Any GBP/USD Pro's Here?

[Sledge 13]

I trade GBP/USD exclusively and wondered if their are any folks here that tend to gravitate to this particular currency pair.

 

I find it to be a much needed "old soul" in the Currency Market- Trading Yen is for the brave and thrill seeking, EUR seems to be the flavor of the day currency as every noob in the Forex Trading world knows it is where "the action is" CAD seems boring to most (not enough excitement) and the list goes on and on.

 

I gravitated towards GBP for it's consistancy. Just wondered if anyone here tends to trade it quite often or specialize in it?

Sledge

[torero 10]

I used to trade GBPUSD more often but eventually got attracted to JPY based pairs. Not sure why other than the fact that it moves more than the others. I mainly trade GBPJPY, EURJPY, and USDJPY.

[cowpip 10]

I gravitated towards GBP for it's consistancy. Just wondered if anyone here tends to trade it quite often or specialize in it?

Sledge

 

For a few years, particularly when I first started trading forex, I used to trade it exclusively as well. But I have learned that it's wise to keep your eye on more than just one pair (if you're able to). If your strat can handle the behavior of other pairs, you'll see far more signals if you monitor other pairs. I trade almost entirely on price patterns and very simple indicators such as fibs and known prior support and resistance points, so my strat is easily transferable between pairs.

 

Cable is a reliable old friend, but there are other pairs almost equally reliable. I have found that most of the yen cross-pairs are reliable as well and adhere to the technicals quite well. My personal favorite is eur/jpy (I call it the "yuppy"). It returns the goods day in and day out, on an intraday basis as well as on a longer-term basis. And as Torero noted, so does geppy (gbp/jpy) - although your risk tolerance needs to be a tad higher for that pair given the higher spreads and the larger moves.

[Sledge 13]

Well I am working diligently on mastering VSA- which would indeed lead me to be able to trade ANY currency or anything in the world for that matter so I'm sure I will get back to diversifying- I actually took a JPY/USD trade today for the first time in probably 6 months because I saw a good set-up this morning.

 

Cable, EUR and, CHF are rangebound right now- guess I needed some excitement as my Cable is in range-bound frustration hell for the moment.

Sledge

[torero 10]

One problem with VSA is finding volume in forex to use it. As Anna-Marie mentioned, volume is not complete, it's based on price ticks, not pure volume as we define it.

[cowpip 10]

One problem with VSA is finding volume in forex to use it. As Anna-Marie mentioned, volume is not complete, it's based on price ticks, not pure volume as we define it.

 

That's right. I wouldn't trust volume indicators further than I could throw them, particularly if you're a user of retail forex. Good point, Torero.

[torero 10]

Right now, I only trade on price action with S/R, no problem without volume. I use volume with index futures though. Somehow, forex just seems to be ok without volume since practically everyone is without volume info, so an exemplary level playing field I must say.

[cowpip 10]

Yep, use the tools that are best suited to the product you are working. The decentralized nature of forex prevents the computation of a true level of volume. Even price comparison's between brokers vary (and with some, they can vary quite substantially - I've seen variations of over 10 pips in some cases). But those are usually associated with less reliable retail shops.

 

We probably shouldn't be too quick to dismiss Sledge's strategy of using a volume indicator on forex if it's working for him. You use what works, and if you can find an edge using a volume indicator, then good for you! I consider many (if not most) of the indicators out there lagging in nature and therefore they don't fit in well with my own personal strategy. But for others, they form a fundamental basis and have led to success.

 

In forex, as in any other trading activity, you won't be successful until you can find your own "edge." If mastering VSA accomplishes that for some people, so be it. VSA can be correlated to enhanced volume in forex, although it can also give false signals. If someone can differentiate between the two, then that may formulate the basis of an edge. And that's all it takes to be profitable.

[Sledge 13]

BUT You can use your brokers TICK Volume because it is relative!

Say at any moment their are 100,000 contracts trading hands.

Even though your broker is not handling all 100,000 contracts- they will be handling a certain percentage- consistantly.

 

It is the same as taking a random sample in Marketing- if you don't have any specific demographic and you just want to know what the country is thinking on a topic (opinion poll.) You can take a random sample of 1000 people you see on the street. When you get the percentage of their answers- those percentages will be a good indicator of what the country as a whole would say- without having to ask every American their opinion.

 

So in essence one brokers tick volume will be on par with the market as a whole.

 

Sledge

[cowpip 10]

So in essence one brokers tick volume will be on par with the market as a whole.

 

That is unproven and is subject to considerable debate. That argument presumes that each broker's trading occurs in volume waves that are comparable to the waves of other brokers (and in particular, the volumes injected by the big dogs). I don't think that is necessarily true. It may be (I can't deny that it is possible), but it seems unlikely.

