The market rose to 837, but has turned back and is currently headed down, threatening to break support at 813.25. I would hope to have moved my stop up to breakeven. I was bullish because support had been formed by prior resistance of two seperate gaps in the last month, as well as the appearance of the hammer that fell into the support line yesterday.
Prices fell a little before stopping, and price action formed a hammer just under support. I regained my bullish outlook. When viewed in the 30 mins timeframe, one can see a breakaway, a moderate reversal signal. There seems to be plenty of evidence to suggest the downtrend is at an end, with the initial hammer of yesterday, the morning 'star' (not doji) and the hammer/breakaway all forming around support.
edit: Alas, the bears win the day and price falls, heading down to the next support line at 780.
edit: Alas, the bears win the day and price falls, heading down to the next support line at 780.
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I've recently become fascinated by Ichimoku Kinko Hoy or "equilibrium-chart-at-a-glance-technique", clouds that detect support and resistance in trending markets. It is an extension of Japanese candlesticks. As I live in Japan, and I know the Japanese to be rigorous in the pursuit of perfection, I believe it when I hear that this indicator can result in a very high probability of success.
This is what I've found out about it:
It is a trend following indicator which reduces the number of false breakouts and keeps you in most of the move.
Constructing an Ichimoku Chart
(Source: Investopedia)
1. Tenkan-Sen, or conversion line:
(Highest high + lowest low) / 2, calculated over the past seven time periods.
2. Kijun-Sen, or base line:
(Highest high + lowest low) / 2, calculated over the past 22 time periods.
3. Chikou Span, or lagging span :
The most current closing price plotted 22 time periods behind (optional).
4. Senkou Span A:
(Tenkan-Sen + Kijun-Sen) / 2, plotted 26 time periods ahead.
5. Senkou Span B:
(Highest high + lowest low) / 2, calculated over the past 44 time periods. Plot 22 periods ahead.
1. Tenkan line is a sort of 7-period Ma
2. Kijun line is sort of 22-period MA
3. When Tenkan crosses Kijun from below, a buy signal is generated
4. When Tenkan crosses Kijun from above, a sell signal is generated
5. The area between Senkou Span A and Senkou Span B is referred to as "the cloud"
6.If the price is between these lines, or "in the cloud", the market is considered without a trend
7. The bounderies of the cloud act as support/resistance for prices above or below the cloud: if price is above the cloud, the upper line act as a first support, the second line as second support
8. If price is below the cloud, the two lines act as first and second resistance.
9. A bullish crossover ABOVE the cloud is a very strong buy signal, in the cloud is medium strength, and below the cloud is weak
10. A bearish crossover BELOW the cloud is a very strong sell signal, in the cloud - medium, above the cloud - weak
11. If the price remains above the cloud, the prevailing trend is up
15 If the price remains below the cloud, the prevailing trend is down
16. A breakout from the cloud in either direction is considered a strong trend reversal signal.
This is what I've found out about it:
It is a trend following indicator which reduces the number of false breakouts and keeps you in most of the move.
Constructing an Ichimoku Chart
(Source: Investopedia)
1. Tenkan-Sen, or conversion line:
(Highest high + lowest low) / 2, calculated over the past seven time periods.
2. Kijun-Sen, or base line:
(Highest high + lowest low) / 2, calculated over the past 22 time periods.
3. Chikou Span, or lagging span :
The most current closing price plotted 22 time periods behind (optional).
4. Senkou Span A:
(Tenkan-Sen + Kijun-Sen) / 2, plotted 26 time periods ahead.
5. Senkou Span B:
(Highest high + lowest low) / 2, calculated over the past 44 time periods. Plot 22 periods ahead.
1. Tenkan line is a sort of 7-period Ma
2. Kijun line is sort of 22-period MA
3. When Tenkan crosses Kijun from below, a buy signal is generated
4. When Tenkan crosses Kijun from above, a sell signal is generated
5. The area between Senkou Span A and Senkou Span B is referred to as "the cloud"
6.If the price is between these lines, or "in the cloud", the market is considered without a trend
7. The bounderies of the cloud act as support/resistance for prices above or below the cloud: if price is above the cloud, the upper line act as a first support, the second line as second support
8. If price is below the cloud, the two lines act as first and second resistance.
9. A bullish crossover ABOVE the cloud is a very strong buy signal, in the cloud is medium strength, and below the cloud is weak
10. A bearish crossover BELOW the cloud is a very strong sell signal, in the cloud - medium, above the cloud - weak
11. If the price remains above the cloud, the prevailing trend is up
15 If the price remains below the cloud, the prevailing trend is down
16. A breakout from the cloud in either direction is considered a strong trend reversal signal.
That seems like a very good entry. I am a trend follower and I would have been pleased with that, if I had been watching it.
