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Former investment bank FX trader: Risk management part II
Firstly, thanks for the overwhelming comments and feedback. Genuinely really appreciated. I am pleased 500+ of you find it useful. If you didn't read the first post you can do so here: risk management part I. You'll need to do so in order to make sense of the topic. As ever please comment/reply below with questions or feedback and I'll do my best to get back to you. Part II
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Letting stops breathe
We talked earlier about giving a position enough room to breathe so it is not stopped out in day-to-day noise. Let’s consider the chart below and imagine you had a trailing stop. It would be super painful to miss out on the wider move just because you left a stop that was too tight. Imagine being long and stopped out on a meaningless retracement ... ouch! One simple technique is simply to look at your chosen chart - let’s say daily bars. And then look at previous trends and use the measuring tool. Those generally look something like this and then you just click and drag to measure. For example if we wanted to bet on a downtrend on the chart above we might look at the biggest retracement on the previous uptrend. That max drawdown was about 100 pips or just under 1%. So you’d want your stop to be able to withstand at least that. If market conditions have changed - for example if CVIX has risen - and daily ranges are now higher you should incorporate that. If you know a big event is coming up you might think about that, too. The human brain is a remarkable tool and the power of the eye-ball method is not to be dismissed. This is how most discretionary traders do it. There are also more analytical approaches. Some look at the Average True Range (ATR). This attempts to capture the volatility of a pair, typically averaged over a number of sessions. It looks at three separate measures and takes the largest reading. Think of this as a moving average of how much a pair moves. For example, below shows the daily move in EURUSD was around 60 pips before spiking to 140 pips in March. Conditions were clearly far more volatile in March. Accordingly, you would need to leave your stop further away in March and take a correspondingly smaller position size. ATR is available on pretty much all charting systems Professional traders tend to use standard deviation as a measure of volatility instead of ATR. There are advantages and disadvantages to both. Averages are useful but can be misleading when regimes switch (see above chart). Once you have chosen a measure of volatility, stop distance can then be back-tested and optimised. For example does 2x ATR work best or 5x ATR for a given style and time horizon? Discretionary traders may still eye-ball the ATR or standard deviation to get a feeling for how it has changed over time and what ‘normal’ feels like for a chosen study period - daily, weekly, monthly etc.
Reasons to change a stop
As a general rule you should be disciplined and not change your stops. Remember - losers average losers. This is really hard at first and we’re going to look at that in more detail later. There are some good reasons to modify stops but they are rare. One reason is if another risk management process demands you stop trading and close positions. We’ll look at this later. In that case just close out your positions at market and take the loss/gains as they are. Another is event risk. If you have some big upcoming data like Non Farm Payrolls that you know can move the market +/- 150 pips and you have no edge going into the release then many traders will take off or scale down their positions. They’ll go back into the positions when the data is out and the market has quietened down after fifteen minutes or so. This is a matter of some debate - many traders consider it a coin toss and argue you win some and lose some and it all averages out. Trailing stops can also be used to ‘lock in’ profits. We looked at those before. As the trade moves in your favour (say up if you are long) the stop loss ratchets with it. This means you may well end up ‘stopping out’ at a profit - as per the below example. The mighty trailing stop loss order It is perfectly reasonable to have your stop loss move in the direction of PNL. This is not exposing you to more risk than you originally were comfortable with. It is taking less and less risk as the trade moves in your favour. Trend-followers in particular love trailing stops. One final question traders ask is what they should do if they get stopped out but still like the trade. Should they try the same trade again a day later for the same reasons? Nope. Look for a different trade rather than getting emotionally wed to the original idea. Let’s say a particular stock looked cheap based on valuation metrics yesterday, you bought, it went down and you got stopped out. Well, it is going to look even better on those same metrics today. Maybe the market just doesn’t respect value at the moment and is driven by momentum. Wait it out. Otherwise, why even have a stop in the first place?
Entering and exiting winning positions
Take profits are the opposite of stop losses. They are also resting orders, left with the broker, to automatically close your position if it reaches a certain price. Imagine I’m long EURUSD at 1.1250. If it hits a previous high of 1.1400 (150 pips higher) I will leave a sell order to take profit and close the position. The rookie mistake on take profits is to take profit too early. One should start from the assumption that you will win on no more than half of your trades. Therefore you will need to ensure that you win more on the ones that work than you lose on those that don’t. Sad to say but incredibly common: retail traders often take profits way too early This is going to be the exact opposite of what your emotions want you to do. We are going to look at that in the Psychology of Trading chapter. Remember: let winners run. Just like stops you need to know in advance the level where you will close out at a profit. Then let the trade happen. Don’t override yourself and let emotions force you to take a small profit. A classic mistake to avoid. The trader puts on a trade and it almost stops out before rebounding. As soon as it is slightly in the money they spook and cut out, instead of letting it run to their original take profit. Do not do this.
Entering positions with limit orders
That covers exiting a position but how about getting into one? Take profits can also be left speculatively to enter a position. Sometimes referred to as “bids” (buy orders) or “offers” (sell orders). Imagine the price is 1.1250 and the recent low is 1.1205. You might wish to leave a bid around 1.2010 to enter a long position, if the market reaches that price. This way you don’t need to sit at the computer and wait. Again, typically traders will use tech analysis to identify attractive levels. Again - other traders will cluster with your orders. Just like the stop loss we need to bake that in. So this time if we know everyone is going to buy around the recent low of 1.1205 we might leave the take profit bit a little bit above there at 1.1210 to ensure it gets done. Sure it costs 5 more pips but how mad would you be if the low was 1.1207 and then it rallied a hundred points and you didn’t have the trade on?! There are two more methods that traders often use for entering a position. Scaling in is one such technique. Let’s imagine that you think we are in a long-term bulltrend for AUDUSD but experiencing a brief retracement. You want to take a total position of 500,000 AUD and don’t have a strong view on the current price action. You might therefore leave a series of five bids of 100,000. As the price moves lower each one gets hit. The nice thing about scaling in is it reduces pressure on you to pick the perfect level. Of course the risk is that not all your orders get hit before the price moves higher and you have to trade at-market. Pyramiding is the second technique. Pyramiding is for take profits what a trailing stop loss is to regular stops. It is especially common for momentum traders. Pyramiding into a position means buying more as it goes in your favour Again let’s imagine we’re bullish AUDUSD and want to take a position of 500,000 AUD. Here we add 100,000 when our first signal is reached. Then we add subsequent clips of 100,000 when the trade moves in our favour. We are waiting for confirmation that the move is correct. Obviously this is quite nice as we humans love trading when it goes in our direction. However, the drawback is obvious: we haven’t had the full amount of risk on from the start of the trend. You can see the attractions and drawbacks of both approaches. It is best to experiment and choose techniques that work for your own personal psychology as these will be the easiest for you to stick with and build a disciplined process around.
Risk:reward and win ratios
Be extremely skeptical of people who claim to win on 80% of trades. Most traders will win on roughly 50% of trades and lose on 50% of trades. This is why risk management is so important! Once you start keeping a trading journal you’ll be able to see how the win/loss ratio looks for you. Until then, assume you’re typical and that every other trade will lose money. If that is the case then you need to be sure you make more on the wins than you lose on the losses. You can see the effect of this below. A combination of win % and risk:reward ratio determine if you are profitable A typical rule of thumb is that a ratio of 1:3 works well for most traders. That is, if you are prepared to risk 100 pips on your stop you should be setting a take profit at a level that would return you 300 pips. One needn’t be religious about these numbers - 11 pips and 28 pips would be perfectly fine - but they are a guideline. Again - you should still use technical analysis to find meaningful chart levels for both the stop and take profit. Don’t just blindly take your stop distance and do 3x the pips on the other side as your take profit. Use the ratio to set approximate targets and then look for a relevant resistance or support level in that kind of region.
Not all returns are equal. Suppose you are examining the track record of two traders. Now, both have produced a return of 14% over the year. Not bad! The first trader, however, made hundreds of small bets throughout the year and his cumulative PNL looked like the left image below. The second trader made just one bet — he sold CADJPY at the start of the year — and his PNL looked like the right image below with lots of large drawdowns and volatility. Would you rather have the first trading record or the second? If you were investing money and betting on who would do well next year which would you choose? Of course all sensible people would choose the first trader. Yet if you look only at returns one cannot distinguish between the two. Both are up 14% at that point in time. This is where the Sharpe ratio helps . A high Sharpe ratio indicates that a portfolio has better risk-adjusted performance. One cannot sensibly compare returns without considering the risk taken to earn that return. If I can earn 80% of the return of another investor at only 50% of the risk then a rational investor should simply leverage me at 2x and enjoy 160% of the return at the same level of risk. This is very important in the context of Execution Advisor algorithms (EAs) that are popular in the retail community. You must evaluate historic performance by its risk-adjusted return — not just the nominal return. Incidentally look at the Sharpe ratio of ones that have been live for a year or more ... Otherwise an EA developer could produce two EAs: the first simply buys at 1000:1 leverage on January 1st ; and the second sells in the same manner. At the end of the year, one of them will be discarded and the other will look incredible. Its risk-adjusted return, however, would be abysmal and the odds of repeated success are similarly poor.
The Sharpe ratio works like this:
It takes the average returns of your strategy;
It deducts from these the risk-free rate of return i.e. the rate anyone could have got by investing in US government bonds with very little risk;
It then divides this total return by its own volatility - the more smooth the return the higher and better the Sharpe, the more volatile the lower and worse the Sharpe.
For example, say the return last year was 15% with a volatility of 10% and US bonds are trading at 2%. That gives (15-2)/10 or a Sharpe ratio of 1.3. As a rule of thumb a Sharpe ratio of above 0.5 would be considered decent for a discretionary retail trader. Above 1 is excellent. You don’t really need to know how to calculate Sharpe ratios. Good trading software will do this for you. It will either be available in the system by default or you can add a plug-in.
VAR is another useful measure to help with drawdowns. It stands for Value at Risk. Normally people will use 99% VAR (conservative) or 95% VAR (aggressive). Let’s say you’re long EURUSD and using 95% VAR. The system will look at the historic movement of EURUSD. It might spit out a number of -1.2%. A 5% VAR of -1.2% tells you you should expect to lose 1.2% on 5% of days, whilst 95% of days should be better than that This means it is expected that on 5 days out of 100 (hence the 95%) the portfolio will lose 1.2% or more. This can help you manage your capital by taking appropriately sized positions. Typically you would look at VAR across your portfolio of trades rather than trade by trade. Sharpe ratios and VAR don’t give you the whole picture, though. Legendary fund manager, Howard Marks of Oaktree, notes that, while tools like VAR and Sharpe ratios are helpful and absolutely necessary, the best investors will also overlay their own judgment. Investors can calculate risk metrics like VaR and Sharpe ratios (we use them at Oaktree; they’re the best tools we have), but they shouldn’t put too much faith in them. The bottom line for me is that risk management should be the responsibility of every participant in the investment process, applying experience, judgment and knowledge of the underlying investments.Howard Marks of Oaktree Capital What he’s saying is don’t misplace your common sense. Do use these tools as they are helpful. However, you cannot fully rely on them. Both assume a normal distribution of returns. Whereas in real life you get “black swans” - events that should supposedly happen only once every thousand years but which actually seem to happen fairly often. These outlier events are often referred to as “tail risk”. Don’t make the mistake of saying “well, the model said…” - overlay what the model is telling you with your own common sense and good judgment.
Coming up in part III
Available here Squeezes and other risks Market positioning Bet correlation Crap trades, timeouts and monthly limits *** Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
Some trading wisdom, tools and information I picked up along the way that helped me be a better trader. Maybe it can help you too.
Its a bit lengthy and I tried to condense it as much as I can. So take everything at a high level as each subject is has a lot more depth but fundamentally if you distill it down its just taking simple things and applying your experience using them to add nuance and better deploy them. There are exceptions to everything that you will learn with experience or have already learned. If you know something extra or something to add to it to implement it better or more accurately. Then great! However, my intention of this post is just a high level overview. Trading can be far too nuanced to go into in this post and would take forever to type up every exception (not to mention the traders individual personality). If you take the general information as a starting point, hopefully you will learn the edge cases long the way and learn how to use the more effectively if you end up using them. I apologize in advice for any errors or typos. Introduction After reflecting on my fun (cough) trading journey that was more akin to rolling around on broken glass and wondering if brown glass will help me predict market direction better than green glass. Buying a $100 indicator at 2 am when I was acting a fool, looking at it and going at and going "This is a piece of lagging crap, I miss out on a large part of the fundamental move and never using it for even one trade". All while struggling with massive over trading and bad habits because I would get bored watching a single well placed trade on fold for the day. Also, I wanted to get rich quick. On top all of that I had a terminal Stage 4 case of FOMO on every time the price would move up and then down then back up. Just think about all those extra pips I could have trading both directions as it moves across the chart! I can just sell right when it goes down, then buy right before it goes up again. Its so easy right? Well, turns out it was not as easy as I thought and I lost a fair chunk of change and hit my head against the wall a lot until it clicked. Which is how I came up with a mixed bag of things that I now call "Trade the Trade" which helped support how I wanted to trade so I can still trade intra day price action like a rabid money without throwing away all my bananas. Why Make This Post? - Core Topic of Discussion I wish to share a concept I came up with that helped me become a reliable trader. Support the weakness of how I like to trade. Also, explaining what I do helps reinforce my understanding of the information I share as I have to put words to it and not just use internalized processes. I came up with a method that helped me get my head straight when trading intra day. I call it "Trade the Trade" as I am making mini trades inside of a trade setup I make from analysis on a higher timeframe that would take multiple days to unfold or longer. I will share information, principles, techniques I used and learned from others I talked to on the internet (mixed bag of folks from armatures to professionals, and random internet people) that helped me form a trading style that worked for me. Even people who are not good at trading can say something that might make it click in your head so I would absorbed all the information I could get.I will share the details of how I approach the methodology and the tools in my trading belt that I picked up by filtering through many tools, indicators strategies and witchcraft. Hopefully you read something that ends up helping you be a better trader. I learned a lot from people who make community posts so I wanted to give back now that I got my ducks in a row. General Trading Advice If your struggling finding your own trading style, fixing weakness's in it, getting started, being reliably profitable or have no framework to build yourself higher with, hopefully you can use the below advice to help provide some direction or clarity to moving forward to be a better trader.
