thalestrader

Well, in the context of this thread your statement sounds rude. As a new TL member, you ought to extend us the courtesy of reading some of the thread before making your statements. Plenty of threads here and elsewhere though ... go find one that fits you better. This is not it. Thank You, Thales

Have you read any of this thread before posting, or have you just wandered in from ET? Best Wishes, Thales

I hear what you're saying Beachtrade. But the EURUSD looks very attractive to me for a long at these levels. I would not be surprised by a rally toward 1.4450 before the EU makes another try at lower lows. Any other day of the week and I would have no qualms about a 6E long. Best Wishes, Thales

Most people need the extra $4500 to cover their losses! I have a friend who starts each month with 8K and trades the TF. Based on some things I have read in various forums, he should have at least 80K in his account to trade the size he puts on. Best Wishes, Thales

It's still taking off for you Cory! Best Wishes, Thales

Current look of the EURUSD ... Best Wishes, Thales

The targets are usually 1.618 and 2.618 of the Low to High as measured from the Higher Low. I will often place my actual target 1-5 ticks inside the fib level, and of course, actual S/R always trumps fib levels for me. For that reason, the targets applied in this example were the 1.27 and the 1.618. Entry would have been a buy stop at 1.6293 basis the spot, stop loss 1.6247, with targets at 1.6347 (+54 ticks) and 1.6376 (+83 ticks) for an profit on the trade of 65 ticks versus a risk of 46 ticks. I usually only take a trade if the first target offers at least a 1R profit. Best Wishes, Thales

As nothing is guaranteed, there is always risk. As there is always risk, we need to be aware of how to manage that risk. We all know that every trade one takes with this approach, if applied how I have presented it, has a stop loss and has at least one, usually two, and sometimes three profit targets. This is, of course, part of managing your risk. However, I have mentioned position sizing, and I have been sharing Van Tharp's articles here in an attempt to show how one might use bet sizing to maximize the benefits of minimizing one's risk. Let's look at two trades, both long sequences from last night, on the EURJPY to see what I am geting at with respect to position sizing and how it can help your equity curve. This first long sequence did trigger, and the result, assuming an either 1st target or full stop loss management, would have been a -33 pip loss. The second long sequence also triggered, and this trade hit both targets, +24 and +53, for a +38.5 tick profit. So a net profit in pips of 5.5. Not a bad night, but certainly nothing to write home about, right? Here is the chart showing both of the trade sequences: Now, here is what is interesting. I have been trying to introduce the subject of money management through position sizing here, and in other threads kiwi and Blowfish have been discussing expectancy and risk of ruin. Let's look at how position sizing/bet sizing can help smooth your equity curve while helping to minimize your risk of ruin by looking at how position sizeing would have affected your result last night. In trade #1, the initial risk was -33 pips, the two profit targets, averaged together (50%PT1 + 50%PT2) was 49.5 pips ([(29+70)/2]). In this case, had you placed the trade and not moved your stop, your loss was -33 pips. Now, applying position sizing to the trade, assuming a $500 micro fx account and a 2% max bet size, here is how the trade plan would have looked: You would bought 3 micro lots (3K) and your risk would have been $9.90 and the potential reward $14.85. The result, of course, was a $9.90 loss. Let's note that the leverage, in this case, would have been 5x's equity ($3000 trade size/$500 account). In the second trade, the intial risk was 19 pips, and the two profit targets, averaged together, were 38.5 pips ([24 + 53]/200. Using the same assumptions, we'd be trading an account equity of $490 (after taking the 2% loss on the first trade. Againb risking 2% of current equity, here is what the trade plan would look like: In this case, you would have gone long 5 micro lots (5K) and your risk would have been $9.50, the potential reward $19.25, with the result being a $19.25 profit. Let's also note that the leverage in this case would have been 10.2 ($5000 trade size/$490 account size). While leverage increased, risk, as managed through psoition sizing, remained identical with respect to %equity at risk. Leverage, divorced from considerations of position size, kills. Leverage, controlled through position sizing, is a blessing to your equity. So, while you only netted 5.5 pips out of the two trades, you managed to finish the night up almost 2% on your starting equity after having suffered a 2% drawdown on the first trade. Using position sizing for your money management regime can be made even more powerful if you were to filter your trades so that you'd only take trades where price going to the second target would result in a 2R trade. In such a case, the first trade would not have been taken, as the potenital reward was only 1.5R assuming both targets were hit. If you trade only for 2R rewards while always keeping your bet size as a % of equity the same, you will have a mechanism in place to increase bet size while keeping risk stable as measured as a % of equity. There are other considerations, as well. For example, is 2% of equity too much (or even too little) to maximize the results of your trading appraoch. And while position sizing will slow the bleeding of a negative expectancy system, it will not prevent the inevitable ruin that comes with negative expectancy. I'll leave any discussion of expectancy to those such as Kiwi and Blowfish - and I welcome those discussions here - this thread should be a "total package" discussion. By this, I do not mean that this approach can be "all things to all traders." Rather, I mean that I would like for it to offer a comprehensive view of a trading approach - and that means money management and psychology in addition to the technical considerations of identifying trade sequences and placing stops and targets. I will keep bringing up position sizing as I think it is a crucial element to a well managed trading account, regardless of the size. It is also a tremendous psychological tool - do you recall Larry Hite's interview in Market Wizards where he says all his trades are the same to him: Each is a 2% bet. There is no need to get excessively nervous or to put too much emotional stake in any one trade if each trade is a 2% bet. Every trade should be the same, whether it has a 10 tick stop loss or an eighty tick stop loss. If the required stop loss would result in an unfavorable risk reward profile (greater than 2% risk at the smallest available size, less than a 2R reward if full targets achieved) then you skip that opporuntiy. If you can make it so that all your trades carry the same risk, then, as you experience losses and see no long term damage to your account as a result of thsoe losses, losses come to matter less and less. I could go on, but that is enough to get folks thinking about this a little more than perhaps some here have. Best Wishes, Thales

