Munchie "the noob" dude's Virgin Trading journal

[munchiedude]

I hinted at one reason earlier regarding indicators, but I'll have another stab. Trading is not just about entry. Entry is important but it is one moment in time, based on some past price action. You think the probabilities are in your favour, so you enter. But current price action has more weight than past price action. So you've entered, and price is going against you. The probabilities are now not what you thought they were. Re-assessment time.

So you are using an indicator on a 10-min chart say. Price can tell you the probablitilies have changed in one minute. It could drop 50 pips in one minute. It doesn't need 10 mins, but your indicator exit strategy isn't valid until the 10 min bar closes. So do you wait for the 10-min bar to close and your indicator to tell you to get out? Realising that you're wrong slower than everyone else is going to hurt your account. Or you can say, 'well I have a stop at 20 pips' to save me when I'm wrong. Fine, but then that 20 pip stop isn't based on the indicator, so why 20? Should be a reason for everything you do.

If you're wrong you want to be able to recognise it as early as possible and get out. You can use indicators to help you, it's not bad. A bit of price action and just a moving average could make you money. But you need to have a plan of what to do after entry, and that will be more important than the entry. And I believe that is partly what Rathcoole was trying to get across.

rathcoole has lost all credibility in my eyes, and regardless of his comments, i no longer feel i would benefit from any feedback given by him/her.

your explanation shakone is far better and i now understand in part, the limitations of using indicators as part of a trade setup.20 pip s/l was within 2% allowed per trade which i did not state altho this may change to <20 depending on price action so far and range that the pair is trading in.

insofar as the timeframe lag for exits, its something that ive picked up as experience in my trading today, lower timeframes i believe tend to give more false signals (noise) whereas longer TF's would give more reliable indication but lag so its a tradeoff it seems between reliability and speed of response. this is still something im working on.

as i said previously, im nt hung up on indicators one way or another, i just find that its a good starting point as my experience grows.

thanks for your input shakone, it obviously shows your maturity and professionalism.

 

[munchiedude]

but obviously too forcibly for whiney mummy's boy here

rathcoole, you're a funny one lol.

you're showing your immaturity. as i said, ur entitled to your opinions so thanks for that, tho im a bit more civlised than you to respond in the crude manner that you did, you was obviously raised very well.

nuff said on the topic, thanks for your input but i no longer value them.

 

[munchiedude]

buy eurusd (stox crossover)

entry: 1.4471
s/l: 1.4461
t/p: 1.4484 (~1:1)

target reached: +10pips.

reason for 1:1 and not 2:5, eurusd entered a range from a trend.

 

[munchiedude]

ok end of mkts but wont be trading eurusd today.

day has been fairly ok, summary later.
some useful (and not so useful) feedbacks today, im going to go back to drawing board to distill all the info, read resources etc and start again tomorrow.

thanks to all posters that have contributed!

 

[munchiedude]

did backtest last night for an EA created for a simple moving avg crossover for last 6 years and results were not good on M15.

will test on my strategy and see how that fairs, will be programming update here.

things seem all over the place re: strategy so will go back to drawing board to redefine and backtest some strategies before going live qiwith any fixed long term strategy. appreciate doing things the wrong way around, however, the live experience has helped me get some screen time and market movements are becoming clearer to me.

in particular, having a little success identifying trend sup/res levels and trading off that with stoxs to conf and fine tune entry. exit points set at major sup/resistance levels with previous swing high/low as stop loss. if risk/reward is in my favour, i take the trade and despite a big fall in my deposit (small tho it is) trading sup/resistance has increased it back by 40%+.

im finding it works well for the M5 timeframe whilst keeping an eye on M15/M30/H1 for longer term trend changes and adapting accordingly.

back to drawing board this weekend with lots of backtesting and strategy defining.

update sunday night.

 

[munchiedude]

chart of today's moves. long and short trades taken, short trade at swing high with confirmation of lower low, placed trade and did the best there.

price action is becoming more clear as the "indicator" of choice where stox/macd are useful, cannot be accurately used for entry exits, merely to confirm trend changes.

 

[munchiedude]

have been in training these last few days and havent been posting trades here altho i have been trading.

strategy getting a bit more defined based on trading trendline/fibonnaci retracement/extensions.

have been trading trendline breaks with some success...noticeable pattern developing...initially, every trade i made was a loss, now trades are becoming more profitable with the losses getting smaller and the gains getting larger. need to get all data into logs but i wont post trades here until i get the strategy nailed.

update on more later.

 

[eegozi]

I have just read this entire "journal" and must say that I agree that many indicators lag and give you information based on price ,...so why not just watch price.? Answer is that the manipulation of the price information provide further information about momentum and strngth of the move. I disagree in that I DO find indicators usefull IF used correctly.