KEEP IT SIMPLE. Do not throw a million things on your chart from the get go or over analyzing what the market is doing while trying to learn the basics. Tons of stuff on your chart can actually slow your learning by distracting your focus on all your bells and whistles and not the price action.
PRICE ACTION. Learn how to read price action. Not just the common formations, but larger groups of bars that form the market structure. Those formations carry more weight the higher the time frame they form on. If struggle to understand what is going on or what your looking at, move to a higher time frame.
INDICATORS. If you do use them you should try to understand how every indicator you use calculates its values. Many indicators are lagging indicators, understanding how it calculates the values can help you learn how to identify the market structure before the indicator would trigger a signal . This will help you understand why the signal is a lagged signal. If you understand that you can easily learn to look at the price action right before the signal and learn to watch for that price action on top of it almost trigging a signal so you can get in at a better position and assume less downside risk. I recommend using no more than 1-2 indicators for simplicity, but your free to use as many as you think you think you need or works for your strategy/trading style.
PSYCOLOGY. First, FOMO is real, don't feed the beast. When you trade you should always have an entry and exit. If you miss your entry do not chase it, wait for a new entry. At its core trading is gambling and your looking for an edge against the house (the other market participants). With that in mind, treat as such. Do not risk more than you can afford to lose. If you are afraid to lose it will negatively effect your trade decisions. Finally, be honest with your self and bad trading happens. No one is going to play trade cop and keep you in line, that's your job.
TRADE DECISION MARKING: Before you enter any trade you should have an entry and exit area. As you learn price action you will get better entries and better exits. Use a larger zone and stop loss at the start while learning. Then you can tighten it up as you gain experience. If you do not have a area you wish to exit, or you are entering because "the markets looking like its gonna go up". Do not enter the trade. Have a reason for everything you do, if you cannot logically explain why then you probably should not be doing it.
ROBOTS/ALGOS: Loved by some, hated by many who lost it all to one, and surrounded by scams on the internet. If you make your own, find a legit one that works and paid for it or lost it all on a crappy one, more power to ya. I do not use robots because I do not like having a robot in control of my money. There is too many edge cases for me to be ok with it.However, the best piece of advice about algos was that the guy had a algo/robot for each market condition (trending/ranging) and would make personalized versions of each for currency pairs as each one has its own personality and can make the same type of movement along side another currency pair but the price action can look way different or the move can be lagged or leading. So whenever he does his own analysis and he sees a trend, he turns the trend trading robot on. If the trend stops, and it starts to range he turns the range trading robot on. He uses robots to trade the market types that he is bad at trading. For example, I suck at trend trading because I just suck at sitting on my hands and letting my trade do its thing.
Trade the Trade - The Methodology
Base Principles These are the base principles I use behind "Trade the Trade". Its called that because you are technically trading inside your larger high time frame trade as it hopefully goes as you have analyzed with the trade setup. It allows you to scratch that intraday trading itch, while not being blind to the bigger market at play. It can help make sense of why the price respects, rejects or flat out ignores support/resistance/pivots.
Trade Setup: Find a trade setup using high level time frames (daily, 4hr, or 1hr time frames). The trade setup will be used as a base for starting to figure out a bias for the markets direction for that day.
Indicator Data: Check any indicators you use (I use Stochastic RSI and Relative Vigor Index) for any useful information on higher timeframes.
Support Resistance: See if any support/resistance/pivot points are in currently being tested/resisted by the price. Also check for any that are within reach so they might become in play through out the day throughout the day (which can influence your bias at least until the price reaches it if it was already moving that direction from previous days/weeks price action).
Currency Strength/Weakness: I use the TradeVision currency strength/weakness dashboard to see if the strength/weakness supports the narrative of my trade and as an early indicator when to keep a closer eye for signs of the price reversing.Without the tool, the same concept can be someone accomplished with fundamentals and checking for higher level trends and checking cross currency pairs for trends as well to indicate strength/weakness, ranging (and where it is in that range) or try to get some general bias from a higher level chart that may help you out. However, it wont help you intra day unless your monitoring the currency's index or a bunch of charts related to the currency.
Watch For Trading Opportunities: Personally I make a mental short list and alerts on TradingView of currency pairs that are close to key levels and so I get a notification if it reaches there so I can check it out. I am not against trading both directions, I just try to trade my bias before the market tries to commit to a direction. Then if I get out of that trade I will scalp against the trend of the day and hold trades longer that are with it.Then when you see a opportunity assume the directional bias you made up earlier (unless the market solidly confirms with price action the direction while waiting for an entry) by trying to look for additional confirmation via indicators, price action on support/resistances etc on the low level time frame or higher level ones like hourly/4hr as the day goes on when the price reaches key areas or makes new market structures to get a good spot to enter a trade in the direction of your bias.Then enter your trade and use the market structures to determine how much of a stop you need. Once your in the trade just monitor it and watch the price action/indicators/tools you use to see if its at risk of going against you. If you really believe the market wont reach your TP and looks like its going to turn against you, then close the trade. Don't just hold on to it for principle and let it draw down on principle or the hope it does not hit your stop loss.
Trade Duration Hold your trades as long or little as you want that fits your personality and trading style/trade analysis. Personally I do not hold trades past the end of the day (I do in some cases when a strong trend folds) and I do not hold trades over the weekends. My TP targets are always places I think it can reach within the day. Typically I try to be flat before I sleep and trade intra day price movements only. Just depends on the higher level outlook, I have to get in at really good prices for me to want to hold a trade and it has to be going strong. Then I will set a slightly aggressive stop on it before I leave. I do know several people that swing trade and hold trades for a long period of time. That is just not a trading style that works for me.
Enhance Your Success Rate Below is information I picked up over the years that helped me enhance my success rate with not only guessing intra day market bias (even if it has not broken into the trend for the day yet (aka pre London open when the end of Asia likes to act funny sometimes), but also with trading price action intra day. People always say "When you enter a trade have an entry and exits. I am of the belief that most people do not have problem with the entry, its the exit. They either hold too long, or don't hold long enough. With the below tools, drawings, or instruments, hopefully you can increase your individual probability of a successful trade. **P.S.*\* Your mileage will vary depending on your ability to correctly draw, implement and interpret the below items. They take time and practice to implement with a high degree of proficiency. If you have any questions about how to do that with anything listed, comment below and I will reply as I can. I don't want to answer the same question a million times in a pm. Tools and Methods Used This is just a high level overview of what I use. Each one of the actions I could go way more in-depth on but I would be here for a week typing something up of I did that. So take the information as a base level understanding of how I use the method or tool. There is always nuance and edge cases that you learn from experience.
I keep a general high level Macro outlook for currencies. I dont get too deep into Fundamentals and just keep an eye out for news. If I am already in a trade I will hold it if its far enough away from my entry. However, I wont enter right before/during news as it can invalidate your setup.
I started with the basics of learning the standard price action formations/patterns and candles. You can find tons of free info on that online, google is your friend. Then I stared at charts and said "why did the price do that or do this etc" then after a while I started to understand what's happening without having to think about it and I can see the market structure without having to look as closely as I did in the past.
After many many hours of staring at 5 min charts for 15 hours a day 5 days a week I learned how to look at 5 min charts and be like "Oh that's a hammer on the 15 min etc. If you keep track of time you can do the same for hourly candles as well and you will start to see market structure naturally. However I typically trade in a two chart panel window so I have a 15 min and 5 min chart up when trading intra day so I dont have to think too hard about it.
Draw support resistance lines on Daily/4hr timeframes. I prefer to use body of the candle instead of the wick for support/resistance.
You can find support/resistance liquidity levels through out the day as well and trade those if the price retraces back through levels its already been through that same day.
It would be a bit length to explain exactly the best place to draw them. If your unsure there is plenty of free resources on the internet. Just try to use your head and look for price levels where the price was "Supported" or it "Resisted" that price level then slap a line on it. Draw as few or as many lines as you feel helps you and your style. I tend to lean on the side of fewer. I typically do about 6 lines main support/resistances (3 of each).
Draw two Fibonacci Extensions. One on the daily timeframe, and then one on the 4hr time frame. Then you can trade the Fibonacci levels and use them for TP targets or entry zones if price action respects the level. Also you can use it along with support/resistance and pivots if they happen to line up or are very close.
I cannot really figure out how to put it into words how to draw a Fib if you dont know how. I will have to make a picture to demonstrate it. If your interested post below and I will draw one up and post a link. Probably the easiest way to understand. Just keep in mind the Fib you draw on the 4hr time frame will be inside the daily timeframe one.
The TradeVision2020 dashboard that I use just helps me keep a tab on the current market post plus any swing strength/momentum a currency might have on higher time frames. Helps me look for shifts in the market or confirmation that the bias it already has in momentum is continuing. I have found that often currencies when they get really/weak or strong might continue for several days or even longer like a full week or more. We recently had what felt like 1 week or so of flat out Yen weakness which was making some things wonky. All it does is allow me to look at the dashboard instead of a million other charts.
I use two that work well for my intra day style. The Stochastic RSI is just like a RSI but its faster. The second is the Relative Vigor Index which I use to detect swings in momentum and divergences in bullish/bearish momentum. I have used many others in the past, but as I have grown and got better as a trader I have found making my analysis simpler has improved my trading.I dont like the whole idea of have 43 different indicators on 32 different time frames light up a dashboard to be green for me to enter a trade. With how I do it now, I have a clear understanding of what I expect to happen and why. That way when it does happen I understand the move and dont get freaked out if the market moves funny after I am in the trade.
Conclusion I use the above tools/indicators/resources/philosophy's to trade intra day price action that sometimes ends up as noise in the grand scheme of the markets movement.use that method until the price action for the day proves the bias assumption wrong. Also you can couple that with things like Stoch RSI + Relative Vigor Index to find divergences which can increase the probability of your targeted guesses. Trade Example from Yesterday This is an example of a trade I took today and why I took it. I used the following core areas to make my trade decision.
Fundamental Bias: I already had a bullish fundamental outlook on EUUSD with expecting the markets to price in future similes due a higher an higher chance of Biden winning on paper as the election closed in and a "Blue wave" coming which would lead to a weaker dollar. Also, the Euro Zone is getting hammered with COVID pretty hard plus Brexit drama so I had a strong Euro bias.NOTE: As frame of reference, all the other pairs I trade I traded as if they were ranging and trade a range. Markets are messed up right now.
Currency Strength/Weakness: I use a tool that gives me a currency strength/weakness dashboard called TradeVision2020. Helps me track individual currency strength/weakness intra day. Took me about a month to get used to it, but helps me keep track of intra day strength/weakness that can add a bias to trade direction as the day unfolds. Like "Will this run have a 2nd or 3rd push higher" or "I should look to TP at the first sign of weakness in the push" type bias data. You still got to use your brain and figure out the best decision. It wont make choices for you, its only a guide.NOTE: I am not trying to adverse the tool (if providing the code is against sub rules let me know), its just a tool I use every day that helps me with directional bias calls. I am sharing the coupon code that was given to me when I found out about the tool in the TradingView forex chatroom and the guy gave me the code to use when I signed up. I dont want someone to read the name and want to try it out then overpay for no reason. The coupon will give you 40% off. Coupon Code: 3F7A0T5T
Higher Timeframe Analysis: Detected some early signs of Bearish Divergence on the 1hr chart using a on a higher time frame using a Stochastic RSI. Then I saw more confirmation on 5 min charts using Relative Vigor Index to help time my entry mid session.
Pivot Points: I treat pivot points like support/resistance and trade them as such using price action to give me some idea how its being treated by the market. Pretty straight forward.
It may seem like a lot of stuff to process on the fly while trying to figure out live price action but, for the fundamental bias for a pair should already baked in your mindset for any currency pair you trade. For the currency strength/weakness I stare at the dashboard 12-15 hours a day so I am always trying to keep a pulse on what's going or shifts so that's not really a factor when I want to enter as I would not look to enter if I felt the market was shifting against me. Then the higher timeframe analysis had already happened when I woke up, so it was a game of "Stare at the 5 min chart until the price does something interesting" Trade Example: Today , I went long EUUSD long bias when I first looked at the chart after waking up around 9-10pm Eastern. Fortunately, the first large drop had already happened so I had a easy baseline price movement to work with. I then used tool for currency strength/weakness monitoring, Pivot Points, and bearish divergence detected using Stochastic RSI and Relative Vigor Index. I first noticed Bearish Divergence on the 1hr time frame using the Stochastic RSI and got confirmation intra day on the 5 min time frame with the Relative Vigor Index. I ended up buying the second mini dip around midnight Eastern because it was already dancing along the pivot point that the price had been dancing along since the big drop below the pivot point and dipped below it and then shortly closed back above it. I put a stop loss below the first large dip. With a TP goal of the middle point pivot line Then I waited for confirmation or invalidation of my trade. I ended up getting confirmation with Bearish Divergence from the second large dip so I tightened up my stop to below that smaller drip and waited for the London open. Not only was it not a lower low, I could see the divergence with the Relative Vigor Index. It then ran into London and kept going with tons of momentum. Blew past my TP target so I let it run to see where the momentum stopped. Ended up TP'ing at the Pivot Point support/resistance above the middle pivot line. Random Note: The Asian session has its own unique price action characteristics that happen regularly enough that you can easily trade them when they happen with high degrees of success. It takes time to learn them all and confidently trade them as its happening. If you trade Asia you should learn to recognize them as they can fake you out if you do not understand what's going on. TL;DR At the end of the day there is no magic solution that just works. You have to find out what works for you and then what people say works for them. Test it out and see if it works for you or if you can adapt it to work for you. If it does not work or your just not interested then ignore it. At the end of the day, you have to use your brain to make correct trading decisions. Blindly following indicators may work sometimes in certain market conditions, but trading with information you don't understand can burn you just as easily as help you. Its like playing with fire. So, get out there and grind it out. It will either click or it wont. Not everyone has the mindset or is capable of changing to be a successful trader. Trading is gambling, you do all this work to get a edge on the house. Trading without the edge or an edge you understand how to use will only leave your broker happy in the end.