GBPUSD looked as though it were willing to go either way last night. Once it broke the area marked by the blue lines, it went to target. There were downside targes as well, but at the time I thought that the likely direction was up, so those were the targets I marked off in greem. I wasn't making a call - just following price along and responding to what it was showing us. Neither I nor my daughter traded this. We were just having fun watching. Best Wishes, Thales

GBPUSD ... keeping an open mind ... Best Wishes, Thales

If I were the kind of guy who bet on such things, I'd be inclined to bet up. Best Wishes, Thales

Great fun, indeed! Best Wishes, Thales

I wasn't planning on any trading until Tuesday. The girls have no school, so we were going to going to go to a science museum. I could tell by the look on my oldest daughter's face that she was not entirely thrilled with the idea. I asked her what she would like to do. Immediately she had a big smile and said, "I want to trade!" So who knows. I won't be trading futures, but I may be sitting here watching her trade. Anyway ... the GBPUSD sure looks like fun! Best Wishes, Thales

It's almost as though your mind wants to fill in the rest of a decline that's yet to come, isn't it? Best Wishes, Thales

As the pullback deepens, the sequence still lives, but I adjust my stop and targets based on the swing size and pullback depth. By the way, I am long Jets. Best Wishes, Thales

Ok. Best Wishes, Thales

Here is the current look at the EURJPY. What is clear to me is that price has made a low, price has rallied off that low in an impulsive manner, and price is now pulling back from the rally high. This, what is clear to me is that price has done everything it needs to do to present a possible long sequence. It is not guaranteed to trigger before price prints a lower low. It may test the session low and then trigger. It may make a lower low and reset the game clock, so to speak as there would no longer be a long sequence, but a further downtrend confirmation. If it triggers, it is not guaranteed to go to the first target. If it triggers, it may immediately reverse and fall to new session lows. But, it is nonetheless clear that at this moment in time, everything is in place to get me long if price makes a new session high. Price has tested last week's low and found immediate support at that low, and price has a L-H-HL sequence potential at this point in time. Nothing else is guaranteed. Best Wishes, Thales

I am not sure how we differ other than that you seem to have some criteria as to what makes a trend change sequence that I do not hold. The term "123" has become a sort of easy short hand as this thread has progressed. But early on I used 123 to refer specifically and only to a reversal of the Trader Vic variety. Later in the thread, when I first posted the chart where I spelled out the highs and lows, I referred to those price indications that I trade as "sequences." I would perhaps prefer that we use the phrase "short sequence" and long sequence" rather than 123, but that is not the root of the problem here. What I am saying is that H-L-LH (short sequence) or a L-H-HL (long sequence) can manifest itself at varying degrees of trend. By degree of trend, I am referring to extent or magnitude of price movement when price is followed as a continuous flow of activity (time is also a factor, though on the degrees of trend that manifest themselves intraday, time is much less a factor than when considering larger trends). I think you are concentrating on price as blocks of activity that exists in discrete units known as bars. You see inside bars. I see chop zones (chop zones, like the trade sequences themselves, exist at all and varying degrees of trend). I do not advocate trading all such sequences, especially those of small degree. But if price is at an anticipated level of S/R, I often take a shot. As I have said, folks should take a week or two to do nothing but paper trade these sequences, identifying H's and L's. Perhaps I was a ssuming that from such an exercise wone would come to distinuish how price acts when a move has exhausted itself and this when to act on thse sequences or not. I think it has worked for some. But it has not worked for others. I do not know what to sugest next. I suspect that if this approach is not working for you, then there ,may be something in your experience that is preventing you from making it work,. Best Wishes, Thales