I almost exclusively use indicators and have found much success with them. So far I have called the market top prior to the flash crash in May 2010 and the top this year in late June 2011 and the market bottom in Sept 2010. These were mainly done using MACD!!! It CAN be done!! I was short the market and financials as of July 28 also because of MACD mostly. I have been trading about 3.5 years now and have admittedly only recently become profitable after being breakeven or slight los for 1 year prior to that. I have gone through the same trial and errors as you and feel as if now I am hitting my stride. I have tried some of the pin bar systems described and I watch price action everyday as many do on here as well.

I would like to offer these few points and questions to ponder:
1) ALL price action is retrospective and by definition lagging. You do not see the price until the trade has occured!!
2) I would advise studying various indicators and choose 1 indicator from each of the following categories ...a) Trend indicator b) Oscillator c) Volume Indicator d) Sentiment indicator
3) MACD is USUALLY a trend indicator but can be used as an oscillator like Stoch when you focus on the HISTOGRAM. Use either Stoch or Hist but not both.
4) Focus on 3 time frames. The same indicator on 3 time frames means much more than just one. If the weekly trend is down and the daily trend is up and hourly is down which way would you trade? What if one time frame was consolidating?
5) Focus on HOW do you EXACTLY define a trend?? I use 60 min, Daily , and weekly so I call these short, medium, and longterm trends respectively. What do you follow if they give contradicting data? Does the time frame that shows a trend mean you may carry a trade for a longer time with wider stops or shorter time with tighter stops? How will you decide how much capital to risk on these potential contratrend trends (or rallies as some call them)
6) Good for you for telling rathcoole that he was not being helpful. We are all here to learn and trade ideas.
7) One more thing about indicators. If you were flying a plane at night would you not use various indicators to tell you where you are (think price within a price channel), how fast you were going (think oscillator/momentum and trend indicators) , how far away from your destination (think target price), and the weather that may lie ahead (think sentiment or market volatility), how much fuel you have to get to your target destination (think volume indicator), your altitude above the ground (think bollinger bands)...??? I do not like flying blind!! Maybe you can sense where the airport is and look out the window to see how fast or high you are without using indicators,.... but to me more information is better especially in cloudy weather.

I hope this helps,....good luck

 

[munchiedude]

Thanks for your post eegozi,

you're feedback has been most helpful and i read it with interest, there is some good stuff there for a newbie like myself and newbies that view this thread and i applaud you for taking the time to explain things.

I have just read this entire "journal" and must say that I agree that many indicators lag and give you information based on price ,...so why not just watch price.? Answer is that the manipulation of the price information provide further information about momentum and strngth of the move. I disagree in that I DO find indicators usefull IF used correctly.

in my journey so far i have only heard from those that have been anti indicator followers and i can see their point of view. the argument of whether indicators are useful or a total waste of time would probably go on eternity, i suppose ultimately what works for some wont work for others.
having communicated with many experienced traders on here, my feeling is that indicators do have their uses as a guidance rather than a total reliance on them as a trading strategy. this was evident when i ran a backtest for the last 7 years on MT4 with the most common SMA/EMA crossover strategy and results were not very good to say the least.

I almost exclusively use indicators and have found much success with them. So far I have called the market top prior to the flash crash in May 2010 and the top this year in late June 2011 and the market bottom in Sept 2010. These were mainly done using MACD!!! It CAN be done!!

i use the macd atm also with stocs, tho there are limitations to its use in that it sometimes gives off false signals tho i find stocs a bit more reliable.


I would like to offer these few points and questions to ponder:

1) ALL price action is retrospective and by definition lagging. You do not see the price until the trade has occured!!

totally agree, the onus for me is not to use any indicator/price action to predict the market rather to identify high probability setups for extry and exits.

2) I would advise studying various indicators and choose 1 indicator from each of the following categories ...a) Trend indicator b) Oscillator c) Volume Indicator d) Sentiment indicator

i would agree that i need to study indicators and more importantly how they calculate their readings from price and their relative limitations and advantages.

3) MACD is USUALLY a trend indicator but can be used as an oscillator like Stoch when you focus on the HISTOGRAM. Use either Stoch or Hist but not both.

you mean dont use macd/stocs combo?

4) Focus on 3 time frames. The same indicator on 3 time frames means much more than just one. If the weekly trend is down and the daily trend is up and hourly is down which way would you trade? What if one time frame was consolidating?

yes i have been, my regular daily routine is to check whether there are any fundamental announcements for the day, look at h4, h1, m30 for longer term trends and i trade off the m5 at present.