Real quick before I get into my next steps of my FX Journey, id like to say thank you to all the people who commented on my last post! All of the tips I got were really eye-opening and introduced me to different parts of FX trading that I didn't even know existed. So thank you so much, and I hope to get more interesting feedback from you guys in the future! Also Im going to probably change my writing frequency from daily to biweekly. I think writing about every little trade is not going to be as beneficial to me as writing about my overall progress at certain points throughout the week. I started this trading day out by learning up on order flow. A whole bunch of you guys suggested really interesting youtubers to watch, and I started with Mr. pip's series on order flow. After I finished up watching a few of his videos, I started to tweak my trading plan so that I could get in some chart time. I changed currency pair from EUUSD to the AUD/USD, the time frame from the 4 hour to the 1 hour, and my indicators from RSI, Stochastic, 2 SMAs and ADX to ATR, RSI, and Ichimoku Kinko Hyo. I also added a little fundamental analysis in my trading plan because I think that I am being far too reliant on my indicators. I planned to check the economic calendar and determine the general trend of the currency pairs that are strongly correlated to the AUD/USD before I began my chart analysis. In addition to all of my analysis, I tried to practice using the techniques I learned in Mr. Pip's videos and analyze the order flow of the chart. Even if my analysis of order flow is wrong, as long as I am getting practice I am learning. Eventhough I planned to use today to back-test indicators and find a solid new plan, I did not have enough time. I ended up getting on my demo account really late in the day, and started to force myself to enter a trade. Destructive habits like this could lead into some massive issues when I eventually get into live trading. To combat this harmful attitude specifically, I will restrict myself to trading on certain parts of the day (for example session overlaps, news releases, and earlier in the day). Despite this mistake I still continued with my trading strategy. I calculated all the currency correlations for AUS/USD using the past weeks economic data, and set my indicators in place. After checking the overall trend of the most strongly correlated pairs (Positive: EUUSD, GPB/USD, Negative: USD/CAD, USD/JPY) I started to analyze the order flow. All the correlated currencies, except for EUUSD, indicated that the AUD/USD would fall, while my order flow analysis indicated the opposite. Seeing as though I am extremely new to order flow, I dismissed this analysis, and ended up forcing a trade on the AUD/USD going short when my indicators seemed to line up correctly. I learned from last time that I should not alter or close my trade purely based on emotion, and to just wait till the market hits my stop loss or take profit. I included a trailing stop loss of 60 pips this time, but I have no evidence to base that number range on. The trade is currently open and I am down about 30 pips. Although I am not labeling this trade as a loser yet, I can definitely see a lot of holes in my trading strategy. The most obvious mistake in my eyes right now is my use of indicators. Currently all my trades are purely based on what my indicators say, and since I do not have any back-tested data to support the credibility of my indicators, it feels a lot like strategic gambling. Another issue is that I feel far too reliant on indicators alone. I think that if I can find ways to include various types of analysis efficiently and evenly in my trading plan I will become a much more skillful and well-rounded trader. In order to combat these two issues I will begin forming various types of trading strategies this weekend and back-test them all extensively. I also plan on researching more on price action, order flow, and Naked Forex. Once again any and all feedback is welcome. I am just beginning Forex, but it had been a huge passion of mine and I don't plan on stopping anytime soon.
Someone posted on here a few days ago asking about forex and forex trading in Kenya, I have gone through the responses and clearly, most people don’t have an idea. It is 3am in the morning and am in a good mood so let me make this post. This will be a comprehensive and lengthy post so grab a pen and paper and sit down. We’ll be here a while. FIRST OF ALL, who am I..? I am a forex trader, in Nairobi, Kenya..i have been actively involved in forex since I found out about it in Feb 2016 when I somehow ended up in a wealth creation seminar (lol) in pride inn Westlands, the one close to Mpaka Rd. Luckily for me, it was not one of those AIM global meetings or I’d be on Facebook selling God knows what those guys sell. I did not take it seriously till August of the same year and I have been active ever since. I don’t teach, mentor or sell a course or signals, I trade my own money. I am also posting from a throwaway account because I don’t want KRA on my ass. What the fuck is forex and forex trading. In simple plain English, forex is like the stock market but for currencies. Stock Market = Shares, forex = currencies. If you want more in-depth explanation, google is your friend. These currencies are pegged on specific countries, united states- dollar, UK- pound, euro zone- euro, Switzerland- Swiss franc, Kenya- Kenya shilling.. you get the point. Now, there are specific events and happenings between these economies that affect the movement and values of the currencies, driving their value (purchasing power up and down). Forex trading exploits these movements to make money. When the value is going up, we buy and vice versa (down –sell) Is forex trading illegal in Kenya? Is it a scam? Illegal, no. scam, no. All the banks in the world do it (KCB made about 4 billion from trading forex in 2019) Have there been scams involving forex in Kenya? Yes. Here is one that happened recently. This one is the most infamous one yet. Best believe that this is not the end of these type of scams because the stupidity, greed and gullibility of human beings is unfathomable. However, by the end of this post, I hope you won’t fall for such silliness. What next how do I make it work..? Am glad you asked. Generally, there are two ways to go about it. One, you teach yourself. This is the equivalent of stealing our dad’s car and hoping that the pedal you hit is the brake and not the accelerator. It is the route I took, it is the most rewarding and a huge ego boost when you finally make it on your own. Typically, this involves scouring the internet for hours upon hours going down rabbit holes, thinking you have made it telling all your friends how you will be a millionaire then losing all your money. Some people do not have the stomach for that. The second route is more practical, structured and smarter. First Learn the basics. There is a free online forex course at www.babypips.com/learn/forex this is merely an introductory course. Basically it is learning the parts of a car before they let you inside the car. Second, start building your strategy. By the time you are done with the babypips, you will have a feel of what the forex market is, what interests you, etc. Tip..Babypips has a lot of garbage. It is good for introductory purposes but not good for much else, pick whatever stick to you or jumps at you the first time. Nonsense like indicators should be ignored. The next step is now the most important. Developing the skill and building your strategy. As a beginner, you want to exhaust your naivety before jumping into the more advanced stuff. Eg can you identify a trend, what is a pair, what is position sizing, what is metatrader 4 and how to operate it, what news is good for a currency, when can I trade, what are the different trading sessions, what is technical analysis, what is market sentiment, what are bullish conditions what is emotion management, how does my psychology affect my trading (more on this later) an I a swing, scalper or day trader etc Mentors and forex courses.. you have probably seen people advertising how they can teach and mentor you on how to trade forex and charging so much money for it. Somehow it seems that these people are focused on the teaching than the trading. Weird, right..? Truth is trading is hard, teaching not quite. A common saying in the industry is “Those who can’t trade, teach” you want to avoid all these gurus on Facebook and Instagram, some are legit but most are not. Sifting the wheat from the chaff is hard but I did that for you. The info is available online on YouTube, telegram channels etc. am not saying not to spend money on a course, if you find a mentor whose style resonates with you and the course is reasonably priced, please, go ahead and buy..it will cut your learning curve in half. People are different. What worked for me might not work for you. Here are some nice YouTube channels to watch. These guys are legit..
After a short period of time, you will be able to sniff out bs teachers with relative ease. You will also discover some of your own and expand the list. Two tips, start with the oldest videos first and whichever of these resonates with you, stick with till the wheels fall off. How long will it take until things start making sense Give yourself time to grow and learn. This is all new to you and you are allowed to make mistakes, to fail and discover yourself. Realistically, depending on the effort you put in, you will not start seeing results until after 6 months. Could take longeshorter so there is no guarantee. Social media, Mentality, Psychology and Books Online, forex trading might not have the best reputation online because it takes hard work and scammers and gurus give it a bad name. However, try to not get sucked into the Instagram trader lifestyle as it is nowhere close to what the reality is. You will not make millions tomorrow or the day after, you might never even make it in this market. But that is the reality of life. Nothing is promised, nothing is guaranteed. Your mentality, beliefs and ego will be challenged in this market. You will learn things that will make you blood boil, you will ask yourself daily, how is this possible, why don’t they teach this in school..bla bla bla..it will be hard but growth is painful, if it wasn’t we’d all be billionaires. Take a break, take a walk, drink a glass of whatever you like or roll one..detox. Chill with your girl (or man) Gradually you will develop mental toughness that will set you up for life. Personally, I sorta ditched religion and picked up stoicism. Whatever works for you. Psychology, this is unfortunately one of the most neglected aspects of your personal development in this journey. Do you believe in yourself? Can you stand by your convictions when everyone is against you? Can you get up every day uncertain of the future? There will be moments where you will question yourself, am I even doing the right thing? the right way? It is normal and essential for your growth. People who played competitive sports have a natural advantage here. Remember the game is first won in your head then on the pitch. Books: ironically, books that helped me the most were the mindset books, Think and grow rich, trading for a living, 4 hour work week, the monk who sold his Ferrari..just google mindset and psychology books, most trading books are garbage. Watch and listen to people who have made it in the investing business. Ray Dalio, warren, Bill Ackman and Carl Icahn. This is turning out to be lengthier than I anticipated so I’ll try to be brief for the remaining parts. Brokers You will need to open up an account with a broker. Get a broker who is regulated. Australian ones (IC Market and Pepperstone) are both legit, reliable and regulated. Do your research. I’d avoid local ones because I’ve heard stories of wide spreads and liquidity problems. International brokers have never failed me. There are plenty brokers, there is no one size fits all recommendation. If it ain’t broke..don’t fix it. Money transfer. All brokers accept wire transfers, you might need to call your bank to authorize that, avoid Equity bank. Stanchart and Stanbic are alright. Large withdrawals $10k+ you will have to call them prior. Get Skrill and Neteller if you don’t like banks like me, set up a Bitcoin wallet for faster withdrawals, (Payoneer and Paypal are accepted by some brokers, just check with them.) How much money can I make..? I hate this question because people have perceived ceilings of income in their minds, eg 1 million ksh is too much to make per month or 10,000ksh is too little. Instead, work backwards. What % return did I make this month/ on this trade. Safaricom made 19.5% last year, if you make 20% you have outperformed them. If you reach of consistency where you can make x% per month on whatever money you have, then there are no limits to how much you can make. How much money do I need to start with..? Zero. You have all the resources above, go forth. There are brokers who provide free bonuses and withdraw-able profits. However, to make a fulltime income you will need some serious cash. Generally, 50,000 kes. You can start lower or higher but if you need say 20k to live comfortably and that is a 10% return per month, then you can do the math on how big your account should be. Of course things like compound interest come into play but that is dependent on your skill level. I have seen people do spectacular things with very little funds. Taxes..? Talk to a lawyer or an accountant. I am neither. Family? Friends? Unfortunately, people will not understand why you spend hundreds of hours watching strangers on the internet so it is best to keep it from them. Eventually you will make it work and they will come to your corner talking about how they always knew you’d make it. The journey will be lonely, make some trading buddies along the way. You’d be surprised at how easy it is when people are united by their circumstances (and stupidity) I have guys who are my bros from South Africa and Lebanon who I have never met but we came up together and are now homies. Join forums, ask questions and grow. That is the only way to learn. Ideally, a group of 5-10 friends committed to learning and growth is the best model. Pushing each other to grow and discovering together. Forex is real and you can do amazing things with it. It is not a get rich quick scheme. If you want a quick guaranteed income, get a job. And now it is 5am, fuck. This is oversimplified and leaves out many many aspects. Happy to answer any questions.
Disclaimer: None of this is financial advice. I have no idea what I'm doing. Please do your own research or you will certainly lose money. I'm not a statistician, data scientist, well-seasoned trader, or anything else that would qualify me to make statements such as the below with any weight behind them. Take them for the incoherent ramblings that they are. TL;DR at the bottom for those not interested in the details. This is a bit of a novel, sorry about that. It was mostly for getting my own thoughts organized, but if even one person reads the whole thing I will feel incredibly accomplished.
For those of you not familiar, please see the various threads on this trading system here. I can't take credit for this system, all glory goes to ParallaxFX! I wanted to see how effective this system was at H1 for a couple of reasons: 1) My current broker is TD Ameritrade - their Forex minimum is a mini lot, and I don't feel comfortable enough yet with the risk to trade mini lots on the higher timeframes(i.e. wider pip swings) that ParallaxFX's system uses, so I wanted to see if I could scale it down. 2) I'm fairly impatient, so I don't like to wait days and days with my capital tied up just to see if a trade is going to win or lose. This does mean it requires more active attention since you are checking for setups once an hour instead of once a day or every 4-6 hours, but the upside is that you trade more often this way so you end up winning or losing faster and moving onto the next trade. Spread does eat more of the trade this way, but I'll cover this in my data below - it ends up not being a problem. I looked at data from 6/11 to 7/3 on all pairs with a reasonable spread(pairs listed at bottom above the TL;DR). So this represents about 3-4 weeks' worth of trading. I used mark(mid) price charts. Spreadsheet link is below for anyone that's interested.
I'm pretty much using ParallaxFX's system textbook, but since there are a few options in his writeups, I'll include all the discretionary points here:
I'm using the stop entry version - so I wait for the price to trade beyond the confirmation candle(in the direction of my trade) before entering. I don't have any data to support this decision, but I've always preferred this method over retracement-limit entries. Maybe I just like the feeling of a higher winrate even though there can be greater R:R using a limit entry. Variety is the spice of life.
I put my stop loss right at the opposite edge of the confirmation candle. NOT at the edge of the 2-candle pattern that makes up the system. I'll get into this more below - not enough trades are saved to justify the wider stops. (Wider stop means less $ per pip won, assuming you still only risk 1%).
All my profit/loss statistics are based on a 1% risk per trade. Because 1 is real easy to multiply.
There are definitely some questionable trades in here, but I tried to make it as mechanical as possible for evaluation purposes. They do fit the definitions of the system, which is why I included them. You could probably improve the winrate by being more discretionary about your trades by looking at support/resistance or other techniques.
