Mickey's Journal

[kiravon]

Thanks Ed

Brilliant video, I think more about the wisdom of letting winners run
than anything else

EC patterns are definitely very powerful, especially on higher time frames,
When all three sessions result in a candle being overwhelmingly bullish or
bearish it probably means something

when a candle on the M1 or M5 prints a similar pattern it can be 10,000
times less substantial and convincing than the weekly time frame! - a blip
even

Today some very compelling setups on both Daily and Weekly.

Of particular note are currencies where there are confluent setups on both.

Short on-
GBPJPY 144.097
GBPCHF 1.26861
CHFJPY 113.386


A beautiful sample here of engulfing pattern on GBPJPY - I especially like
the confluence of ewaves - it's probably going into Wave 5 or something
- in my considered opinion

There are many conflicting schools of thought and I reject rules that just
plain don't make sense to me.

So currently here are my rules for EC patterns:-

Range of Signal candle must engulf range of preceding candle

The signal candle body does NOT need to engulf the body of the preceding candle however
the body (Close) must exceed the range ie High or Low, of preceding candle.

The Close of candle must be in the top or bottom 25% of range, the ideal close being
a 'Shaved head' where the close is equal to either the Low or High of candle. Some say
within 33% of top or bottom, - it may still be profitable but I'm looking for no ambiguity.
I use ammended Fib tool to check for below bottom 25% or above top 75% - makes life
much easier and eliminates error - This is an important rule, unless the Close is decisively
near top or bottom I cannot consider it unequivocally bullish or bearish

The Entry candle must exceed range of Signal Candle by at least 10 pips. If it is very much less
then I will hold back for another one or two candles and will be looking to enter as much as 30 pips
beyond the High or Low of Signal Candle. If nothing much has happened within three candles I
place the currency on my 'Watch List' but I would then need extra compelling reason to enter as
no Signal is relevant forever, - so ideally I want to see movement within the next one or two bars.

Exit - This is tentative but one Fund Manager managing ( on aforementioned video) at least $750 Million,
backtested EC patterns with NO S/R zones whatsover on Daily chart only and turned $10,000 into over
$2 Million. His strategy was to stay Long or Short until an Opposing EC pattern emerged and then simply
Close and Reverse. So an excellent example of letting winners run.

I believe he is genuine, and he wasn't even selling a service when relating this, but one thing didn't quite
ring true - Letting winners run on higher time frames is where the money is made, I already know that, but
he claimed backtesting over 11 years on EURUSD yielded 86% win rate. I have always associated very
high Win rates with only modestly winning systems and even losing systems that might win a little most
of the time but the rare massive drawdown all but wipes them out.

Usually, letting winners run in a trend following system relies on just a very few really big wins that just go
on and on, even though most trades might lose for a moderate loss. So even with a 30% win rate, with
most losers losing between 1% - 3% but some of the winners chalking up 10%, 20%, 30%+ you would
still do very well and $10,000 could be turned into $2 Million with compounding.

I would not expect this style of trading to return 86% winning trades or even anything like it. but I like the sound
of his approach albeit a little skeptical regarding the stats.

It will be interesting to put this to the test - something profitable is likely to come of it

Also very curious that a Fund Manager should recommend a Micro account so that you could risk
2% precisely on every trade, which you can't usually do on HTFs with a standard account

It makes mathematical sense but I didn't think anyone took PAMM micro accounts very seriously,
and I have seen Broker warnings to the effect ''This PAMM manager's Micro account allows him to take
extremely high risks!''

If there is one thing investors are not looking for its very high risks - indeed any risk at all!

but at any rate I'm quite sure that higher time frames, and letting winners run, is where long term
success in Forex trading is to be found

[kiravon]

Up well over 2% already.

I have long found Tuesdays the best day for entry
on HTFs, confirmed also by the Fund Manager
above

[kiravon]

Up 4% so far

To keep going until we get a reversed EC pattern
might be a challenge

normally I would target TZ1

4pc.PNG

[baldeagle]

WOW! I am trading it on Oanda's fxTrade penny platform. 8h I am up 1 cent! I will hold on until a reversal signal 3 weeks from now!