Trendfollowing systems have a big drawback,though. There is a lot of chop, or whipsaw movement, once the main trend is over. If you hang around with a three minute bar, waiting for the Dow to open, never mind EOD, you can lose most, if not all, of your gains.
I have learned to be a profitgrabber. Choppy areas happen a lot during lunchtime (but are, by no means, peculiar to that period). Your #1 exit point was a good time to close.
It was oversold relative to the average and what came afterwards was, as can be seen in hindsight, chop. There is nothing to be gained in those periods, except a cold lunch.
I was referring to the chart on post 93. A lot has happened since then
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Looks like I'm setting up a spreadbetting account today. I've read the advice that says don't join a bucketshop and trade futures instead, but I've only 300 pounds and getting documents notarized in Japan aint easy or cheap. My cfd account was with ig, and they can start me up an account without extra documentation. It's the easy way, though my next goal (after survival) is to join a direct access broker with 3000 pounds starting capital. If I can stay afloat while getting more experience and add savings each month, plus a big bonus in March next year, I might be able to reach that goal then.
Very interesting journal. I'll be following it. 
However, what will you do if you lose the 300pounds?
As you are looking into Ichimoku, why not trade on a
simulator using Ichimoku and see for yourself, after 1 week,
if you can really use it?
However, what will you do if you lose the 300pounds?
As you are looking into Ichimoku, why not trade on a
simulator using Ichimoku and see for yourself, after 1 week,
if you can really use it?
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PokerBrat
Active member
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RSD - I haven't read this thread for a while and was wondering how you were doing.
Can I make a suggestion? Stop reading anymore books or trying to learn anymore systems. You are overloading yourself in search of the holy grail. And you are jumping from one technique or system to another, without mastering any of them.
What will happen is that you will see buy or sell entries all over the place and just end up confused and unable to make a decision.
Pick one system that you like and concentrate on learning and mastering it. The reality of trading is that price moves up from a demand zone to a supply zone and then down back again. It does this on every timescale, over and over again.
All of these indicators and patterns are just ways of interpreting price action, which is simply the movement from a demand to a supply zone.
It is much simpler than you think, and you are definately over complicating things by loading up your brain with patterns and candlesticks and god knows what else.
If you read Trader Dante's "How to make money trading" thread, you will see a very simple technique that gives you high probability/low risk entries based on seeing price reject support or resistance levels by forming a pin bar.
Your trading plan should be no more complicated than that as you are starting out.
The truth is that you should be putting all your effort into understanding yourself, your psychology, and how you will react under the pressure of winning/losing money. And then all your effort on understanding risk management, position sizing and probability.
You are still focusing all your attention on finding entry signals, when this is actually a tiny part of being a profitable trader.
Can I make a suggestion? Stop reading anymore books or trying to learn anymore systems. You are overloading yourself in search of the holy grail. And you are jumping from one technique or system to another, without mastering any of them.
What will happen is that you will see buy or sell entries all over the place and just end up confused and unable to make a decision.
Pick one system that you like and concentrate on learning and mastering it. The reality of trading is that price moves up from a demand zone to a supply zone and then down back again. It does this on every timescale, over and over again.
All of these indicators and patterns are just ways of interpreting price action, which is simply the movement from a demand to a supply zone.
It is much simpler than you think, and you are definately over complicating things by loading up your brain with patterns and candlesticks and god knows what else.
If you read Trader Dante's "How to make money trading" thread, you will see a very simple technique that gives you high probability/low risk entries based on seeing price reject support or resistance levels by forming a pin bar.
Your trading plan should be no more complicated than that as you are starting out.