5) Focus on HOW do you EXACTLY define a trend?? I use 60 min, Daily , and weekly so I call these short, medium, and longterm trends respectively. What do you follow if they give contradicting data? Does the time frame that shows a trend mean you may carry a trade for a longer time with wider stops or shorter time with tighter stops? How will you decide how much capital to risk on these potential contratrend trends (or rallies as some call them)

im enjoying better results with trading trendline breaks rather than trends using sup/res lvls, inner, outer and long term trend lines with careful money/trade amangement. its too early to say as i do not have any results, but my account is up 20% in last 3 days cos of it.

6) Good for you for telling rathcoole that he was not being helpful. We are all here to learn and trade ideas.

yea, its nothing personal, i think that some people express themselves in different ways and his particular way didnt help much whereas your post at least approached it in a manner i would expect, mature and sensible.

7) One more thing about indicators. If you were flying a plane at night would you not use various indicators to tell you where you are (think price within a price channel), how fast you were going (think oscillator/momentum and trend indicators) , how far away from your destination (think target price), and the weather that may lie ahead (think sentiment or market volatility), how much fuel you have to get to your target destination (think volume indicator), your altitude above the ground (think bollinger bands)...??? I do not like flying blind!! Maybe you can sense where the airport is and look out the window to see how fast or high you are without using indicators,.... but to me more information is better especially in cloudy weather.

the anaology is solid and def makes sense. i would probably look to somewhere in the middle between trading price action and indicator guidance.

I hope this helps,....good luck

thanks for the input, found it most useful!

 

[timsk]

. . . yea, its nothing personal, i think that some people express themselves in different ways and his particular way didnt help much whereas your post at least approached it in a manner i would expect, mature and sensible.

It is a feature of the forum that the longer standing members and more experienced traders can have a somewhat 'edgey' online persona. In part, I think this may be a result of seeing so many newbies going through the same teething issues - that they become a little jaded over time. Who knows. Anyway, the point is that it's worth listening to their views and trying to understand the message conveyed - even if you don't much care for its style and presentation. Sure enough, rathcoole_exile isn't destined for the diplomatic corps, but he is a knowledgable and experienced trader and many of his posts contain useful market insights. Always try to keep an open mind folks!

Tim.

 

[munchiedude]

It is a feature of the forum that the longer standing members and more experienced traders can have a somewhat 'edgey' online persona. In part, I think this may be a result of seeing so many newbies going through the same teething issues - that they become a little jaded over time. Who knows. Anyway, the point is that it's worth listening to their views and trying to understand the message conveyed - even if you don't much care for its style and presentation. Sure enough, rathcoole_exile isn't destined for the diplomatic corps, but he is a knowledgable and experienced trader and many of his posts contain useful market insights. Always try to keep an open mind folks!

Tim.

thanks for your post timsk. whilst i agree that rathcoole is an experienced trader no doubt and im sure he possesses some useful market insights, his jaded, possibly frustrated approach towards beginner traders is neither helpful nor useful and some could argue would prevent some newbie traders from posting viable questions for fear of being ridiculed and berated by more experienced traders.

of course, the above is an isolated case and definitely not representative of the T2W community as a whole, i have received many helpful, useful and valuable guidance from most members of T2W and for that i am thankful.

i always maintain that when i am in a position of experience to return the favour and contribute knowledge when ive found my way.

i dont take it personally, but i do feel some members should remember their roots and realise that they themselves were beginners once.

 

[eegozi]

Munchie,

As for your time frames ,...read Dr. Alexander Elder's books especially "Trading for a Living" and "Come Into my Trading Room". There he recommends using 3 time frames that differ by a factor of 5. 1 hour and 30 min time frames (2 to 1 ratio) do not give as much info as say 1 hour and 10-15 min time frames together because of them being closer to the factor of 5 apart. I would agree with this. I use weekly, daily, 60 min, and combine info from 5 and 15 min charts. These are close enough to 5:1 ratio of time.

As far as stochastics,...I think that is the most useless indicator. You get LOTS of whipsaws and confusion looking at that indicator in my opinion. It is an oscillator,...so using MACD Histogram (another oscillator) should give you the same information and its already on your MACD chart. Besides, the Histogram is more smoothed and easier to interpret in my opinion than the herky jerky motion of Stoch. Also, again with the time frames you CAN use MACD as your SOLE indicator if you think about it in the concept of the 3 time frames.

For instance, I believe that MACD is a good trend following indicator. But think about what happens to the same MACD on shorter time frames.....You may have guessed it. The MACD on the shorter time frame is nearly equivalent to the Histogram or Stoch (oscillators) on the longer time frame. (So a trend indicator on a shorter time frame roughly coincides with an oscillator on a longer time frame) So Daily MACD will coiincide VERY CLOSELY to the Histogram or even Stoch on the longer Weekly time frame. So in one indicator you have a trend following and oscillator all in one...Thats 2 of the 4 indicators you need.

