tradecopy

Again, please notice that, everything I talk is on the base of Daily and Weekly chart.

Critical break-out: When prices moves through 38.2%-50% of previous trend very quickly, it means the changes of the trend. No transition any more, but from one trend to another trend.

Range: if prices moves in a range for more than a month, this is also a signal

Daily Reversal, Weekly Reversal, Hammer candle another warning signal: the candlestick pattern

Moving averages, trendlines, Fibonacci Ratio: the warning signal from trend to transition: break MA 14, break trend, hit the 23.6% of previous trend.

Volatility: At the end of the trend, Daily volatility would be larger than that of break day. Especially when the candlestick with high volatility is against the trend.

Duration: Usually, the time the prices needed to move to the minimum objective is 1/5 of the duration of the trading range.

Height of the Trading Range: Usually, we use the height of the range to measure the minimum price objective.

in last post, we talked about the market actions. we know that markets move in three directions:Up, Down or Sideways. Most of the time, most changes in trend are not very abrupt affairs, the fact is that important changes in trend usually require a period of transition. it is these periods of transition that will be talked in next posts. we all know that after a particular market move, prices retrace a portion of the previous trend before resuming the move in the original direction. the best known application of the phenomenon is the 50% retracement. so, that means, during the trading range, prices would move in the range of 50% of previous trend. and now, the question is , how can we identify the changes of the trend at the beginning of the transition ? there are some tools we need: height of the range, duration, volatility, moving averages, trend lines, Fibonacci Ratio, reversal day, reversal week, hammer candlestick, range, critical break-out.

Short GBPUSD @ 1.5592

Hi illcrx, thanks for your reply. this system is not only used in stock market, but also any other financial market. Volume is very important in stock. but in forex trading, people can not get any information about volume. I will talk about this later. this is for the new trader, so, let's make the things step by step. Thanks again. Best wishes

last post, we talked about Money Management, so, we all know how to survive in this market for longer time now. now, we will get to learn how to get some profits from the market. we often hear such familiar expressions as 'always trade in the direction of the trend," "never buck the trend," or "the trend is your friend." right, the concept of trend is absolutely essential to the technical approach to market analysis. all of the tools used by the chartist---support and resistance levels, price patterns, moving averages, trendlines, etc.--- have the sole purpose of helping to measure the trend of the market for the purpose of participating in that trend. Most people tend to think of markets as being always in either an uptrend or a downtrend. the fact of the matter is that markets actually move in three directions- up, down, and sideways. it is important to be aware of this distinction because for at least a third of the time, prices move in a flat, horizontal pattern that is referred to as a trading range. so, in fact, markets move in a cycle: from trend (up or down) to trendless to trend (up or down) again. Again, the trend I talk about is at least in Daily Chart. so, the problem now is that: how can we know if the markets are in trend or trendless ? we will talk about this problem in next post. Best wishes

I think before you start to trade, you should read this book first: Technical Analysis of the Financial Markets by John J. Murphy you will get useful information to start your trading life. hope helpful

For this account, initial balance is US$ 3548. I short EURUSD @ 1.3643 this morning, SL 1.3800, TP 1.3344

In this thread, I will post some of my trade record, and give some explanation to these trades. after the down trend in Sep, the market tend to trade range in Oct. so, in this month, we do range trading. find the support and resistance in the pic below. Buy when price in the support area, stop loss is the last low point. Sell when price in the resistance area, stop loss is the last high point.

before a new trader start to learn trading skills, there is something much more important he need to know. that is: Money Management. for a new trader, what is his first expectation in this market ? double the account or find a good system ? no, no, no. the answer is: to survive in this market. everyone knows that trading is high risk, 90% traders are loser. but it is strange that everyone believes that trading can make him be rich very quickly . but the fact is that new traders always lose his first account very quickly. first, let's see a example, still take the coin toss as a example: for this game, obverse side, I win $10, and reverse side, I lose $2. let's play 10000 times. so, what's the result ? as we know, for this game, the winning rate is 50%. so, I would have 5000 times win and 5000 times lose. then the profit should be 5000*10-5000*2= 40000, right ? so, what makes me win in this game ? 1. enough trades to get the real winning rate. in this game, I have 5000 times lose. so, just think about that, what would happen if I meet the 5000 times loss in consecutive ? this is possible. 5000 consecutive loss, and then 5000 consecutive win, the winning rate is still 50%. so, you must control your loss for each trade to make sure that you can survive from the 5000 consecutive loss. 2. control the frequency of your trading as a new trader, you'd better do only 1 trade every week, and no more than 7 trades every month before you know how the markets move and get your own weapon. for new trader, you need be patience to spend much more time on learning. the first step for you is to survive in this market and learn how the markets move. the more time you live in this market, the more experiences you get, the more chance you could win.