I didn't use MBB much for either entering trades, or as support/resistance indicators. Again, trying to be pretty mechanical here just for data collection purposes. Plus, we all make bad trading decisions now and then, so let's call it even.
As stated in the title, this is for H1 only. These results may very well not play out for other time frames - who knows, it may not even work on H1 starting this Monday. Forex is an unpredictable place.
I collected data to show efficacy of taking profit at three different levels: -61.8%, -100% and -161.8% fib levels described in the system using the passive trade management method(set it and forget it). I'll have more below about moving up stops and taking off portions of a position.
And now for the fun. Results!
Total Trades: 241
TP at -61.8%: 177 out of 241: 73.44%
TP at -100%: 156 out of 241: 64.73%
TP at -161.8%: 121 out of 241: 50.20%
Adjusted Proft % (takes spread into account):
TP at -61.8%: 5.22%
TP at -100%: 23.55%
TP at -161.8%: 29.14%
As you can see, a higher target ended up with higher profit despite a much lower winrate. This is partially just how things work out with profit targets in general, but there's an additional point to consider in our case: the spread. Since we are trading on a lower timeframe, there is less overall price movement and thus the spread takes up a much larger percentage of the trade than it would if you were trading H4, Daily or Weekly charts. You can see exactly how much it accounts for each trade in my spreadsheet if you're interested. TDA does not have the best spreads, so you could probably improve these results with another broker. EDIT: I grabbed typical spreads from other brokers, and turns out while TDA is pretty competitive on majors, their minors/crosses are awful! IG beats them by 20-40% and Oanda beats them 30-60%! Using IG spreads for calculations increased profits considerably (another 5% on top) and Oanda spreads increased profits massively (another 15%!). Definitely going to be considering another broker than TDA for this strategy. Plus that'll allow me to trade micro-lots, so I can be more granular(and thus accurate) with my position sizing and compounding.
A Note on Spread
As you can see in the data, there were scenarios where the spread was 80% of the overall size of the trade(the size of the confirmation candle that you draw your fibonacci retracements over), which would obviously cut heavily into your profits. Removing any trades where the spread is more than 50% of the trade width improved profits slightly without removing many trades, but this is almost certainly just coincidence on a small sample size. Going below 40% and even down to 30% starts to cut out a lot of trades for the less-common pairs, but doesn't actually change overall profits at all(~1% either way). However, digging all the way down to 25% starts to really make some movement. Profit at the -161.8% TP level jumps up to 37.94% if you filter out anything with a spread that is more than 25% of the trade width! And this even keeps the sample size fairly large at 187 total trades. You can get your profits all the way up to 48.43% at the -161.8% TP level if you filter all the way down to only trades where spread is less than 15% of the trade width, however your sample size gets much smaller at that point(108 trades) so I'm not sure I would trust that as being accurate in the long term. Overall based on this data, I'm going to only take trades where the spread is less than 25% of the trade width. This may bias my trades more towards the majors, which would mean a lot more correlated trades as well(more on correlation below), but I think it is a reasonable precaution regardless.
Time of Day
Time of day had an interesting effect on trades. In a totally predictable fashion, a vast majority of setups occurred during the London and New York sessions: 5am-12pm Eastern. However, there was one outlier where there were many setups on the 11PM bar - and the winrate was about the same as the big hours in the London session. No idea why this hour in particular - anyone have any insight? That's smack in the middle of the Tokyo/Sydney overlap, not at the open or close of either. On many of the hour slices I have a feeling I'm just dealing with small number statistics here since I didn't have a lot of data when breaking it down by individual hours. But here it is anyway - for all TP levels, these three things showed up(all in Eastern time):
7pm-4am: Fewer setups, but winrate high.
5am-6am: Lots of setups, but but winrate low.
12pm-3pm Medium number of setups, but winrate low.
I don't have any reason to think these timeframes would maintain this behavior over the long term. They're almost certainly meaningless. EDIT: When you de-dup highly correlated trades, the number of trades in these timeframes really drops, so from this data there is no reason to think these timeframes would be any different than any others in terms of winrate. That being said, these time frames work out for me pretty well because I typically sleep 12am-7am Eastern time. So I automatically avoid the 5am-6am timeframe, and I'm awake for the majority of this system's setups.
Moving stops up to breakeven
This section goes against everything I know and have ever heard about trade management. Please someone find something wrong with my data. I'd love for someone to check my formulas, but I realize that's a pretty insane time commitment to ask of a bunch of strangers. Anyways. What I found was that for these trades moving stops up...basically at all...actually reduced the overall profitability. One of the data points I collected while charting was where the price retraced back to after hitting a certain milestone. i.e. once the price hit the -61.8% profit level, how far back did it retrace before hitting the -100% profit level(if at all)? And same goes for the -100% profit level - how far back did it retrace before hitting the -161.8% profit level(if at all)? Well, some complex excel formulas later and here's what the results appear to be. Emphasis on appears because I honestly don't believe it. I must have done something wrong here, but I've gone over it a hundred times and I can't find anything out of place.
Moving SL up to 0% when the price hits -61.8%, TP at -100%
Adjusted Proft % (takes spread into account): 5.36%
Taking half position off at -61.8%, moving SL up to 0%, TP remaining half at -100%
Adjusted Proft % (takes spread into account): -1.01% (yes, a net loss)
Now, you might think exactly what I did when looking at these numbers: oof, the spread killed us there right? Because even when you move your SL to 0%, you still end up paying the spread, so it's not truly "breakeven". And because we are trading on a lower timeframe, the spread can be pretty hefty right? Well even when I manually modified the data so that the spread wasn't subtracted(i.e. "Breakeven" was truly +/- 0), things don't look a whole lot better, and still way worse than the passive trade management method of leaving your stops in place and letting it run. And that isn't even a realistic scenario because to adjust out the spread you'd have to move your stoploss inside the candle edge by at least the spread amount, meaning it would almost certainly be triggered more often than in the data I collected(which was purely based on the fib levels and mark price). Regardless, here are the numbers for that scenario:
Moving SL up to 0% when the price hits -61.8%, TP at -100%
Winrate(breakeven doesn't count as a win): 46.4%
Adjusted Proft % (takes spread into account): 17.97%
Taking half position off at -61.8%, moving SL up to 0%, TP remaining half at -100%
Winrate(breakeven doesn't count as a win): 65.97%
Adjusted Proft % (takes spread into account): 11.60%
From a literal standpoint, what I see behind this behavior is that 44 of the 69 breakeven trades(65%!) ended up being profitable to -100% after retracing deeply(but not to the original SL level), which greatly helped offset the purely losing trades better than the partial profit taken at -61.8%. And 36 went all the way back to -161.8% after a deep retracement without hitting the original SL. Anyone have any insight into this? Is this a problem with just not enough data? It seems like enough trades that a pattern should emerge, but again I'm no expert. I also briefly looked at moving stops to other lower levels (78.6%, 61.8%, 50%, 38.2%, 23.6%), but that didn't improve things any. No hard data to share as I only took a quick look - and I still might have done something wrong overall. The data is there to infer other strategies if anyone would like to dig in deep(more explanation on the spreadsheet below). I didn't do other combinations because the formulas got pretty complicated and I had already answered all the questions I was looking to answer.
2-Candle vs Confirmation Candle Stops
Another interesting point is that the original system has the SL level(for stop entries) just at the outer edge of the 2-candle pattern that makes up the system. Out of pure laziness, I set up my stops just based on the confirmation candle. And as it turns out, that is much a much better way to go about it. Of the 60 purely losing trades, only 9 of them(15%) would go on to be winners with stops on the 2-candle formation. Certainly not enough to justify the extra loss and/or reduced profits you are exposing yourself to in every single other trade by setting a wider SL. Oddly, in every single scenario where the wider stop did save the trade, it ended up going all the way to the -161.8% profit level. Still, not nearly worth it.
As I've said many times now, I'm really not qualified to be doing an analysis like this. This section in particular. Looking at shared currency among the pairs traded, 74 of the trades are correlated. Quite a large group, but it makes sense considering the sort of moves we're looking for with this system. This means you are opening yourself up to more risk if you were to trade on every signal since you are technically trading with the same underlying sentiment on each different pair. For example, GBP/USD and AUD/USD moving together almost certainly means it's due to USD moving both pairs, rather than GBP and AUD both moving the same size and direction coincidentally at the same time. So if you were to trade both signals, you would very likely win or lose both trades - meaning you are actually risking double what you'd normally risk(unless you halve both positions which can be a good option, and is discussed in ParallaxFX's posts and in various other places that go over pair correlation. I won't go into detail about those strategies here). Interestingly though, 17 of those apparently correlated trades ended up with different wins/losses. Also, looking only at trades that were correlated, winrate is 83%/70%/55% (for the three TP levels). Does this give some indication that the same signal on multiple pairs means the signal is stronger? That there's some strong underlying sentiment driving it? Or is it just a matter of too small a sample size? The winrate isn't really much higher than the overall winrates, so that makes me doubt it is statistically significant. One more funny tidbit: EUCAD netted the lowest overall winrate: 30% to even the -61.8% TP level on 10 trades. Seems like that is just a coincidence and not enough data, but dang that's a sucky losing streak. EDIT: WOW I spent some time removing correlated trades manually and it changed the results quite a bit. Some thoughts on this below the results. These numbers also include the other "What I will trade" filters. I added a new worksheet to my data to show what I ended up picking.
Total Trades: 75
TP at -61.8%: 84.00%
TP at -100%: 73.33%
TP at -161.8%: 60.00%
Moving SL up to 0% when the price hits -61.8%, TP at -100%: 53.33%
Taking half position off at -61.8%, moving SL up to 0%, TP remaining half at -100%: 53.33% (yes, oddly the exact same winrate. but different trades/profits)
Adjusted Proft % (takes spread into account):
TP at -61.8%: 18.13%
TP at -100%: 26.20%
TP at -161.8%: 34.01%
Moving SL up to 0% when the price hits -61.8%, TP at -100%: 19.20%
Taking half position off at -61.8%, moving SL up to 0%, TP remaining half at -100%: 17.29%
To do this, I removed correlated trades - typically by choosing those whose spread had a lower % of the trade width since that's objective and something I can see ahead of time. Obviously I'd like to only keep the winning trades, but I won't know that during the trade. This did reduce the overall sample size down to a level that I wouldn't otherwise consider to be big enough, but since the results are generally consistent with the overall dataset, I'm not going to worry about it too much. I may also use more discretionary methods(support/resistance, quality of indecision/confirmation candles, news/sentiment for the pairs involved, etc) to filter out correlated trades in the future. But as I've said before I'm going for a pretty mechanical system. This brought the 3 TP levels and even the breakeven strategies much closer together in overall profit. It muted the profit from the high R:R strategies and boosted the profit from the low R:R strategies. This tells me pair correlation was skewing my data quite a bit, so I'm glad I dug in a little deeper. Fortunately my original conclusion to use the -161.8 TP level with static stops is still the winner by a good bit, so it doesn't end up changing my actions. There were a few times where MANY (6-8) correlated pairs all came up at the same time, so it'd be a crapshoot to an extent. And the data showed this - often then won/lost together, but sometimes they did not. As an arbitrary rule, the more correlations, the more trades I did end up taking(and thus risking). For example if there were 3-5 correlations, I might take the 2 "best" trades given my criteria above. 5+ setups and I might take the best 3 trades, even if the pairs are somewhat correlated. I have no true data to back this up, but to illustrate using one example: if AUD/JPY, AUD/USD, CAD/JPY, USD/CAD all set up at the same time (as they did, along with a few other pairs on 6/19/20 9:00 AM), can you really say that those are all the same underlying movement? There are correlations between the different correlations, and trying to filter for that seems rough. Although maybe this is a known thing, I'm still pretty green to Forex - someone please enlighten me if so! I might have to look into this more statistically, but it would be pretty complex to analyze quantitatively, so for now I'm going with my gut and just taking a few of the "best" trades out of the handful. Overall, I'm really glad I went further on this. The boosting of the B/E strategies makes me trust my calculations on those more since they aren't so far from the passive management like they were with the raw data, and that really had me wondering what I did wrong.
What I will trade
Putting all this together, I am going to attempt to trade the following(demo for a bit to make sure I have the hang of it, then for keeps):
"System Details" I described above.
TP at -161.8%
Static SL at opposite side of confirmation candle - I won't move stops up to breakeven.
Trade only 7am-11am and 4pm-11pm signals.
Nothing where spread is more than 25% of trade width.
Looking at the data for these rules, test results are:
Adjusted Proft % (takes spread into account): 47.43%
I'll be sure to let everyone know how it goes!
Other Technical Details
ATR is only slightly elevated in this date range from historical levels, so this should fairly closely represent reality even after the COVID volatility leaves the scalpers sad and alone.
The sample size is much too small for anything really meaningful when you slice by hour or pair. I wasn't particularly looking to test a specific pair here - just the system overall as if you were going to trade it on all pairs with a reasonable spread.
Here's the spreadsheet for anyone that'd like it. (EDIT: Updated some of the setups from the last few days that have fully played out now. I also noticed a few typos, but nothing major that would change the overall outcomes. Regardless, I am currently reviewing every trade to ensure they are accurate.UPDATE: Finally all done. Very few corrections, no change to results.) I have some explanatory notes below to help everyone else understand the spiraled labyrinth of a mind that put the spreadsheet together.
I'm on the East Coast in the US, so the timestamps are Eastern time.
Time stamp is from the confirmation candle, not the indecision candle. So 7am would mean the indecision candle was 6:00-6:59 and the confirmation candle is 7:00-7:59 and you'd put in your order at 8:00.
I found a couple AM/PM typos as I was reviewing the data, so let me know if a trade doesn't make sense and I'll correct it.
Insanely detailed spreadsheet notes
For you real nerds out there. Here's an explanation of what each column means:
Pair - duh
Date/Time - Eastern time, confirmation candle as stated above
Win to -61.8%? - whether the trade made it to the -61.8% TP level before it hit the original SL.
Win to -100%? - whether the trade made it to the -100% TP level before it hit the original SL.
