Reading Charts in Real Time

[thalestrader 14]

I markd the targets in the previous post.

As far as moving my SL, I would wait for a minor swing point to materialize and then move the SL to the PEAK or the TROUGH of that swing point (for the SHORT and LONG trades respectively)

 

Gabe

 

By then you may have a profit that you have allowed to run to a loss. Unless you are trading off of a larger swing at a major S/R and playing for big targets, I suggest that you start to develop a "rip cord" mentality where you get out with your skin intact as much as possible.

 

I have twice referred to two posts by Bakrob99 in another thread where he discusses his approach. He does something very similar to what I do. Take a look at his posts and study them, don't just read them. There are bits and pieces of a strategy there that may help you.

 

If the GU goes short, watch price at 1.6542 should it get there. I'll see you in NY in the AM.

 

Best Wishes,

 

Thales

[TrueBalance 10]

This is what I am looking at right now (just observing). Would move stop to B/E at 132.59.

[Kiwi 16]

I was just looking at it, as it was a couple of hours back and thinking ... yep, and with the trend too. And then I remembered to connect my forex Sierra Chart to the data and I see you're probably very pleased with the trade already.

 

Even looks like its cutting through he 123.44 support. Nice trade TrueBalance.

[MidKnight 12]

It was indeed a good trade idea, but I believe it would have been ticked out at BE.

[BlowFish 10]

 

......Instead of thinking of it as overhead resistance what about reversing that and thinking about it as an overhead magnet......

 

This seems like quite a small thing but it is quite profound in it's implication. If you believe markets are there to facilitate trade and move around to seek out liquidity then this is not such a stretch. This can still fit well with other paradigms like supply & demand or auction market theory etc. At the very least it can give some confidence in the method for establishing targets that has been presented here.

[MidKnight 12]

I'm done here for the night as the frustration is eating me up. 3 losers tonight totaling 6 losers from 6 trades for the week.All of tonight trades were 'with the trend' trying to short the pound. Yeah sure, all the losses were tiny but that won't help get profitable if one doesn't get a winning trade.

 

This style of trading I'm finding extremely complex as there are so many subtleties that I cannot get any traction mixing them altogether. One would think that using a simple method, some traction could be gained within 4 weeks, but I'm just not seeing that - especially this week. I can go counter trend and lose money fast, I can go with the trend and lose money just as fast - the concept of trend just seems irrelevant to results. The concept of cutting ones losses fast is too difficult to execute in real-time. I'm exiting every trade too fast and all for small losses, its meaning I don't get any winners. Forex usually is moving slow and doesn't give me the same pace I would get on index futures to try and feel a valid break. The entries I'm taking are mostly leaving me to enter on the minor false breaks. Simply buying high and selling higher or vice-versa is not the key to success with this method - it is complex, but the complexity is undefined and fuzzy (intuitive?), and thus, so is how to succeed with a style such as this.

Edited November 24, 2009 by MidKnight

[Gabe2004 10]

By then you may have a profit that you have allowed to run to a loss. Unless you are trading off of a larger swing at a major S/R and playing for big targets, I suggest that you start to develop a "rip cord" mentality where you get out with your skin intact as much as possible.

 

I have twice referred to two posts by Bakrob99 in another thread where he discusses his approach. He does something very similar to what I do. Take a look at his posts and study them, don't just read them. There are bits and pieces of a strategy there that may help you.

 

If the GU goes short, watch price at 1.6542 should it get there. I'll see you in NY in the AM.

 

Best Wishes,

 

Thales

 

What was so meaningful at 1.6542?

 

Gabe

 

BTW my potential long from last night ended up witha loss.

I am not sure, had I been awake, would I have moved my SL higher to lose less than the approximately 16 pips that this trade would have resulted in in real time.

 

Gabe

[thalestrader 14]

What was so meaningful at 1.6542?

 

Gabe

 

 

There were a few things coming together based on different time frames, etc that led me to believe that 1.6542 and 1.6518 would possibly see reactions. Price treated 1.6542 as an almost non-event as it bounced very weakly and very, very briefly there. 1.6518 proved to be somewhat more significant, but even that bounce resolved to lower lows before setting the low launch for this rally.

 

Best Wishes,

 

Thales

[thalestrader 14]

BTW my potential long from last night ended up with a loss.

I am not sure, had I been awake, would I have moved my SL higher to lose less than the approximately 16 pips that this trade would have resulted in in real time.

 

In real time, in my opinion, your long trade should probably not have been taken, but if it were takene, it should have been no worse than break even as after entry, price rallied back to the prior breakdown point. Everyone knows the old saw, "Prior support is now resistance." In fact, depending upon your broker's spread you were likely buying that test. At our broker, the buy stop would have been 1.6578, and the breakdown point was our sell stop at 1.6584. So there was only 6 ticks between the entry and the point where your stop should have moved to break even. As you were sitting on a 16 tick initial stop loss, you probably should have skipped this trade.

 

Best Wishes,

 

Thales

[Gabe2004 10]

In real time, in my opinion, your long trade should probably not have been taken, but if it were takene, it should have been no worse than break even as after entry, price rallied back to the prior breakdown point. Everyone knows the old saw, "Prior support is now resistance." In fact, depending upon your broker's spread you were likely buying that test. At our broker, the buy stop would have been 1.6578, and the breakdown point was our sell stop at 1.6584. So there was only 6 ticks between the entry and the point where your stop should have moved to break even. As you were sitting on a 16 tick initial stop loss, you probably should have skipped this trade.

