Support @ .9750 breaks and we trade the trend (short)

Resistance @ 1.033 fails to break and we trade the flag ranging pattern (short)

Resistance @ 1.033 breaks and we wait to see a test of the 365ema (wait and see).

right now I'd stay flat from the dailies; I want to trade it as it moves off S/R, which means I'll have to wait until it gets there (whichever one it moves to) first. It might take a couple of weeks before anything pops up.

Enjoyed reading the above post - thanks. Especially the way you place your odds in your favour at each critical juncture.

 

[grimweasel]

That Daily pin on Cable (27 Mar) is providing the pips at the moment. The dismal UK Housing data did act as a catalyst for the decline today though. Still, good news if you are short GBP and long Euro. Lets wait and see what the policy makers provide at 1200 and 1245 on Thurs, although I do think that any decision may now be in the price?
Good Trading all,
Grim

 

[rags2riches]

EUR/USD daily pin?

I wonder if yesterday's daily pin on EUR/USD is worth taking?

The only factor in its favour is the nose poking above the weekly pivot point.

I will zoom to a smaller timeframe to look for possible turning points down today....

Good trading

[After repeating trying to short this in the morning (aggressive pin bar entry) I forgot that the market doesn't care about my opinion. Stopped trying to run into a brick wall when the 1.5743 resistance broke and followed the trend (4 hour double bottom looks good). It's a lot more profitable ]