Win to -161.8%? - whether the trade made it to the -161.8% TP level before it hit the original SL.
Retracement level between -61.8% and -100% - how deep the price retraced after hitting -61.8%, but before hitting -100%. Be careful to look for the negative signs, it's easy to mix them up. Using the fib% levels defined in ParallaxFX's original thread. A plain hyphen "-" means it did not retrace, but rather went straight through -61.8% to -100%. Positive 100 means it hit the original SL.
Retracement level between -100% and -161.8% - how deep the price retraced after hitting -100%, but before hitting -161.8%. Be careful to look for the negative signs, it's easy to mix them up. Using the fib% levels defined in ParallaxFX's original thread. A plain hyphen "-" means it did not retrace, but rather went straight through -100% to -161.8%. Positive 100 means it hit the original SL.
Trade Width(Pips) - the size of the confirmation candle, and thus the "width" of your trade on which to determine position size, draw fib levels, etc.
Loser saved by 2 candle stop? - for all losing trades, whether or not the 2-candle stop loss would have saved the trade and how far it ended up getting if so. "No" means it didn't save it, N/A means it wasn't a losing trade so it's not relevant.
Spread(ThinkorSwim) - these are typical spreads for these pairs on ToS.
Spread % of Width - How big is the spread compared to the trade width? Not used in any calculations, but interesting nonetheless.
True Risk(Trade Width + Spread) - I set my SL at the opposite side of the confirmation candle knowing that I'm actually exposing myself to slightly more risk because of the spread(stop order = market order when submitted, so you pay the spread). So this tells you how many pips you are actually risking despite the Trade Width. I prefer this over setting the stop inside from the edge of the candle because some pairs have a wide spread that would mess with the system overall. But also many, many of these trades retraced very nearly to the edge of the confirmation candle, before ending up nicely profitable. If you keep your risk per trade at 1%, you're talking a true risk of, at most, 1.25% (in worst-case scenarios with the spread being 25% of the trade width as I am going with above).
Win or Loss in %(1% risk) including spread TP -61.8% - not going to go into huge detail, see the spreadsheet for calculations if you want. But, in a nutshell, if the trade was a win to 61.8%, it returns a positive # based on 61.8% of the trade width, minus the spread. Otherwise, it returns the True Risk as a negative. Both normalized to the 1% risk you started with.
Win or Loss in %(1% risk) including spread TP -100% - same as the last, but 100% of Trade Width.
Win or Loss in %(1% risk) including spread TP -161.8% - same as the last, but 161.8% of Trade Width.
Win or Loss in %(1% risk) including spread TP -100%, and move SL to breakeven at 61.8% - uses the retracement level columns to calculate profit/loss the same as the last few columns, but assuming you moved SL to 0% fib level after price hit -61.8%. Then full TP at 100%.
Win or Loss in %(1% risk) including spread take off half of position at -61.8%, move SL to breakeven, TP 100% - uses the retracement level columns to calculate profit/loss the same as the last few columns, but assuming you took of half the position and moved SL to 0% fib level after price hit -61.8%. Then TP the remaining half at 100%.
Overall Growth(-161.8% TP, 1% Risk) - pretty straightforward. Assuming you risked 1% on each trade, what the overall growth level would be chronologically(spreadsheet is sorted by date).
Based on the reasonable rules I discovered in this backtest:
Date range: 6/11-7/3
Adjusted Proft % (takes spread into account): 47.43%
Demo Trading Results
Since this post, I started demo trading this system assuming a 5k capital base and risking ~1% per trade. I've added the details to my spreadsheet for anyone interested. The results are pretty similar to the backtest when you consider real-life conditions/timing are a bit different. I missed some trades due to life(work, out of the house, etc), so that brought my total # of trades and thus overall profit down, but the winrate is nearly identical. I also closed a few trades early due to various reasons(not liking the price action, seeing support/resistance emerge, etc). A quick note is that TD's paper trade system fills at the mid price for both stop and limit orders, so I had to subtract the spread from the raw trade values to get the true profit/loss amount for each trade. I'm heading out of town next week, then after that it'll be time to take this sucker live!
Date range: 7/9-7/30
Adjusted Proft % (takes spread into account): 20.73%
Starting Balance: $5,000
Ending Balance: $6,036.51
Live Trading Results
I started live-trading this system on 8/10, and almost immediately had a string of losses much longer than either my backtest or demo period. Murphy's law huh? Anyways, that has me spooked so I'm doing a longer backtest before I start risking more real money. It's going to take me a little while due to the volume of trades, but I'll likely make a new post once I feel comfortable with that and start live trading again.
Summarizing some free trading idea resources I've been using
I've been following many free resources on youtube and twitter to generate trading ideas. Some of them are suspicious; some are more like boasting their wining trades but never post any losing trades. I see many people ask about trading ideas/resources, so I want to briefly share some resources I find useful. Twitter resources:
Instrument: Mostly SPX/SPY/ES
Highlights: TicTocTick is amazingly good at levels, spotting sellers and buyers levels. Everyday he posts his plan for the next day of the following format: If open above X, long/short bias, target Y. If open below X, short/long bias, target Z. Intraday he sometimes send "warnings" of potential big sellers / buyers at certain level. His price target and long/short bias is often right in my experience. His levels are useful for day trades IMHO.
Notes: (1) even with his plan, one needs an actionable plan. (2) He sometimes delete his tweets. His day-by-day and intraday tweets are more actionable than his longer term view. (3) he sometimes tweets political and controversial non-stock related things.
Trade transparency: 0/5 (doesn't post any trades)
Live update in-time: 5/5 (updates very frequently)
Actionable trading plan: 1/5 (good at levels and price targets. need your own plan)
Live interaction: 0/5 (no interaction)
Educational: 2/5 (can learn the technique from other resources. TicTock doesn't teach you directly)
Instrument: Mainly SPY/SPX/ES
Technique: candlestick patterns, Fib levels, support and resistance levels etc
Style: only day trading
Highlights: he diligently post daily plan and many educational resources, sometimes intraday updates. Had many good trades.
Notes: I haven't followed him long but so far so good. He also recently has educational youtube videos.
Trade transparency: X/5 (hard to measure)
Live update in-time: 2.5/5 (updates frequently)
Actionable trading plan: 3.5/5
Live interaction: X/5
Educational: 5/5 (youtube videos)
Technique: candlestick patterns, support and resistance levels, trendlines, channels etc
Instrument: SPX/SPY, Forex, Cryptocurrency,, Gold and Silver.
Style: holding for a few hours for SPX/SPY, swing trade for all
Timeframe: 8H for analysis. Lower time frame for entry.
Trading frequency: 1-2 trades per week.
Highlights: For SPX, he rode the big drop down in March; rode the rally up, and rode some pullbacks down in April. Got chopped in May. Now he's positinoning long. He also did well in Gold and Silverthis month. He only uses candle sticks, support and resistance lines, trendlines, and sometimes true trend indicator. He doesn't use volume though.
Youtube style: 2 videos every trading day: (1) live at 9am ET for 1-2 hours and talk about his plan and market analysis. Sometimes he trades during the live session (enter / exit). (2) after market closes he summarizes the day, and talks about plans for the next day. (3) Every weekend he gives out his technical analysis for the next week.
What I like: His levels on the chart are very good. He is also very transparent about his trades no matter whether it's winning or losing. He also explains the general economic environment.
Trade transparency: 4/5 (not knowing trading size; but knowing entry/exit)
Real-time update: 2.5/5 (two times a day)
Actionable trading plan: 5/5
Live interaction: 3.5/5 (some interaction on youtube live; Jordan responses to youtube comments)
Timeframe: all time frames. Mostly 5min, 1H, 1D, 1W, 1M.
Trading frequency: very frequent. multiple trades per day.
Highlights: Justin is very good at seeing through market maker manipulation and highly manipulated stocks. He often explained his plan and his outlook (especially in OPEX days) in his YouTube channel. The stocks on their weekly watchlist tend to do very well. He does live Q&A on youtube as well everyday where one can ask him to look at a chart.
Youtube style: Three videos by his team every trading day: (1) live at 9:30am ET; does 1-2 live scalping trades. Explains what he thinks of the market. (might discontinue) (2) at noon: summarizes what happened and what he sees is happening later in the day. Some of his trading plans. (3) 4:15pm ET: summarizes today and looking forward to the rest of the week. Videos (1) and (2) include live Q&A. I've asked many questions on youtube. Every weekend has two videos talking about plans for the next week.
What I like: The Q&A and Justin's outlook of the market, his team's stock pick.
The scalping trades in the morning is not very suitable for small accounts since they will trade for example 100 shares of BA (~160) to scalp a few dollars per share.
Even though the stocks on their weekly watchlist does well very, one still need to come up with an actionable plan. Very often say they recommend stock A on Sunday, and on Monday it already gaps up big. They sometimes do YOLO options -- big risk big rewards-- options can go to 0.
Besides the free content, everyone can get a free one-week trial for their paid membership, or a 2-week free trial by winning a lottery game on their youtube ( what I did) or knowing someone in their group and get a referral. What I like about the group: (i) very frequently updates each day on SPY and stocks on the watchlist. (ii) all their positions, Profit / Loss are very transparent. I learned a lot about how to manage trades by observing their live trades. (iii) There are many very experienced traders in the group posting their trading ideas, plans, entry/exit, and there are many live discussions. (iv) There's a "helpdesk" in the group where members' questions will be answered in minutes. I often ask about my trading plan, entries/ targets.
Trade transparency: 0/5 (free content: not knowing entry/exit nor position size);5+/5 (membership\*)*
Live update in-time: 3.5/5 (free content: three times a day);5+/5 (membership\*)*
Highlights: I follow their free Shadow trader swing newsletter, where every few days they post some trading ideas and analysis with actionable plan. Their twitter account will also real-time update their entry/exit and trade management.
What I like: I enjoyed learning what they look at to find a good set-up and how to manage a trade. They also have a spreadsheet tracking all their positions and profit/loss. All the winning/losing trades are transparent.
Notes: Because of the current market volatility, during certain weeks the swing trading performance is quite shaky. Profits (per 100K account with no more than 30K invested each time): 2020YTD: +9K, 2019: +6K; 2018: +30K; 2017: +3K; 2016: +2.5K; 2015: -1.8K.