I recommend not getting fancy with volume indicators. There are only 2 that I have found useful. I use either actual trade Volume for that time frame or Force Index which has an element of price momentum as well as volume in its calculation. Forget about Money Flow, Accumulation/Distribution, OBV, PVO and the others as they are also very herky jerky volume indicators and less useful in my opinion.

I recommend picking whatever sentiment indicator you like,..I follow many just to see if they all agree and they all DO pretty much agree wihin a day or 2 of each other. These will tell you whether you should lean to the long or short side. So just pick one.

I also use EMAs and trend lines (supprt/resist) to help identify a trend more obviously than the MACD. EMAs are also useful for looking at support and resistance levels. They work well when combined with MACD.

For Instance,...lets say you are in a trend and have a profitable position and want to add to it. You see prices dropping toward a 20 or 50 day EMA and dont know where is the best price to buy...which do you choose?...20 or 50 or 150 day EMA as support? Well answer is look at past bounces and look at trend line support (to get an idea of possble support/bounce) and MACD on the NEXT LOWEST TIME FRAME. Remember,...its and oscillator on the longer time frame so it will tell you when the downward pressure is losing steam and as it CURLS BACK UP and giving a buy signal on the LOWER time frame it is usually a good time to buy again and add to winning position.

Good Luck

 

[munchiedude]

Munchie,

As for your time frames ,...read Dr. Alexander Elder's books especially "Trading for a Living" and "Come Into my Trading Room". There he recommends using 3 time frames that differ by a factor of 5. 1 hour and 30 min time frames (2 to 1 ratio) do not give as much info as say 1 hour and 10-15 min time frames together because of them being closer to the factor of 5 apart. I would agree with this. I use weekly, daily, 60 min, and combine info from 5 and 15 min charts. These are close enough to 5:1 ratio of time.

As far as stochastics,...I think that is the most useless indicator. You get LOTS of whipsaws and confusion looking at that indicator in my opinion. It is an oscillator,...so using MACD Histogram (another oscillator) should give you the same information and its already on your MACD chart. Besides, the Histogram is more smoothed and easier to interpret in my opinion than the herky jerky motion of Stoch. Also, again with the time frames you CAN use MACD as your SOLE indicator if you think about it in the concept of the 3 time frames.

For instance, I believe that MACD is a good trend following indicator. But think about what happens to the same MACD on shorter time frames.....You may have guessed it. The MACD on the shorter time frame is nearly equivalent to the Histogram or Stoch (oscillators) on the longer time frame. (So a trend indicator on a shorter time frame roughly coincides with an oscillator on a longer time frame) So Daily MACD will coiincide VERY CLOSELY to the Histogram or even Stoch on the longer Weekly time frame. So in one indicator you have a trend following and oscillator all in one...Thats 2 of the 4 indicators you need.

I recommend not getting fancy with volume indicators. There are only 2 that I have found useful. I use either actual trade Volume for that time frame or Force Index which has an element of price momentum as well as volume in its calculation. Forget about Money Flow, Accumulation/Distribution, OBV, PVO and the others as they are also very herky jerky volume indicators and less useful in my opinion.

I recommend picking whatever sentiment indicator you like,..I follow many just to see if they all agree and they all DO pretty much agree wihin a day or 2 of each other. These will tell you whether you should lean to the long or short side. So just pick one.

I also use EMAs and trend lines (supprt/resist) to help identify a trend more obviously than the MACD. EMAs are also useful for looking at support and resistance levels. They work well when combined with MACD.

For Instance,...lets say you are in a trend and have a profitable position and want to add to it. You see prices dropping toward a 20 or 50 day EMA and dont know where is the best price to buy...which do you choose?...20 or 50 or 150 day EMA as support? Well answer is look at past bounces and look at trend line support (to get an idea of possble support/bounce) and MACD on the NEXT LOWEST TIME FRAME. Remember,...its and oscillator on the longer time frame so it will tell you when the downward pressure is losing steam and as it CURLS BACK UP and giving a buy signal on the LOWER time frame it is usually a good time to buy again and add to winning position.

Good Luck

thanks for your thoughts and ideas eegozi. just as a bit of an update, havent traded much these last few days, i've been going back to the drawing board and digging into the research a bit more and i have also focussed on my other passion, poker, where i know i am a consistent winner. if anyone cares to know, had a big score 2 days ago, ($9000, ~£5600) by coming 3rd ion a tourney lol!

off on holiday on sunday, so will be back fresh and funky to update this journal in around 3 weeks time, best of luck trading to all in the meantime!

 

[Spunkyotoole]

Hi Munchiedude

I've just spent some time reading your journal.

How's trading going?

I'm also a noobie in EURUSD, sounds like you have got a strategy down.

What's working for you?