The truth is that you should be putting all your effort into understanding yourself, your psychology, and how you will react under the pressure of winning/losing money. And then all your effort on understanding risk management, position sizing and probability.
You are still focusing all your attention on finding entry signals, when this is actually a tiny part of being a profitable trader.
Hey Pokerbrat,
Thanks for dropping by. I've been reading trader_dante's thread over the last few days, got to page 56. There's a lot of good stuff. I think you are right that I am trying to take on too much in one go, and the making money trading thread puts forward a clear and easily digested method of trading, based on a strong candle signal around support and resistance. This is kind of where I was heading, using stochastics as confirmation on occasion, but that thread brought it all together and adds a few pearls of wisdom too. I will look only for strong candles around s/r with confluence of signals. That is where I am starting from.
I still have a lot to work on in regards to money management, position sizing, managing the trade, and dealing with my emotions -- I like the way trader_dante stated that you have to have almost scientific detachment from the trade or something to that effect. I know I get very caught up in my emotions during a trade, but that was likely as a result of over-leveraging. I think I have knocked that on the head, actually I know I have - I literally can't get any more money than the 300 I have --my wife and family's reaction to me losing so much was basically 'we expected it because it is just gambling.' Aside from that, my mother went on to say a friend of her's son works for Solomon Brothers and he can't beat the market, and HE's intelligent!
Can you believe that? Bloody cheek.
You mentioned probability, I'm not entirely sure what I should do with this, but one idea would be to record which signals are evident each trade and then measure performance and compare.
I shall avoid taking on any new ideas or systems. I will try to master the methodology stated above.
Thanks for dropping by. I've been reading trader_dante's thread over the last few days, got to page 56. There's a lot of good stuff. I think you are right that I am trying to take on too much in one go, and the making money trading thread puts forward a clear and easily digested method of trading, based on a strong candle signal around support and resistance. This is kind of where I was heading, using stochastics as confirmation on occasion, but that thread brought it all together and adds a few pearls of wisdom too. I will look only for strong candles around s/r with confluence of signals. That is where I am starting from.
I still have a lot to work on in regards to money management, position sizing, managing the trade, and dealing with my emotions -- I like the way trader_dante stated that you have to have almost scientific detachment from the trade or something to that effect. I know I get very caught up in my emotions during a trade, but that was likely as a result of over-leveraging. I think I have knocked that on the head, actually I know I have - I literally can't get any more money than the 300 I have --my wife and family's reaction to me losing so much was basically 'we expected it because it is just gambling.' Aside from that, my mother went on to say a friend of her's son works for Solomon Brothers and he can't beat the market, and HE's intelligent!
Can you believe that? Bloody cheek.
You mentioned probability, I'm not entirely sure what I should do with this, but one idea would be to record which signals are evident each trade and then measure performance and compare.
I shall avoid taking on any new ideas or systems. I will try to master the methodology stated above.
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I've been watching a seminar by Steve Nison and he really drills home the concept of risk and reward. Never place a trade unless it offers good risk reward. This was something I was struggling with. You see a bullish signal forming on support. If it's a long candle, by the time you want to enter, you will probably have incurred quite a bit of risk by putting a stop under the low. This is supposedly okay so long as the reward ratio is high enough. He looks for recent pivot highs to calculate where resistance is likely.
I've tried to draw up a potential trade and look at the risk reward. If I entered on the hammer in the following trade, and put a stop at its low, the reward to risk ratio would have been 5-1.
I would have looked at fibs, rsi and stochastics for added confirmation of this signal, which formed near support (though rather annoyingly, this chart package doesn't appear to let me draw in fib lines).
I've tried to draw up a potential trade and look at the risk reward. If I entered on the hammer in the following trade, and put a stop at its low, the reward to risk ratio would have been 5-1.
I would have looked at fibs, rsi and stochastics for added confirmation of this signal, which formed near support (though rather annoyingly, this chart package doesn't appear to let me draw in fib lines).
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Rsd,
It is never easy to do something well if you do not have the full support of your family.
About being intelligent : stay reassured intelligence and trading profitably are not linked.
Any links to his seminar?
You last candle is supposed to be a bearish candle : why do you have the reward going as high as the point marked "pivot high"?
It is never easy to do something well if you do not have the full support of your family.