Trade transparency: 5/5
Live update in-time: 5/5 (updates frequently)
Actionable trading plan: 5/5
Live interaction: 0/5 (newsletter and twitter alerts only)
Educational: 4.5/5 (the newsletter explains set-ups, what sectors they are looking at)
I've spent much time looking for free contents, and I like the ones above. Also looking forward to hearing about other good/bad resources. I might also update this post if there are enough interests. NFA
Due to popular demand I've decided to bring this series back for a week 2 and I'll continue to release 3-5 trading ideas every Saturday. How do you guys feel about the name of this series? Would you like me to change the name to something like "Setup Saturdays" or are you guys cool with the current naming scheme? So this week I wanted to be a lot more in depth in my analysis and setups since I didn't think I was super clear last week with my reasoning on some the setups. I want these posts to be as beginner friendly as possible because there's a lot more beginners in this Subreddit than I had realized. I want you to use this as an educational tool and not as a signal service as a result I'm going to give you possible trade setups and I want you to be the judge of whether you should enter once/if price gets to that point since I feel like that will benefit beginners in the long run. I got a couple questions about top down time frame analysis so that'll be a focus of today's post. Scroll down to NZDJPY if you really want an in-depth look at how I perform top down time frame analysis. I'll include a picture of a chart and my TradingView chart so if you want to zoom in and out of the chart you'll have that ability to do so. Quick Disclaimer: Some of the charts pricing might be off by a bit since I started working on this during the New York session on Friday. If any of the charts are impacted in a way that alters the setup I'll be sure to update the charts before I post this on Saturday. Just gotta hope that hope that Powell doesn't break the market or else I might have to redo this entire post. AUDUSD: AUDUSD Daily TradingView Link For Daily: https://www.tradingview.com/chart/AUDUSD/Wb5K2bS8-AUDUSD-Daily-For-Reddit-Post-6-20-U-AD3133/ Analysis: Which way is the trend pointing? It looks like it's pointing up which we can see with the green trend line but how about we zoom in to the 4 hour char to see if that's actually the case. Tip: When drawing a trend line, especially on the daily and higher time frames, remember to hit as many wicks as possible since they are relevant and not just some anomaly you can ignore. AUDUSD 4 Hour TradingView Link For 4 Hour: https://www.tradingview.com/chart/AUDUSD/aah8294z-AUDUSD-4-Hour-For-Reddit-Post-6-20-U-AD3133/ Analysis: When we got close to where we are with price and we draw a Fibonacci Retracement from the point where price took off to the point where price peaked we can see that price came down to .5 Fibonacci level where it then started going up again. Coincidence? Possibly. As a result I believe that price could continue higher and it would be justified if it did. However, if we look at the trend lines we can see that price appears to have broke put of of our major trend line (Green) which means that price could fall to the downside if it's actually a breakout. Price then appears like it would then adhere to the new minor trend line (Red). There's also the possibility that this was just a fake breakout and price could go up and adhere to green trend line. I'm going to have a selling bias on this trade since price looks like it double topped at the highs of this year and it looks like we could see price fall. I'm leaning towards the drop of price due to the symmetrical triangle pattern created by the major and minor trend line and looks like price is going to get pushed down which we should get an idea of soon. Tip: Every time price makes a large move and falls/rises after making a peak/valley always pull out the Fibonacci retracement tool to see if price will bounce from the .382, .5, or .618 levels as they are the most significant levels. This can tell you if you're going to likely get a trend continuation. AUDUSD 1 Hour TradingView Link For 1 Hour: https://www.tradingview.com/chart/AUDUSD/IHgrnfYs-AUDUSD-1-Hour-For-Reddit-Post-6-20-U-AD3133/ Analysis: I drew out multiple different scenarios which I think can play out since like I said before we're not trying to predict a single movement but we're preparing to be reactive to an ideal condition which may be thrown at us. Remember that major trend line we drew in on the daily chart well it's going to play a large role here. This trend line has been in the making since March so we're not just going to brush it off. The trend line appears to have been broken and we seem to be sticking that minor trend line after the break of the symmetrical triangle pattern. After the break of the symmetrical triangle pattern price usually gets pushed heavily to one side and it looks like price is wanting to get pushed to the downside. As a result, I'm going to really keep on eyes on scenario the blue arrows display since I think it's the most probable. Looking at the scenario there are going to be two potentially good entry points for a sell. The first being when price goes up to retest the green trend line which would also serve as a bounce from our red trend line. Once we get that bounce we could enter in for a sell with a take profit hopefully somewhere around the .66 area. Another good entry would be when price breaks the zone of support of .68 and after it retests it. Wait for a confirmation candlestick pattern showing price will fall when retesting (i.e. railroad track, bullish engulfment candle, evening star, shooting star, etc.). Look for these candlestick patterns on the 15 minute chart. Once you got the confirmation take the sell and ride price down to the .66 zone. The other scenario that could occur is we could see price go back into the green trend line by breaking the red trend line (Orange Arrows). If this occurs we want to catch the retest bounce of the red trend line and ride price up to the high of the year which is at .702. At that point price could break the resistance at which point we could catch the retest of the zone and ride price up. Or it could go up to .702 create a triple top and fall. If you get a candlestick confirmation saying it'll fall then take a sell at the high of the year. NZDUSD: If there's something I really like in Forex it's definitely got to be harmonic patterns due to their high accuracy. NZDUSD just recently completed one of them and this is a really good indicator of what price is going to do. NZDUSD Daily TradingView Chart For Daily: https://www.tradingview.com/chart/NZDUSD/zQpHzUcK-NZDUSD-Daily-For-Reddit-Post-6-20-U-AD3133/ Analysis: Yes, we have trend line that says that price is going up however I make exceptions for Harmonic patterns since they are accurate about 80%-90% of the time. The pattern you see above is know as a Bearish Bat Pattern. Like the name says it's an indicator that price is going to go Bearish so although the trend line is going up I'm going to have a bearish bias on this trade. NZDUSD 4 Hour TradingView Chart For 4 Hour: https://www.tradingview.com/chart/NZDUSD/C29kpCyO-NZDUSD-4-Hour-For-Reddit-Post-6-20-U-AD3133/ Analysis: Not really much to add here just tossed on a Fibonacci retracement tool from where price took off to the peak just to check for any potential support from any of the major levels which we don't appear to have. We'll go a lot more in-depth on this pair on the 1 hour chart since that's where things get interesting. NZDUSD 1 Hour TradingView Link For 1 Hour: https://www.tradingview.com/chart/NZDUSD/dKJatcM7-NZDUSD-1-Hour-For-Reddit-Post-6-20-U-AD3133/ Analysis: Looking at price we can see that since June 11th price has been trading in a boxed consolidation range. Again I drew out the possibilities I believe could be ideal for us. Remember that I said Harmonics work 80%-90%. Well that means that they fail 10%-20% of the time which is definitely not something we can neglect. We can see that there's a descending triangle which price is reaching the end of. This means that price is getting ready to move to one direction since big moves always come after consolidation. If it moves to upside wait for price to close above the the spot marked D then you can enter for a buy and ride price up to the .67525 zone where price could break to upside or bounce back down (Orange Arrow). Remember to wait for it to actually close above point D since it could create a triple top and drive price back down. It's the same procedure as AUDUSD here if it makes this move where if it breaks it then catch the retest and if it looks like it's wanting to fall down wait for a confirmation pattern. If it breaks the box to the downside and breaks the support zone then take a sell and ride price down to the trend line at which point you should close the trade as there's a chance price could move against you and it's best to secure profits while you can. Once at the trend line it could bounce and if it does you should be able to ride price up to that .67525 zone (Green Arrow). If price breaks the trend line then wait for the retest and you should be able to ride price down pretty far (Red Arrows). I think you should be able to ride it down to .5918 zone but you'll have to keep your on it. EURNZD: EURNZD Daily TradingView Link For Daily:https://www.tradingview.com/chart/EURNZD/jzgmGcRe-EURNZD-Daily-For-Reddit-Post-6-20-U-AD3133/ Analysis: Well we got a pretty clear descending channel and price looks like it's at the top part of the channel currently so we're going to want to look for some optimal selling conditions due to the down trend. EURNZD 4 Hour TradingView Link For 4 Hour:https://www.tradingview.com/chart/EURNZD/YzOpvcH7-EURNZD-4-Hour-For-Reddit-Post-6-20-U-AD3133/ Analysis: Looking at the 4 hour chart we can see that there appears to be a symmetrical triangle coming to it's end meaning price is getting ready to get pushed to a side. I believe it'll break the triangle and fall to the downside so once you see it break it would be a good idea to take a sell and ride price down to that support zone at 1.7187. Price could also briefly break to the upside then bounce off the top of the channel and it does take a trade from the bounce and ride price down to the same support zone. At that point, I'll leave it up to you to determine how you think price will go and what you should be looking for. Consider it to be a little quiz if you want to think of it like that. You've got my charts so use them as a reference since I've already marked some crucial support/resistance zones which we should keep our on for the next couple weeks. EURNZD 1 Hour TradingView Link For 1 Hour:https://www.tradingview.com/chart/EURNZD/ICWvgEsg-EURNZD-1-Hour-For-Reddit-Post-6-20-U-AD3133/ Analysis: There's nothing that special on the one hour chart that I have to point out since I think we pretty much got all the big stuff out of the way on our analysis of the 4 hour chart. Be sure to get a good sell in there since there are two potentially good setups which I've outlined for you. Also be sure to be careful and wait for the bounce of the channel if price goes that way since there's a chance price could break the channel and I don't want you to take a loss because you were impatient. NZDJPY: This pair is going to be really fun since we're going to be looking through a lot of time frames so if you really want to learn about a top down approach to analyzing time frames and trends then pay very close attention to how I break down this trade. NZDJPY Monthly TradingView Link For Monthly:https://www.tradingview.com/chart/NZDJPY/jZh4F2Jv-NZDJPY-Monthly-For-Reddit-Post-6-20-U-AD3133/ Analysis: Yes, we're actually going to be looking at the monthly chart. I bet you guys don't do that very often. Looking at it we can see that price has been following a clear down trend line since late 2014. If you look at the wick of this month's candle you can see that it appears to have touched the trend line meaning we could see a good opportunity to catch a sell since it had just recently bounced off. Let's take a look at lower time frames to see if this continues to be true. NZDJPY Weekly TradingView Link For Weekly:https://www.tradingview.com/chart/NZDJPY/dpvI29BB-NZDJPY-Weekly-For-Reddit-Post-6-20-U-AD3133/ Analysis: When zooming into the weekly we can see that using the wicks of the candles we can actually draw a channel for the low portion that runs pretty much in parallel to the trend line we drew on the monthly chart. We can see that price clearly bounced from the trend line and I think this gives us good reason to believe in the coming weeks we could see the price drop. Also looking at the Bollinger Bands we can see that price also bounced from the top band which also supports a drop of price. Let's go into the daily to see if we can get a better idea. NZDJPY Daily TradingView Link For Daily:https://www.tradingview.com/chart/NZDJPY/NbWLURkU-NZDJPY-Daily-For-Reddit-Post-6-20-U-AD3133/ Analysis: Looking at the daily time frame we can see that price is currently consolidated and remember big moves always come after consolidation. If you look closely however you can see that price looks like it's about to break the 200 day EMA (Orange line). If it breaks the EMA we could see price drop pretty far at an accelerated rate. Besides those couple observations there's not much else going on with the daily chart. NZDJPY 4 Hour TradingView Link For 4 Hour:https://www.tradingview.com/chart/NZDJPY/d1kaogH5-NZDJPY-4-Hour-For-Reddit-Post-6-20-U-AD3133/ Analysis: Would you look at that, it looks like we got a descending triangle on the 4 hour chart which looks like it's coming to an end. Looking at price it looks like it's wanting to push to the downside. Once you get a break below the lows of the day of June 11th I think it would be a safe bet to take a sell trade and ride it down for 66.825 for this week. If it breaks the 66.825 support zone then I'll definitely take a sell and try to ride price down to the bottom of the channel which we drew on the weekly chart. There's also the possibility that price could take support at any of these support zones and then head back up to test the top of the channel. At which point I'll be looking to get into a sell at the top of the channel but I won't ride price up to the channel since at this current point in time I feel like there's a large amount of risk in that. NZDJPY 1 Hour TradingView Link For 1 Hour:https://www.tradingview.com/chart/NZDJPY/83b47mFS-NZDJPY-1-Hour-For-Reddit-Post-6-20-U-AD3133/ Analysis: Not much more to add here since I think by this point we got the entire story so I'm not going to say much more about the 1 hour chart since I think the analysis for the 4 hour chart also sums this up pretty well. Well that was a lot of information to go through and I hope you found some value in this since it took me quite a few hours to put this together for you guys. Truth be told, I spent most of Friday working on this so I hope at least one person finds some value in which case I'll consider it a win. So you guys tired of me yet or do you want me to continue this series for a week 3? It takes a lot of time and effort to put this together so I'll only do it if people want it or else I'll pretty much feel like I wasted my time. I might put together a little lesson on how to use the COT in order to catch some big reversal moves in the market since the COT pretty much tells you what the hedge funds are doing and you also want to trade with the hedge funds and institutions. It'll probably take a couple weeks since I'll have to compile some data together and wait for a setup before putting that out but I'll be working on it. Are there any other things you may want explained? Let me know and I'll try to find setups which contain the topic you may want more details on. I hope you have a great trading week!
Everything You Always Wanted To Know About Swaps* (*But Were Afraid To Ask)
Hello, dummies It's your old pal, Fuzzy. As I'm sure you've all noticed, a lot of the stuff that gets posted here is - to put it delicately - fucking ridiculous. More backwards-ass shit gets posted to wallstreetbets than you'd see on a Westboro Baptist community message board. I mean, I had a look at the daily thread yesterday and..... yeesh. I know, I know. We all make like the divine Laura Dern circa 1992 on the daily and stick our hands deep into this steaming heap of shit to find the nuggets of valuable and/or hilarious information within (thanks for reading, BTW). I agree. I love it just the way it is too. That's what makes WSB great. What I'm getting at is that a lot of the stuff that gets posted here - notwithstanding it being funny or interesting - is just... wrong. Like, fucking your cousin wrong. And to be clear, I mean the fucking your *first* cousin kinda wrong, before my Southerners in the back get all het up (simmer down, Billy Ray - I know Mabel's twice removed on your grand-sister's side). Truly, I try to let it slide. Idomybit to try and put you on the right path. Most of the time, I sleep easy no matter how badly I've seen someone explain what a bank liquidity crisis is. But out of all of those tens of thousands of misguided, autistic attempts at understanding the world of high finance, one thing gets so consistently - so *emphatically* - fucked up and misunderstood by you retards that last night I felt obligated at the end of a long work day to pull together this edition of Finance with Fuzzy just for you. It's so serious I'm not even going to make a u/pokimane gag. Have you guessed what it is yet? Here's a clue. It's in the title of the post. That's right, friends. Today in the neighborhood we're going to talk all about hedging in financial markets - spots, swaps, collars, forwards, CDS, synthetic CDOs, all that fun shit. Don't worry; I'm going to explain what all the scary words mean and how they impact your OTM RH positions along the way. We're going to break it down like this. (1) "What's a hedge, Fuzzy?" (2) Common Hedging Strategies and (3) All About ISDAs and Credit Default Swaps. Before we begin. For the nerds and JV traders in the back (and anyone else who needs to hear this up front) - I am simplifying these descriptions for the purposes of this post. I am also obviously not going to try and cover every exotic form of hedge under the sun or give a detailed summation of what caused the financial crisis. If you are interested in something specific ask a question, but don't try and impress me with your Investopedia skills or technical points I didn't cover; I will just be forced to flex my years of IRL experience on you in the comments and you'll look like a big dummy. TL;DR? Fuck you. There is no TL;DR. You've come this far already. What's a few more paragraphs? Put down the Cheetos and try to concentrate for the next 5-7 minutes. You'll learn something, and I promise I'll be gentle. Ready? Let's get started. 