I continue to be amazed how we can all listen to the same webinar and come away with some different information. I will have to re-listen in lieu of your comments. The interviewer, Walter, said he was getting a 70% win rate using a similar approach. With all the distraction in my life right now, I probably need a KISS approach. I really appreciate your input.

Ed

[baldeagle]

Look at her go! I am up 3.05 cents! Check back in a week.

Ed

[kiravon]

Great Stuff! I'm 7% up with no risk now

But I've re evaluated much of that video. The guy said
he traded every EC pattern , many of which are in choppy conditions

No way 86% win rate!

I'm not waiting for a reversal EC pattern - that would be madness
although I would dearly love it to be as mechanical as that

More realistic is something like TZ1. I've passed TZ1 now but
I'm taking the grown up view that I might well be living on borrowed
time so have moved Stops now proportionally.

TZ1 is a great guide, along with RSI (period 3 ) very accurate, and
price action itself.

If you have made well over 200 pips and everything looks like it might be
reversing it quite possibly is!

Yes give the trade breathing space but after quite large gains surely
we don't want to give it all back

Its all about exit here

and no easy answers.

But the video was very motivating, and EC patterns are amazing when
the structure of the market is at least symmetrical, but you need to make
sure the Entry is well above/below the high/low of the Signal candle.

It is then at least in with a good chance of continuing on in that direction.

[kiravon]

Are you listening to what the market is telling you or are you only listening to yourself? The market ‘speaks’ its own language, that language is price action, and not only do you need to be fluent in the language of price action, you also must be able to apply what the price action is telling you in an objective and neutral manner.

Watching the price charts of any given market is something you must do every day if you want to really stay connected with that market and learn how to trade it. I like to think of following price charts like reading a book – to understand the story, you must read each page because what happened before will help you to make sense of what is happening now and where the market might go next.

How to ‘listen’ to what the market is telling you and apply it

Each day, at the close of the market you should check your favorite charts, it’s like reading a page of the market’s story for that day. You can see what happened, who won the battle between the bulls and bears and whether any price action signals formed as a result. It’s important to make this a daily routine so that you don’t forget what has happened and what the market is doing, otherwise, it will take you some time to get back into sync with the market’s rhythm.

When you look at a zoomed out daily price chart or a weekly chart of any market, it’s not hard to quickly see the primary direction that market is headed. This is going to be the ‘right’ direction to trade in, 90% of the time. Yet, time and time again, traders over-complicate this. Rather than zooming out, and getting a feel for the overall dominant direction of a market, many traders want to zoom in, further and further, down to minute charts, where they are basically seeing nothing but noise.

The most obvious direction is usually the right direction

If you remember nothing else from today’s lesson, remember this point: the most obvious direction is usually the right direction. What that means is basically what I said in the previous paragraph – the primary direction, from left to right that a zoomed out daily chart is moving, is typically the direction you want to look to trade. So, determining this direction is the first step of ‘listening’ to what the market is telling you. Don’t over-complicate it! Just zoom the chart out and see which way it’s generally moving from left to right.

This is how you read the market from left to right. It’s not hard, it’s just like reading a book, you need to understand where the market has been and where the key levels are to understand what is happening now and what it may do next…



Path of least resistance

We always want to trade in-line with the path of least resistance. In the EURUSD examples above, the current path of least resistance is up. So, that means we will look for price action buy signals on pull backs to support or value areas. The market will TELL YOU what the path of least resistance is, all you must do is zoom out and ‘listen’.

It only pays to be contrarian sometimes, not always. Don’t let your ego take over.
Whilst I am a fan of contrarian thinking and contrarian trading, everything has its exceptions.