 

That would be similar to saying that the volume of shopping at Target will be similar to the volume of shopping at Walmart, J.C. Penny or Bon-Ton Stores. I don't think you can say that. Volume in forex varies from broker to broker. Brokers that handle smart money might see volumes that peak at times that are opposite to volumes that occur in the dumber-money retail markets.

 

So the way I see it, assuming there is a correlation in volumes is very possibly an incorrect assumption.

[Sledge 13]

Hmm, well I guess I never really thought of it that way cowpip.

 

So if we are to use tick volume in Forex- are we all pretty much out of luck to find a REAL basis of volume as the market is not centralized?

 

Anyone who trades forex and implements Volume into their strategy- what information (data source) is used?

Sledge

[Sledge 13]

Right now, I only trade on price action with S/R

 

Torero-

What is S/R?

[torero 10]

Sorry, S/R is support resistance areas; basically lows and highs of importance (weekly, monthly, and sometimes daily charts).

 

I use tick charts but it's not as a volume but as a speed and movements of the price change that gives me the clue of the action increasing or decreasing. It's like a floor trader listening to the intensity of the noise level to tell him if there's more action that leads to rapidity of price change. I use it gauge but not as a volume indicator.

[Sledge 13]

Torero-

Ahh of course support/resistance. Drew a blank for a second. So is it safe to say you use price action as sort of a way of determining momentum?

 

You just exit trades at support and resistance levels from the left of the chart?

Sledge

[cowpip 10]

So if we are to use tick volume in Forex- are we all pretty much out of luck to find a REAL basis of volume as the market is not centralized?

 

Yep, I'm afraid so. There's no way to compute true volume. At least, none that I'm aware of.

 

Ahh of course support/resistance. Drew a blank for a second. So is it safe to say you use price action as sort of a way of determining momentum?

 

You just exit trades at support and resistance levels from the left of the chart?

Sledge

 

Sure, price action can provide you with an indication of momentum. But for me, reading price action gives you clues as to what price will do in the immediate moments before it actually occurs. For example, a candlestick inverse-hammer at the top of a resistance zone on the longer time-frame charts (hourly+) is generally a good indicator of a reversal. But if you drill down to the faster time frames, you can pick off similar great reversal patterns at these significant S/R zones that will bring in the goods regularly enough to make you quite happy - and long before an hourly candle closes to reveal an inverted hammer at resistance.

 

There are many different types and nuances to reversal patterns. Continuation patterns are also extremely important, for they can help you determine whether momentum will rule and continue to push price in your direction or not.

 

Unfortunately, I don't know of any way to learn price patterns without actually spending googles of time at the screen, watching. Screen-time is incredibly important, as is familiarity with the currency pair you're trading (they all have more-or-less, their own personalities). A lot of people rely on black-box algorithms to earn their bread, but just as the quant-funds performed horribly when the market went askew during the credit crunch last fall, black-box algorithm's will likely consistently fail to return profits when the market gets moody. But price action doesn't (usually) lie. If you can learn to read the market through price action, you'll be able to adjust as the mood changes. As sophisticated as computer algorithms have become to trade forex, I still believe the 'ol trained human brain is better equipped to navigate the markets than a machine will ever be.

 

I should add that the S/R zones are used as take-profit / scale-out zones and/or add-in zones. So yes, we basically just look left of the chart (but on the longer-time frames, as shorter time frames don't usually represent reliable S/R zones) and find those zones where prices have had a hard time getting through. If they are confluent with some major fib levels, that will add further bias towards trading off of those levels, provided price action gives the nod.

Edited February 21, 2008 by cowpip

[Sledge 13]

Cowpip-

Thanks for that very in-depth post, I think I'm in the same camp. I have started to focus back on the basics- Chartreading.

 

I think that one can get so overwhelmed when you start trading that everyone out there touts they have a "magic system" "holy grail" or blah blah blah. It is easy for folks to get sucked into using indicators that lag like hell as crutches to success.

 

Long of the short I have learned in my trading time is this: If you can read a chart- and know what it says, all the other B.S. fades away. I read a great article at one time that stated "Your trading platform should have your chart of your intended trade and possibly a volume indicator- that's it" It was a stock article so the Volume comment would have been relevant.

 

I remember when I started I had a chart, Alligator running over top, a Stoch indicator and others- anyone not in this game would have looked at my screen and run scared. It looked a mess!

 

But you are indeed correct that screentime is the best teacher you can have-people have a tough time just watching though- they see this action going on and think "I'm missing out- I gotta get in there" Just as they hit that buy button- the market read your mind and knew you just couldn't stand it any longer and boom- they yank the rug out" Learning to go back to basics and just learning to read a chart- has done wonders. It is a hard road- but as they say- nothing worth having in life comes easy- or everyone would do it!

Sledge

[cowpip 10]

I remember when I started I had a chart, Alligator running over top, a Stoch indicator and others- anyone not in this game would have looked at my screen and run scared. It looked a mess!