1.The Tao of Risk: Hedging as a Way of Life The simplest way to characterize what a hedge 'is' is to imagine every action having a binary outcome. One is bad, one is good. Red lines, green lines; uppie, downie. With me so far? Good. A 'hedge' is simply the employment of a strategy to mitigate the effect of your action having the wrong binary outcome. You wanted X, but you got Z! Frowny face. A hedge strategy introduces a third outcome. If you hedged against the possibility of Z happening, then you can wind up with Y instead. Not as good as X, but not as bad as Z. The technical definition I like to give my idiot juniors is as follows: Utilization of a defensive strategy to mitigate risk, at a fraction of the cost to capital of the risk itself. Congratulations. You just finished Hedging 101. "But Fuzzy, that's easy! I just sold a naked call against my 95% OTM put! I'm adequately hedged!". Spoiler alert: you're not (although good work on executing a collar, which I describe below). What I'm talking about here is what would be referred to as a 'perfect hedge'; a binary outcome where downside is totally mitigated by a risk management strategy. That's not how it works IRL. Pay attention; this is the tricky part. You can't take a single position and conclude that you're adequately hedged because risks are fluid, not static. So you need to constantly adjust your position in order to maximize the value of the hedge and insure your position. You also need to consider exposure to more than one category of risk. There are micro (specific exposure) risks, and macro (trend exposure) risks, and both need to factor into the hedge calculus. That's why, in the real world, the value of hedging depends entirely on the design of the hedging strategy itself. Here, when we say "value" of the hedge, we're not talking about cash money - we're talking about the intrinsic value of the hedge relative to the the risk profile of your underlying exposure. To achieve this, people hedge dynamically. In wallstreetbets terms, this means that as the value of your position changes, you need to change your hedges too. The idea is to efficiently and continuously distribute and rebalance risk across different states and periods, taking value from states in which the marginal cost of the hedge is low and putting it back into states where marginal cost of the hedge is high, until the shadow value of your underlying exposure is equalized across your positions. The punchline, I guess, is that one static position is a hedge in the same way that the finger paintings you make for your wife's boyfriend are art - it's technically correct, but you're only playing yourself by believing it. Anyway. Obviously doing this as a small potatoes trader is hard but it's worth taking into account. Enough basic shit. So how does this work in markets? 2. A Hedging Taxonomy The best place to start here is a practical question. What does a business need to hedge against? Think about the specific risk that an individual business faces. These are legion, so I'm just going to list a few of the key ones that apply to most corporates. (1) You have commodity risk for the shit you buy or the shit you use. (2) You have currency risk for the money you borrow. (3) You have rate risk on the debt you carry. (4) You have offtake risk for the shit you sell. Complicated, right? To help address the many and varied ways that shit can go wrong in a sophisticated market, smart operators like yours truly have devised a whole bundle of different instruments which can help you manage the risk. I might write about some of the more complicated ones in a later post if people are interested (CDO/CLOs, strip/stack hedges and bond swaps with option toggles come to mind) but let's stick to the basics for now. (i) Swaps A swap is one of the most common forms of hedge instrument, and they're used by pretty much everyone that can afford them. The language is complicated but the concept isn't, so pay attention and you'll be fine. This is the most important part of this section so it'll be the longest one. Swaps are derivative contracts with two counterparties (before you ask, you can't trade 'em on an exchange - they're OTC instruments only). They're used to exchange one cash flow for another cash flow of equal expected value; doing this allows you to take speculative positions on certain financial prices or to alter the cash flows of existing assets or liabilities within a business. "Wait, Fuzz; slow down! What do you mean sets of cash flows?". Fear not, little autist. Ol' Fuzz has you covered. The cash flows I'm talking about are referred to in swap-land as 'legs'. One leg is fixed - a set payment that's the same every time it gets paid - and the other is variable - it fluctuates (typically indexed off the price of the underlying risk that you are speculating on / protecting against). You set it up at the start so that they're notionally equal and the two legs net off; so at open, the swap is a zero NPV instrument. Here's where the fun starts. If the price that you based the variable leg of the swap on changes, the value of the swap will shift; the party on the wrong side of the move ponies up via the variable payment. It's a zero sum game. I'll give you an example using the most vanilla swap around; an interest rate trade. Here's how it works. You borrow money from a bank, and they charge you a rate of interest. You lock the rate up front, because you're smart like that. But then - quelle surprise! - the rate gets better after you borrow. Now you're bagholding to the tune of, I don't know, 5 bps. Doesn't sound like much but on a billion dollar loan that's a lot of money (a classic example of the kind of 'small, deep hole' that's terrible for profits). Now, if you had a swap contract on the rate before you entered the trade, you're set; if the rate goes down, you get a payment under the swap. If it goes up, whatever payment you're making to the bank is netted off by the fact that you're borrowing at a sub-market rate. Win-win! Or, at least, Lose Less / Lose Less. That's the name of the game in hedging. There are many different kinds of swaps, some of which are pretty exotic; but they're all different variations on the same theme. If your business has exposure to something which fluctuates in price, you trade swaps to hedge against the fluctuation. The valuation of swaps is also super interesting but I guarantee you that 99% of you won't understand it so I'm not going to try and explain it here although I encourage you to google it if you're interested. Because they're OTC, none of them are filed publicly. Someeeeeetimes you see an ISDA (dsicussed below) but the confirms themselves (the individual swaps) are not filed. You can usually read about the hedging strategy in a 10-K, though. For what it's worth, most modern credit agreements ban speculative hedging. Top tip: This is occasionally something worth checking in credit agreements when you invest in businesses that are debt issuers - being able to do this increases the risk profile significantly and is particularly important in times of economic volatility (ctrl+f "non-speculative" in the credit agreement to be sure). (ii) Forwards A forward is a contract made today for the future delivery of an asset at a pre-agreed price. That's it. "But Fuzzy! That sounds just like a futures contract!". I know. Confusing, right? Just like a futures trade, forwards are generally used in commodity or forex land to protect against price fluctuations. The differences between forwards and futures are small but significant. I'm not going to go into super boring detail because I don't think many of you are commodities traders but it is still an important thing to understand even if you're just an RH jockey, so stick with me. Just like swaps, forwards are OTC contracts - they're not publicly traded. This is distinct from futures, which are traded on exchanges (see The Ballad Of Big Dick Vick for some more color on this). In a forward, no money changes hands until the maturity date of the contract when delivery and receipt are carried out; price and quantity are locked in from day 1. As you now know having read about BDV, futures are marked to market daily, and normally people close them out with synthetic settlement using an inverse position. They're also liquid, and that makes them easier to unwind or close out in case shit goes sideways. People use forwards when they absolutely have to get rid of the thing they made (or take delivery of the thing they need). If you're a miner, or a farmer, you use this shit to make sure that at the end of the production cycle, you can get rid of the shit you made (and you won't get fucked by someone taking cash settlement over delivery). If you're a buyer, you use them to guarantee that you'll get whatever the shit is that you'll need at a price agreed in advance. Because they're OTC, you can also exactly tailor them to the requirements of your particular circumstances. These contracts are incredibly byzantine (and there are even crazier synthetic forwards you can see in money markets for the true degenerate fund managers). In my experience, only Texan oilfield magnates, commodities traders, and the weirdo forex crowd fuck with them. I (i) do not own a 10 gallon hat or a novelty size belt buckle (ii) do not wake up in the middle of the night freaking out about the price of pork fat and (iii) love greenbacks too much to care about other countries' monopoly money, so I don't fuck with them. (iii) Collars No, not the kind your wife is encouraging you to wear try out to 'spice things up' in the bedroom during quarantine. Collars are actually the hedging strategy most applicable to WSB. Collars deal with options! Hooray! To execute a basic collar (also called a wrapper by tea-drinking Brits and people from the Antipodes), you buy an out of the money put while simultaneously writing a covered call on the same equity. The put protects your position against price drops and writing the call produces income that offsets the put premium. Doing this limits your tendies (you can only profit up to the strike price of the call) but also writes down your risk. If you screen large volume trades with a VOL/OI of more than 3 or 4x (and they're not bullshit biotech stocks), you can sometimes see these being constructed in real time as hedge funds protect themselves on their shorts. (3) All About ISDAs, CDS and Synthetic CDOs You may have heard about the mythical ISDA. Much like an indenture (discussed in my post on $F), it's a magic legal machine that lets you build swaps via trade confirms with a willing counterparty. They are very complicated legal documents and you need to be a true expert to fuck with them. Fortunately, I am, so I do. They're made of two parts; a Master (which is a form agreement that's always the same) and a Schedule (which amends the Master to include your specific terms). They are also the engine behind just about every major credit crunch of the last 10+ years. First - a brief explainer. An ISDA is a not in and of itself a hedge - it's an umbrella contract that governs the terms of your swaps, which you use to construct your hedge position. You can trade commodities, forex, rates, whatever, all under the same ISDA. Let me explain. Remember when we talked about swaps? Right. So. You can trade swaps on just about anything. In the late 90s and early 2000s, people had the smart idea of using other people's debt and or credit ratings as the variable leg of swap documentation. These are called credit default swaps. I was actually starting out at a bank during this time and, I gotta tell you, the only thing I can compare people's enthusiasm for this shit to was that moment in your early teens when you discover jerking off. Except, unlike your bathroom bound shame sessions to Mom's Sears catalogue, every single person you know felt that way too; and they're all doing it at once. It was a fiscal circlejerk of epic proportions, and the financial crisis was the inevitable bukkake finish. WSB autism is absolutely no comparison for the enthusiasm people had during this time for lighting each other's money on fire. Here's how it works. You pick a company. Any company. Maybe even your own! And then you write a swap. In the swap, you define "Credit Event" with respect to that company's debt as the variable leg . And you write in... whatever you want. A ratings downgrade, default under the docs, failure to meet a leverage ratio or FCCR for a certain testing period... whatever. Now, this started out as a hedge position, just like we discussed above. The purest of intentions, of course. But then people realized - if bad shit happens, you make money. And banks... don't like calling in loans or forcing bankruptcies. Can you smell what the moral hazard is cooking? Enter synthetic CDOs. CDOs are basically pools of asset backed securities that invest in debt (loans or bonds). They've been around for a minute but they got famous in the 2000s because a shitload of them containing subprime mortgage debt went belly up in 2008. This got a lot of publicity because a lot of sad looking rednecks got foreclosed on and were interviewed on CNBC. "OH!", the people cried. "Look at those big bad bankers buying up subprime loans! They caused this!". Wrong answer, America. The debt wasn't the problem. What a lot of people don't realize is that the real meat of the problem was not in regular way CDOs investing in bundles of shit mortgage debts in synthetic CDOs investing in CDS predicated on that debt. They're synthetic because they don't have a stake in the actual underlying debt; just the instruments riding on the coattails. The reason these are so popular (and remain so) is that smart structured attorneys and bankers like your faithful correspondent realized that an even more profitable and efficient way of building high yield products with limited downside was investing in instruments that profit from failure of debt and in instruments that rely on that debt and then hedging that exposure with other CDS instruments in paired trades, and on and on up the chain. The problem with doing this was that everyone wound up exposed to everybody else's books as a result, and when one went tits up, everybody did. Hence, recession, Basel III, etc. Thanks, Obama. Heavy investment in CDS can also have a warping effect on the price of debt (something else that happened during the pre-financial crisis years and is starting to happen again now). This happens in three different ways. (1) Investors who previously were long on the debt hedge their position by selling CDS protection on the underlying, putting downward pressure on the debt price. (2) Investors who previously shorted the debt switch to buying CDS protection because the relatively illiquid debt (partic. when its a bond) trades at a discount below par compared to the CDS. The resulting reduction in short selling puts upward pressure on the bond price. (3) The delta in price and actual value of the debt tempts some investors to become NBTs (neg basis traders) who long the debt and purchase CDS protection. If traders can't take leverage, nothing happens to the price of the debt. If basis traders can take leverage (which is nearly always the case because they're holding a hedged position), they can push up or depress the debt price, goosing swap premiums etc. Anyway. Enough technical details. I could keep going. This is a fascinating topic that is very poorly understood and explained, mainly because the people that caused it all still work on the street and use the same tactics today (it's also terribly taught at business schools because none of the teachers were actually around to see how this played out live). But it relates to the topic of today's lesson, so I thought I'd include it here. Work depending, I'll be back next week with a covenant breakdown. Most upvoted ticker gets the post. *EDIT 1\* In a total blowout, $PLAY won. So it's D&B time next week. Post will drop Monday at market open.
Hello fellow Traders! I don't know if you have noticed me but recently I have posted some videos and charts of mine that showed me trading a 10 pip model during London and NY session. Due to the rules my posts got deleted or made invisible. I also got banned from this sub afterwards. A discussion with a mod made him unban me and giving me one last chance. Well now I try to better myself so I'm here explaining what were the reasons of my trades previous week. As already told I right now created a new Forex Account just for Reddit where I consistently trade 10+ pips a day, always starting Tuesday since I don't trade Monday (personal reasons). I will continue showing my trading videos just with a better explanation of why I took the trade so you guys can learn from it if you want. I hope by now it should be clear that I'm not doing this for show off purposes since I wouldn't put in so much effort into one thread. So let's review last weeks trades shall we. Just a heads up you will NEVER find Indicators or other tools in my charts. I trade with a blank chart but for the learning purposes I will outline areas of interest and try to explain as good as I can for you to understand. H4 Cable chart My first post was about this H4 GBPUSD Chart. I outlined the the important areas with the brown squares. So first we see price coming down to the last black candle of the low. The last candle of a swing low will often make price go up one more time before breaking the low. In this case price went up to a previous area where a lot of selling took place (the outlined green candle). Why a green candle?? Well in order to resell price has to go up. We don't sell a black candles ;)As you can see once price reached the sensitive selling area price drops lower breaking the low on the left. I think you can already see that just by using this you could have made 100+ pips just on Friday with almost no draw down. But I don't wanna make you greedy that's why I will continue with my 10 pip model. So let's look into one trade I actually took. Cable 1 Minute chart I think the video showing that trade got deleted but I think you can still see it on my profile if you are curious. Well what you see hear is not much different than the H4 Chart. Price traded into a last down close candle of a swing low went back up to a area of selling and then we go down breaking the low. The red lines show my SL and TP while he square shows where my entry was and will be. :) The reason why I can take this trade and be 100% sure it will be winner is that I know that the H4 chart wants to go lower so obviously a M1 chart will do. I just like to enter a trade and have profits within minutes. I have swing, intraday traded before tho and I can perform just like on a M1 chart but that's just where I feel most comfortable. Well this wraps up my little teaching! Enjoy your weekend.
Dear Traders Most people know me by now I'm the guy with the 10 pips that always put the same song in the video, because I just love it too much. haha Well let's get down to business unfortunately I was too tired to write the explanation post yesterday, but it doesn't matter as long as you read through this carefully it doesn't matter when you read this :) Let's start with the London lunch scalp. A lot of people haven't seen the post because it was posted at a non US friendly time. I'll link it here if you are interested before we get into detail. Post: https://www.reddit.com/Forex/comments/h9f4q8/cable_scalp_london_lunch_session_the_red_line/?utm_source=share&utm_medium=web2x So the reason for this entry came from the M15 Chart and you will see why I only take 10 pips and then out immediately. London Lunch M15 Chart What you are looking at here is the last up close candle before this "major" dump. What's important tho is that price also immediately went back up and traded over this candle. Now we just wait for price to dip into the red square and we have our free 10 pips. As you see shortly after price went lower so be careful with your target. On HTF if you see something like this it is more likely to give you more pips. Always keep in mind we are on M15/ a LTF so we target conservative! M1 London Lunch Chart Just to complete the explanation, here's the M1 chart. Red line was the TP. Square Entry as explained. Most people probably seen the NY video but I will also link it here. Post: https://www.reddit.com/Forex/comments/h9i9gf/another_ny_session_another_10_pips_i_messed_up/?utm_source=share&utm_medium=web2x The other scalp was made in NY and blew up way more. A lot of discussion, questions and accusing of gambling haha as usual. So what's special about this trade... it was my first trade I guess that was purely based of the M1 TF and not like a higher TF candle. Let's look into it. M1 NY Session Chart So this is unusual for my chart so many lines/squares ^^ So let's get started from top to bottom. Just a quick mention the two horizontal red lines are entry and TP.