About being intelligent : stay reassured intelligence and trading profitably are not linked.
Any links to his seminar?
You last candle is supposed to be a bearish candle : why do you have the reward going as high as the point marked "pivot high"?
Fantastic, thanks for the reassurance.
I marked the target as the pivot high before the point at which I took the (paper) trade. Yes, the last candle is a hanging man if it closes like it is, and would suggest that one might move stops up, or lighten up and take some profits.
I'll look to see what actually happened after this point.
Another thing I got from Nison is that one shouldn't use two oscillators, such as RSI and stochastics. Just stochastics will do. So I have removed RSI as a confirmation signal.
I marked the target as the pivot high before the point at which I took the (paper) trade. Yes, the last candle is a hanging man if it closes like it is, and would suggest that one might move stops up, or lighten up and take some profits.
I'll look to see what actually happened after this point.
Another thing I got from Nison is that one shouldn't use two oscillators, such as RSI and stochastics. Just stochastics will do. So I have removed RSI as a confirmation signal.
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In the chart above, price fell a bit before moving up to the 2000 mark, which is where it is now.
The good news is I have set up my spreadbetting account and got myself a charting service too. I can't believe the discrepency between the volume charts! How sneaky. I knew something was up with the volume ranges, they just didn't seem to make sense to me, to the point where I had removed them from my charts.
Now I've just got to find a way to get money into it. My Japanese visa card won't work because betting firms are a no no. (Gambling is supposedly illegal here, despite the fact they have pachinko parlours in every district; people get paid their winnings off the premises in an adjacent side street.)
The good news is I have set up my spreadbetting account and got myself a charting service too. I can't believe the discrepency between the volume charts! How sneaky. I knew something was up with the volume ranges, they just didn't seem to make sense to me, to the point where I had removed them from my charts.
Now I've just got to find a way to get money into it. My Japanese visa card won't work because betting firms are a no no. (Gambling is supposedly illegal here, despite the fact they have pachinko parlours in every district; people get paid their winnings off the premises in an adjacent side street.)
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I've decided to end this thread at this point and start a new one. I'm beginning a new phase shortly, one of actually trading live, and I might get more help if I start a thread that doesn't begin like this one did. I will call it 'Candles and Confluence.' Thanks to contributors, and hope you will visit the new thread now and then.
adamhargreaves
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Hi Rsd,
im new to t2w forum, just came across your post. You have a very honest and open journal and you are readily willing and able to accept when you have made a mistake and most importantly learn lessons from those mistakes. These are very important traits for a good trader to have. Im not an experienced trader at all, im very much in the leraning process. I think your right when you say you are trading too large for your account size.
You may want to conisder restricting your self to maybe 5-10 instruments to trade on a regular basis. This way you will get to know each of these comapnies well and be very intune to the their price action. When selecting these firms you may want to consider equities that are below the 800p mark but have high volatility, so you can use some sort of position sizing algorithm to restrict your sterling loss to a set amount and set your stop levels at a comfortable distance to allow your trade enough breathing room.
With regards to stop losses i would say that using a volatility stop is something you might want to consider. e.g using a % of the average true range to avoid the intraday noise and making sure you sit outside of obvious trendlines where it is likely there are a large cluster of stops present. These stop clusters seem to act like a magnet.
Good luck and stick with it.
im new to t2w forum, just came across your post. You have a very honest and open journal and you are readily willing and able to accept when you have made a mistake and most importantly learn lessons from those mistakes. These are very important traits for a good trader to have. Im not an experienced trader at all, im very much in the leraning process. I think your right when you say you are trading too large for your account size.
You may want to conisder restricting your self to maybe 5-10 instruments to trade on a regular basis. This way you will get to know each of these comapnies well and be very intune to the their price action. When selecting these firms you may want to consider equities that are below the 800p mark but have high volatility, so you can use some sort of position sizing algorithm to restrict your sterling loss to a set amount and set your stop levels at a comfortable distance to allow your trade enough breathing room.
With regards to stop losses i would say that using a volatility stop is something you might want to consider. e.g using a % of the average true range to avoid the intraday noise and making sure you sit outside of obvious trendlines where it is likely there are a large cluster of stops present. These stop clusters seem to act like a magnet.
Good luck and stick with it.