 

Unfortunately, I think everyone has to run through that gambit of experimenting with different indicators that look promising, but prove to be less than worthwhile. Some indicators are useful as guides, but none that I have encountered have any predictive ability. Only price action tells the truth - although even price action can contain fake-outs. Only experience and lots of real-time screen-time will give you the power to discern the fake-outs from the real thing. And no matter what anyone says, even the pro's get conned now and then. It's an inevitable cost of running this business - you'll get burned once in a while. But the more you work this business and the longer you stick with it and really try hard to understand it, the less frequently you'll get burned until a point is reached that most of your trades work out.

 

Most of the pro's out there believe that simplicity works. And it does. Simple trading strats, strictly adhered to, are often the most successful and are the easiest to adapt to changing market conditions. Thus, uncluttered screens are often of greater worth than screens filled with indicators. A screen full of indicators promotes confusion. Simple strats and uncluttered simple screens are the way to go.

 

But you are indeed correct that screentime is the best teacher you can have-people have a tough time just watching though- they see this action going on and think "I'm missing out- I gotta get in there" Just as they hit that buy button- the market read your mind and knew you just couldn't stand it any longer and boom- they yank the rug out"

 

Isn't that the truth? The market is heartless. If you want to maximize your profits and minimize your losses, the two most important factors that will yield success is: patience and discipline. There is nothing more important. Without patience, you'll suffer losses left right and center for exactly the same reasons as you stated above. Without discipline, you will deviate from your edge that is your strategy and will take entries that are not Grade-A. As a result, you will expose yourself to unnecessary losses or trades that do not last as long or run as far as they might otherwise do. Without discipline, you will also hesitate when that Grade-A opportunity presents itself and will either fail to push the order button in time (exposing yourself to unnecessary risk by entering too late) or miss the boat entirely.

 

Time and experience have an interesting consequence. A time comes when your heart stops beating irregularly when you enter a trade and you trade only what you see, and not what you feel. You become more mechanical and better tuned to the rhythm of the market. In addition, losses do not bother you as much, which makes it easier for you to identify quality entries even if you've recently suffered a loss. Losses, unfortunately, are just a part of life in trading. But the more time you spend studying, practicing and (most importantly) reading the charts (preferably in real-time), the more immune you will become to losses.

 

Learning to go back to basics and just learning to read a chart- has done wonders. It is a hard road- but as they say- nothing worth having in life comes easy- or everyone would do it!

 

Excellent observation, Sledge! Yes, it is (for many) the hardest road they will ever travel in their entire life. But the rewards are even more lucrative and welcoming than the difficulties encountered during the travel down that road.

 

The single most important reason why people fail in forex is simply due to their lack of perseverance (or patience). When I first started trading forex, I can't tell you how many times I told myself, "Forget it - this is impossible to do! I'm losing too much money and every strat I try fails to work consistently enough to make this business profitable."

 

Similarly, I can't begin to estimate how many different types of strategies on a myriad of different time-frames I have tried. Even with mentoring from true-professionals, I deviated from what they told me to concentrate on and tried a multitude of failing ideas. As time passed, I began discovering on my own that what these true-professionals had been telling me all along were true. Patience and discipline really are key. Everything hinges on those two words. But in order to make them work, profitably, you must find your own "edge." And almost everyone has a different opinion on what defines their "edge."

 

When you're first learning forex, what you conceive as your edge will change with every new appearance of the moon. That's normal because learning to trade forex is difficult (perhaps more difficult than anything else people will try to learn) and it takes a lot of time and experimentation to find the edges that really work. You'll trade one particular strat and see success a few times and receive positive reinforcement in that strat. But then you'll suffer several losses and lose confidence. That lost confidence will open you up to ideas you hear from other traders or will outright cause you to search for a different strat. When found, you'll try that strat for a while and discover the things that work and don't work with it. For many, it takes years of time of flip-flopping from one strat to another. But for those with sufficient patience and are careful enough with their capital to avoid exhausting it, the payoff almost invariably comes. A time is finally reached when, somehow (and for many, an almost inexplicable "something" you just can't put your finger on to define), you find something (a particular way of trading) that just seems to resonate and work well with your personality. And when that time comes, it is the most sweet feeling you can imagine! When you achieve that realization, you have matured as a trader and have graduated from the rank and file of "newbies" to a more level playing field with the pro's.

 

I personally believe anyone can achieve this. But it really does take someone with the patience, perseverance and guts to stick it out to the end. Someone with an attitude of, "I'm going to keep getting back on this horse regardless of how many times I get bucked off, until I learn how to stay on it no matter what," is liable to make it in this business. If you don't have that resolve, you probably won't last through the training period. The cost is emotional (and for some) financial turmoil. But as I said, the rewards (which include a renewed and entirely different look on life) are far sweeter than the cost.