I was thinking more of a business objective statement rather than a book. Assuming your goal is indeed to profit from your operations - what sort of profit do you expect and how would you like to acquire it? At the very least you might consider pondering those for a while, even if you think initially you already know the answers. There is something beyond mere technical considerations that is causing your difficulty, MK. I truly do believe the answer to your quandary is within you, and not ina anything I can do or say technically about the maner in which I trade. You have to be willing to work on yourself. There are other points in you post to which I will have to respond later. Best Wishes, Thales

At one point during my early trading years, the thought occurred to me that I have lost more money trying to be early while I have often made out very well when I have been "late" entering a move. This approach is really meant to help you "be late," i.e. enter after price has indicated a reversal of some degree is starting. Being early is far more dangerous than being late. The problem is to overcome the bias that says, "why would I want to sell it here when I could have sold it higher," or "I'm not going to buy here, its already up so much." We all want to buy the bottom and sell the top, and yet the easy money to buy after the bottom or sell after the top is confirmed. By the way, rcossey, What are you trading (sorry if I missed it)? Best Wishes, Thales

Excellent post, Sevensa. Nothing helped me along more than when I came to appreciate the concepts you so clearly set out here. Too many focus on winning. What they need to focus upon is making sure that when they win, they win at large enough multiple of their losses so that over the long haul, profits outstrip losses. If I had to lose $1000 50 times to win 100K once, I'd be quite happy with that winning percentage. Of course, I may not have the stomach to sit through that draw down. But th epoint is the point. Best Wishes, Thales

Thank you! I know how much work goes into a good series of posts like you gave us this morning. I am thankful to have someone like you here in the thread helping others. Best Wishes, Thales

Indeed! Best Wishes, Thales

Actually, there really is only one way. A few different paths lead to the same right place; and many more wrong paths exist to lead to ruin. Thank you for sharing the word document, by the way. At first glance, it looks like it describes one of the few right paths to the right place. Best Wishes, Thales

Is it that you think them not clear, or you think them too insignificant to warrant trading off of them? After all, the very definition of trend and what it means to change trend direction demands the presence of a 123 at the point of the turn. Even a "V" bottom has a pullback that prints the first reall higher low. You said that you did not agree that every trend change does not start with a a 123. I think you must mean, even if you are not aware that this is what you mean, that not every trend change commences with a 123 you would consider tradable. This simply means that you have developed some criteria by which you "filter" your interpretation of price action. That is fine. But you need to recognize that you are doing so, and if you are not aware of what those criteria are, you need to try to figure it out for yourself. But every trend change starts with a 123. And every trend is a cascading of 123's in the same direction (except for a sideways trend, which is either a series of 123's alternating in direction, or a series of alternating HL's and LH's (coil, hinge). What I think you are saying is that there is a size or degree of trend change that you think is optimal, and not every trend change seems to offer a clear opportunity compose of the size swings you prefer to trade. I may be wrong, but I think I am not. But they do go somewhere, I guarantee it! Its just you have to learn what to expect from a swing sequence depending upon its magnitude. I have made no secret that I use fib expansions for my profit targets. Why? Because it idiot proofs my trades (me being the idiot) from expecting too much from a particular trade. Of course, this means I sometimes am taking profits while the move is just about to pick up a head of steam. You have no idea how many times I bought right off the very bottom or sold near the very top of important trend reversals, and yet because of my profit strategy which assures that my profit targets are reasonable for the swing sequence I am trading, I lose my position while watching price move vast distances in short periods of time without me. but hey - "thems the breaks." This is the statement that led me to write all that came before. Of course you require volatility. We do not get paid without it. But it seems to imply that you are looking to get something out of your trades that can only be had infrequently. If you were to press me what I think is criss crossed in your trading, my best current guess would be that you want trendfollowing type profits, but you want to get them on a time frame that minimizes your participation in the market. Again, I may be wrong, but before you dismiss my musings out of hand, why not consider them for a few moments. While I may be wrong about the specifics, I am right (as are you) that something is wrong. Let's try to think it out for you. The answer is not in me, MK, it is in you. You understand what I mean about degrees, yet I do not think you understand what I expect from trades based upon swings of various sizes. What do you expect to get out of trading, MK? I think that may be a good question to return to if you are to move forward. I mean this sincerely and in a helpful spirit. I hope you receive it as such. Best Wishes, Thales