The diagonal line on the top is only there to visualize that the highs are not equal this is the first sign of bearishness.
Red square: Wick of the last down close candle before price shoots up. The wick after price came back down is now seen as a bearish level so if price trades there I look for short entries.
Blue Line: Bodys of the previous low. Candles closed below that line confirming that the low will be broken any time. Price went back up a little and I immediately took action on that. 2 Minutes later price showed me that my levels are accurate and I don't need to FOMO. I should have been patient, so I learned something from this trade!
This wraps up the teaching of my monday scalps! I might not post tomorrow since I'll not be home and screen recording might be to stressful. We'll see. Cheers!
This is the best tl;dr I could make, original reduced by 64%. (I'm a bot)
Investing.com - The dollar slipped in early European trade Thursday, with the euro gaining ahead of greenback ahead of a policy meeting of the European Central Bank later in the session. The euro has pushed higher, helped by Bloomberg News reporting that ECB officials are growing more confident in the bloc's economic outlook. With this in mind, traders will be following this ECB meeting closely. While changes in interest rate policy are unlikely, Lane's remarks suggest officials are growing uncomfortable with the euro's almost 6% appreciation against the dollar from its June low. The ECB is under pressure again after Eurozone consumer prices turned negative in August for the first time since 2016, and the U.S. Federal Reserve changed its monetary policy strategy in such a way as to weaken the dollar further. "Despite a challenging economic outlook, we think the ECB will keep its monetary policy stance unchanged at the September meeting," said analysts at Barclays, in a research note.
Summary Source | FAQ | Feedback | Topkeywords: policy#1ECB#2dollar#3trade#4European#5 Post found in /Economics. NOTICE: This thread is for discussing the submission topic. Please do not discuss the concept of the autotldr bot here.
Strategy to Make 50% - 100% a Year Trading One Day a Week.
I feel a lot of times people can over think and try to over engineer making moderate annual gains in the Forex markets. Simple and low maintenance strategies can be devised to do this. If someone said to me, "Hey, I've got $10 million and want 15% a year . I don't want to be in the market more than 3 hours a week". I'd say, "I got this. Give me close of New York session on Friday to 2 hours before the market close. Easy gig." In this post I will teach you how. I will also post setups and track results from strategy on Friday's that qualify. Since I am not doing this for a pedantic millionaire investor, I'll use the whole of Friday for my trades. With this I think I should be able to beat 50% on 1% risk per position. There are specific qualifiers needed going into Friday to trigger this strategy. It will not trade every week. Only when there is a trend present and we are either in a trending week or near the end of a corrective week. Here is what a corrective week tends to look like. https://preview.redd.it/dtdwbsjt74i31.png?width=673&format=png&auto=webp&s=37030c3d5e4aad34812ab806addb5e34e948b525 You can sync up this with real price action in what has been (and still is) a corrective week in GBPUSD. Setting Up Approaching Final High When we see this, we have a really easy trade looking to buy London open area at a 61.8% retracement. There are multiple reasons this trade could work. Lots of different ways a strategy can pick up this trade (I won't cover these here, if you look through my post history I cover them extensively). Here is the area on this chart I will be looking to trade. Entry Area Let's look closer at the trades when we have this set up. I said buy 61.8, but that is too arbitrary. Working one day a week here, should pretend to look busy, huh. https://preview.redd.it/lwtj73tia4i31.png?width=1298&format=png&auto=webp&s=444c8d13d15c8b8f3ea5402ec35cb46c63be1440 So we're looking for the 61.8 retracement for around London. This is where the strategy can potentially come active. This trade may or may not be taken, it depends on a few things. Honestly, one of them is I might sleep in. Others are more professional ... promise. When there has been this failed new high move, it's on. I always want the following trade. Here we're looking for a 61.8 retrace from the failed new high swing. A bounce from there, and then pending order can be placed to enter on a retest of there. This is what I consider to be a strong signal. I can use tight stops here and get good RR. I expect a strong move from this area. When it breaks out of the high and runs a little, I'll close half my profit and trail stops to protect running profits. I will wait and watch for the market contracting and starting to make a messy range. I'll then look for it to start to pull back and look like it's going to start to correct the move of the day. I will look to buy into this move and expect to see price spiking. Not trying to "time the market" or anything, but it's probably going to be 90 to 120 minutes before the market closes this happens. For trending weeks, I'll be using the same sort of execution rules and trading patterns. he prerequisite price action I want to see will be there having been a new high/low in the trend made by Thursday. I'll then be looking for a retrace of that and the market running out the end of the week with a final trend move. https://preview.redd.it/5u0qyoeec4i31.png?width=520&format=png&auto=webp&s=986aa1b123f98e24aec8c23da2dd8651417a8c85 Part 2 https://www.reddit.com/Forex/comments/cufic1/strat_for_50_100_a_year_more_details_first_trade/
Kuvera GenXT: My personal review (was a part of it for several months so trust me when I say it’s not worth it)
Initial price: $250 USD Monthly price: $229 USD (gets waived if 3 people STAY on your team) Compensation plan: earn $500 USD a month if you introduce 12 people, $1000 USD a month if you introduce 40 people, $2000 USD a month if you introduce 100 people. IMPORTANT NOTES: • these people need to stay in your organization each month, if one leaves you need to recruit another- so the whole residual income (money paid to you each month no matter what) thing is a lie. • if you bring in one person and that person brings 6 others, they all count towards you. (Hence why it’s a pyramid scheme) • your tree has to be “balanced” meaning that one person can only count towards 50% of your volume. For example: if you’re aiming towards the business builder rank (12 people), and you have a star recruiter on your team, only 6 people from that star recruiters team will count towards you. So warning the residual income definitely is not as easy as it looks. I initially joined because I really wanted to learn how to invest but I didn’t know where to start. I saw one of the bigger leaders post about the opportunity on thier ig so I decided to join. I was really sceptical at first but my “upline” sent me proof it was legit: A+ rating on BBB (which is bs) , a yahoo finance article, and the company was registered with the SEC. Something still seemed fishy but I brushed it aside (dumb idea). From that day on I was told to go to as many different “opportunity” events as possible so I learn how to pitch the idea, and get my 3 people needed for a free membership. At first I really liked it, everyone was friendly and I felt I was doing something good. However, when I started investing I realized how difficult investing was. ALL of thier trading channels that you’re supposed to “copy and paste” alerts from are complete trash. I did everything I was told (place the alert at consistent allocation, don’t be too risky etc) yet I was either losing money or breaking even each week. One week a leader will say “follow this channel it’s really good” the next week you try it it’s trash again. There was no consistency at all which is needed if you actually want to make profits with forex. Moreover the actual forex education was horrible, the kuvera videos were no help and most “traders” weren’t knowledgeable. If you want to learn from am-mature university students, be my guest and join. The deeper I got in, the more difficult it got. I was told that I had to post everyday on social media because consistency is the key to success (or so they say). I did that for several months and although I got a few people enrolled, many dropped out eventually. I also had a difficult time recruiting because we weren’t supposed to mention the price (because it’ll scare people), and we weren’t supposed to mention kuvera since a quick google search can reveal a lot of negative things. Instead our goal was to just peak people’s interest and get them out to an event or online webinar where one of the leaders explain it in the least sketchiest way possible. Looking back, I spent a LOT of time on social media as well as the “special events” and even though I’m supposed to have more freedom since it’s not a 9-5 job, it was the complete opposite. If I missed an event my up-lines made me feel guilty and bad about skipping. My team eventually grew to many people, and I was told I had to start “being a leader” and leading by example. I was told to go to every event, host my own events, and cold market everywhere. This blew my mind because the whole reason I joined was because I wanted more time to myself, yet I felt I had less and less. I eventually got fed up because there was barely any trading training, so I slowly stopped going. And that, is when I finally got my common sense back :) . I noticed the following: 1.) a lot of the top leaders who preach that they’ve achieved financial freedom are far from the opposite. They’re either struggling with getting their first 3 people and are just faking how it “changed their life”, or they’re at either bb or exec (500-1000) a month which is barely anything compared to if you got a J.O.B. 2.) Nobody mentions their losses during their presentations. When the leader of GenXT (Matt) asks the “team” how much money they made with the system, it’s always the same people. They rotate them and mix it up every now and then but in general it’s the same pitch. If you want an idea of what the system is actually like, ask different people in the room to show you their profits from day one. Not today, not last week but their entire track record.
They want you to “stay close to the fire” and attend as many events and webinars as possible so you stay brainwashed
4.) All of the team culture events (restaurants, basketball games etc) are all there to distract you from the fact that not many people are making profits. 5.) Don’t believe everything you see on social media. They may be posting lavish lifestyles but every single trip they take together (Florida, Mexico etc) was paid individually. The company does not pitch in for anything. We were actually encouraged to go on these random trips because it creates more marketing content and shows people you’re making money. 6.) I noticed a few members were using demo accounts and posting their results on ig which is very misleading. If you see people making $300+ a day and using crazy allocations, just know they either: have a lot of capital, are risking their entire account, or they’re using a demo. 7.) You need A LOT of money to invest into forex in order to make a liveable profit. Either that or you need to be highly skilled, and trust me you won’t learn anything from kuvera. 8.) All the top leaders that make money through residual or forex are literally glued to thier phones. What’s the point of joining something like this and not having a moment of peace? Why not just get a job at least you’ll have weekends in peace. 9.) They talk a lot of shit about jobs but they’re not all that bad. At least you get paid for everything you do, you could put in 100 hours to an mlm and not receive anything in return. And jobs have health benefits, sick days, and sometimes even paid vacations. 10.) If you’re a part of an mlm you’re not a “business owner”. You’re a sales representative for the company. 11.) A lot of the people involved in mlm’s are literal vultures. They’re always looking for people to recruit everywhere they go which is sad. 12.) mlm’s ARE pyramid schemes, they just hide behind a product so they can legally operate. 13.) MLM’s like kuvera sell a dream rather than a product. They claim you can be your own boss, and become financially free just because the distributers see a few big leaders living that way. There are countless webinars and training sessions that motivate you to keep going and never give up, because the people at the top depend on the people at the bottom. The whole point of creating a team culture, is to make sure that people continue to have the right “mindset”, and to make sure their people do too. Because duplication is the most effective way to create strong recruiters. And although it is possible to make lots of money if you’re good at selling, the entire mlm system is flawed. You could be making loads of money from recruits, but at the expense of potentially hurting a lot of the people you bring in. After all, if no one pays the monthly fee, the company would not be able to pay their distributers. Some of you may be reading this and thinking I’m pretty stupid for falling for a scheme like this, and you’re right. I lost more than $1500 just from paying the monthly fees but I kept going because my uplines convinced me that it took one of the biggest leaders (rakan khalifa) a year before he made it to his rank. It took me a long time to even find the courage to quit because everyone knew I was in it. I didn’t want to make it seem like I gave up because it was embarrassing. But I’m glad I did. If you’re a part of it right now the best thing to do is walk away, but ofc the choice is up to you.
With this in mind, we can expect that many traders will be looking to close their positions at the end of their trading session (if they haven't done so already). Evidence is provided by the existance of the "quiet session," the period of time after the North American session closes (17:00 EST = 22:00 GMT) and before the Asian session opens (about 19:00 EST = 0:00 GMT). In fact, unless there ... Forex trading hours can be said to be a time period that is made up of a day of business in the financial market, which covers periods from the opening bell to the closing bell. It is required that all orders for the day should be placed within the time frame of the trading session, with bulls and bears participating in shaping the live market prices. In this how to guide, we unpack Forex trading sessions and explain everything you need to know from strategy to execution in the four timelines: Sydney, Tokyo, London, and New York.. While the Forex marketplace is open 24/7, five and a half days a week, there are periods when there is consistent volatility and periods where nothing much happens. Forex market close at 22:00 GMT winter and 21:00 GMT in summertime (New York forex close time) on Friday for most forex brokers. It is the NY session close time. There is a difference in 1 hour for some brokers. Trader need to know trading server (for example Metatrader platform ) time. For Metatrader in left up corner we can see time : Then we need to know our country’s time and to know ... Pre- and post-market trading sessions allow investors to trade stocks between the hours of 4 a.m. and 9:30 a.m. during pre-market trading, and 4 p.m. to 8 p.m. for the post-market session. Please experiment with the Trading Session settings carefully. They have impact on all strategies. Close at the end of the session and Close at Friday Close close the positions at the last Bar Open before the end of the session. For example, if you set 22:00 and you trade on M15 chart, the positions will be closed at 21:45. They cannot be ... What is post-market trading? Post-market trading enables you to trade after the main session closes. For example, while most UK traders can only access US stock markets from 2.30pm to 9pm (UK time), post-market trading could grant you access to these markets for hours after they close.
What's the Best Time to Trade Forex? 3 Major Market ...
Live NY Session Hosted 6.30am EST Mon to Fri. Ask questions. Post charts and get feedback. This is for educational purposes ONLY. WATCH THIS BEFORE THE LIVE ... Little Lesson on the sessions and markets All about Trading in Forex Marked Forex Marked OPEN/CLOSE indicator :: London Session Viewer ----- Link to Forex Marked OPEN/CLOSE in... #forex #forexlifestyle #forextrader Want to join the A1 Trading Team? See trades taken by our top trading analysts, join our live trading chatroom, and acces... #forex #forexlifestyle #forextrader Want to join the A1 Trading Team? See trades taken by our top trading analysts, join our live trading chatroom, and acces... The ONLY Forex Trading Video You Will EVER NeedTHIS QUICK TEST WILL HELP YOU BECOME FINANCIALLY FREETake it HERE: https://discover.tiersoffreedom.comTo join my ... Here’s the thing: It can be frustrating to know what’s the current Forex trading session. Is it the Asian, London, or New York session? Or perhaps you’re won...