not good. I delete this post. will rewrite it

I must clear that I'm a long term trader. the chart patterns I talked about are all on daily and weekly charts. to get the real winning rates, there are two things you must pay attentions to: 1. the larger the pattern, the greater the potential. when we use the term "larger", we are referring to the height and the width of the price pattern. the height measures the volatility of the pattern. virtually all of the measuring techniques are based on the height of the pattern. and the width is the amount of time required to build and complete the pattern. and in my chart, to be a good pattern, it would take at least 1 months or more to build a potential chart pattern. the more, the better. 2. live in this market as much as you can to get the real winning rates. please notice that, I mean the REAL winning rates. then, what is the REAL winning rates ? let's take the coin toss as an example. everybody knows that there is a 50% rate to win in a coin toss, right ? then, let's play this game for 4 times. with 50% winning rate, could you always have 2 win and 2 loss ? of course not. but if we play this game for 10000 times, then, the winning rate would be very close to 50%. is this clear ? so, for the winning rates in my last post, 50% is the bottom line. but the question is, can you live long enough to get the REAL winning rates ? that's what I will talk about in next post, about Risk control and Money Management. Hope helpful Best wishes

Hi Billy, thanks for asking. before tack testing, you should know in which markets your system could do a better work. the markets move in a cycle: from trend to trendless to trend again. so, it is important to know if your system is trend following or range trading. then, have you ever heard of trade simulator ? use this for back testing. and the most important, be objective. our goal is not to develop a system that achieves the highest returns using historical data, but to formulate a sound concept that has performed reasonably well in the past and can be expected to continue to perform reasonably well in the future. Hope helpful

certain chart patterns have certain winning rates: head and shoulders: 50%-80% double tops and bottoms: 50%-70% rounding patterns: 70%-85% triangle patterns: 50%-70% for those rates, I'm talking about these patterns in the weekly and daily chart. and also, for certain chart patterns, we have the certain method to measure the minimum profit target. so, winning rates are certain, Stop loss are certain, minimum profit target are certain. then, we set A=(minimum profit * winning rate)/ (stop loss * losing rate) before we open a trade, we should calculate what the A is. only when A>2, we open trade. if not, give up this trade. and i do believe that some experienced traders could get profits from the system you refer to. but it is not good for the newbie. when a newbie met a consecutive 40 losing trades, are you sure he still has the courage to open the 41st trades ? for the newbie, the first expectation is to survive in this high risk market.

Hi, spearpointtrader, thanks for your reply. I already include the monetarily and win loss ratio. in winning, profit larger than 40% in loss, loss less than 20% winning rate larger than 65%

Everyone knows that trading is high risk. Imagine yourself to be a soldier, who is your best friend to make you survive in the battlefield ? right, Weapon. then, do you get your weapon ? if you do, just stick to it. but if not, how to get your own weapon ? or, how to build your own weapon ? there are some steps you need to do: 1. Start with a concept This step is the most important in this plan. Because the concept will be the core of your trading system. Develop your own concepts of how markets work. You could read about trading systems and study what others have done, there is a great deal of useful information out there. But most importantly, think for yourself. In general, you should know what you would use to win in this market, chart pattern ? Elliot wave ? or something else. 2.Turn your idea into a set of objective rules. After you have your concept, you should determine what your system is supposed to do and how it will do it. it is with this step that you produce the details needed to accomplish the programming task. You need to take the overall problem and break it down into more and more detail until we finalize all the details. Let’s see an example: A trader trades with chart pattern break-out. Following are the question he should answer: a. Which patterns he would use ? b. In which timeframe ? c. How to confirm the break-out ? d. What about the markets actions after the break-out ? how to add-positions according to those actions ? e. How to measure the duration of the trend after the break-out ? how to track the trend and take profits ? f. How to choose the best chart pattern when there are two or more patterns during a certain time ? g. How to decide the positions according to the quality of the chart pattern ? h. How to monitor himself ? 3. Historical test on the charts. Following the rules you just determined in step 2, let’s check the trading signals that arer produced on the charts. We want to see whether our idea has been stated properly, and also, we want some proof that the idea is a potentially profitable one. There are some standards to check: a. During periods of winning, profits are larger than 40%, Drawdown is less than 10% b. During periods of losing, losses are less than 20% c. Winning rates are larger than 65% so, after the 3 steps, we know exactly how we are trading. yes, we get the weapons. but, does it mean that we are ready to hunt money in the market ? Not exactly ! the weapon is only part of the trading system. (to be continue.....) PS: sorry for my poor english. I'm not sure if you could understand what I post. if not, please let me know. Best wishes