It’s important to not become so contrarian that you are no longer listening to what the market is telling you. For example, if you get long on a breakout that ends up becoming a failed breakout, do not simply stay in the trade because you feel so strongly about it. If you do, you are no longer listening to the market, you’re listening to only yourself. A false break is a like a big warning signal and you need to listen and take heed of that signal, not ignore it.

In this way, price action can help you exit bad trades just as it can help you enter a trade. A massive bearish or bullish tailed bar against your position or false breakout as just mentioned, can often be a signal that the market is going to reverse, so if you arrogantly stay in a trade even considering such a reversal signal, you are not listening to or trading in-tune with the market, which is a very good way to lose a lot of money, fast.

Remember, trade what you see, not just what you think, and don’t get emotionally attached to any one trade. Trade in harmony with the market, not against it.

The importance of price action signals

As we are reading a market’s price action and ‘listening’ to what it’s trying to tell us, one big obvious piece of data that we need to pay special attention to, is a price action signal. Price action signals often convey very important information about a market and so we need to not only be aware of them and on the lookout for them, but understand what they might mean.

Perhaps the most important thing about price action signals, especially those on the daily charts, is to not be the proverbial deer in the headlights when you see one. In other words, don’t freeze up and (or) panic when you see an obvious price action signal, don’t over-think. An obvious daily chart price action signal can act as either an entry signal or an exit signal and is something you should always take note of either way. They are important clues in the ‘story’ the chart is trying to tell you and they can often help you figure out what the market is likely to do in the near-term.

Confluence – when you see price action signals at event areas or key levels, the market is telling you something.


Conclusion

As a beginning trader or as any trader looking to learn to trade with price action, it’s critical you understand how to read and interpret the ‘story’ a chart is trying to tell you. You do this by first learning to read the chart from left to right and then learning to interpret individual price bars. This gets easier the more you do it, but it is important you check in with your favorite charts almost every day so that you stay connected and in-tune with the market.

Eventually, you will begin to develop a trader’s intuition and when you see certain market conditions or patterns, you will simply ‘know’ what the market is trying to tell you, like a flashing light saying, “I’ve seen this before”. The journey of trading never truly ends, but if you are passionate about it, you will look forward to learning how to read the price action and learning to ‘hear’ what the market is telling you.

[kiravon]

Here is what I mean

I've passed TZ1 now and clocked up 250 pips on GBPJPY

It may keep moving down for a few more hundred pips
(not likely) or it may reverse back up past entry ( quite possible)

I can't possibly know

but TZ1 seems to be a very likely retrace or reversal zone here
and RSI may have bottomed as its starting to turn up

but whatever happens 250 pips isn't bad innings!

I wish it could be more mechanical

[kiravon]

Closed the week on 6.35% profit on two currencies
both opened on Tuesday although late Monday would
have been ok

but my trades I opened late THURSDAY are simply
spluttering around and not doing anything.

Like my very profitable Divergence system Monday
was best entry day and usually Thursday was more
Payday than Entry day

So this may still be the case as the guy on video suggests.

I will go on that assumption for the time being.

There may be a few selections next Monday/Tuesday

I may take them all if they qualify, knowing that over half
may need early retirement - you do seem to get a feel for
the complete non movers

As regard Exits

GBPJPY turned up at just past TZ1 and RSI well reversed up
to 25 level. Sure Sign!

GBPCHF is nowhere near TZ1 but price is breaking up through
RSI(3) 25 level indicating a reversal.

EURGBP looks ok and RSI pointing decisively across 75%
but nothing yet!

I'm looking forward to next Monday and Tuesday
My Entries are sound.

I need more clarity on Exits

[kiravon]

Last three trades +212, +173, -89

Opened Positions on EURGBP and EURNZD

Watching USDCAD, EURCHF, and GBPUSD

Also, I am recording every screenshot with commentary
to try to establish patterns of what works and what doesn't

So far, I believe trades opened early in the week are better
than trades opened end of week.

Also, TZ1 is a good guide for Exit when following trend.

Also RSI 3 is deadly accurate! - if you go short just as
RSI has crossed up over either 25 or 85 you are
likely going to lose short term