 

Best Wishes,

 

Thales

 

This is an expalnation I CAN understand.

Thanks.

I saw that S/R line you pointed out but ignored it.

I was also not thinking in terms of distance between possible target to entry and distance of SL to entry.

Have to work on that.

 

Gabe

[thalestrader 14]

Here is another thing to keep in mind that I believe I have implied, but perhaps it needs to be made more explicit: If you are trading this approach, and your broker is padding the your entries & exits with more than 2 ticks in/out, then you should be looking to trade the bigger swings. I'm sure it it nearly impossible at 3+ tick spreads to do well at this. For example, my daughter does not trade the GBPJPY because even at our broker, the spread is usually nearly 5 ticks at bets. That means that whatever spread exists between you entry and your stop loss, and your entry and your break even move trigger, and what ever spread is between your entry point and your first PT is artificially constricted by nearly 10 ticks. That would be some kind of edge if you were able to overcome the edge the market maker is holding at your throat if you are going to play off the minor swings.

 

So, if you are trading Oanda, and Oanda has a 3 tick spread on the GBPUSD, then you have a 6 tick handicap to overcome. Are you good enough to overcome a 6 tick handicap when you are often trying for only a 15-20 tick PT? I'm not. I tried. To be consistent doing this, unless you are playing the larger swings for 50-100 tick moves, you need a broker who is at 2 ticks or less on the spread. Anything else is folly. Some folks probably can do it, but I can't, so I am not going to try.

 

For that reason, we have limited ourselves to the EURJPY, EURUSD, GBPUSD, and USDJPY - each of these typically has a .5 to 1.8 spread at the broker we use. For futures, the 6E, 6B, and 6J usually have a 1-2 tick spread, and this approach generally works very well there as well (6J at times widens to 3-4 ticks, but that is usually a news pending time or the often illiquid period between the NY close and the Tokyo open).

 

If you haven't noticed, whenever I have posted a trade on another pair, e.g. the USDCAD, it is almost always accompanied by a 240 minute chart showing that it is not of the same scale as most of our other trades (even if we also show an entry on the 15 minute, it is based on a more significant level of S/R.

 

Compare the the two screenshots below: The first is the current spreads on the pairs we trade. The second is the current spreads on four pairs I have seen others trading here. Which set would you rather trade?

 

At any rate, here is a little price pattern that I have posted in this thread in the past (as recently as yesterday on the EURJPY. News is pending, so the pattern may not be as reliable as it is when it occurs during the regular course of trading, but under most circumstances, the GBPUSD would be a short candidate here. Again, news pending, so who knows? But if I were forced to take a position going into the number, I'd choose short.

 

Best Wishes,

 

Thales

[thalestrader 14]

I saw that S/R line you pointed out but ignored it.

 

 

I was also not thinking in terms of distance between possible target to entry and distance of SL to entry.

 

If you are ignoring S/R, and/or if you are ignoring the impact of risk to reward, you are not doing what I am doing.

 

Best Wishes,

 

Thales

[Gabe2004 10]

Here is another thing to keep in mind that I believe I have implied, but perhaps it needs to be made more explicit: If you are trading this approach, and your broker is padding the your entries & exits with more than 2 ticks in/out, then you should be looking to trade the bigger swings. I'm sure it it nearly impossible at 3+ tick spreads to do well at this. For example, my daughter does not trade the GBPJPY because even at our broker, the spread is usually nearly 5 ticks at bets. That means that whatever spread exists between you entry and your stop loss, and your entry and your break even move trigger, and what ever spread is between your entry point and your first PT is artificially constricted by nearly 10 ticks. That would be some kind of edge if you were able to overcome the edge the market maker is holding at your throat if you are going to play off the minor swings.

 

So, if you are trading Oanda, and Oanda has a 3 tick spread on the GBPUSD, then you have a 6 tick handicap to overcome. Are you good enough to overcome a 6 tick handicap when you are often trying for only a 15-20 tick PT? I'm not. I tried. To be consistent doing this, unless you are playing the larger swings for 50-100 tick moves, you need a broker who is at 2 ticks or less on the spread. Anything else is folly. Some folks probably can do it, but I can't, so I am not going to try.

 

For that reason, we have limited ourselves to the EURJPY, EURUSD, GBPUSD, and USDJPY - each of these typically has a .5 to 1.8 spread at the broker we use. For futures, the 6E, 6B, and 6J usually have a 1-2 tick spread, and this approach generally works very well there as well (6J at times widens to 3-4 ticks, but that is usually a news pending time or the often illiquid period between the NY close and the Tokyo open).

 

If you haven't noticed, whenever I have posted a trade on another pair, e.g. the USDCAD, it is almost always accompanied by a 240 minute chart showing that it is not of the same scale as most of our other trades (even if we also show an entry on the 15 minute, it is based on a more significant level of S/R.

 

Compare the the two screenshots below: The first is the current spreads on the pairs we trade. The second is the current spreads on four pairs I have seen others trading here. Which set would you rather trade?

 

At any rate, here is a little price pattern that I have posted in this thread in the past (as recently as yesterday on the EURJPY. News is pending, so the pattern may not be as reliable as it is when it occurs during the regular course of trading, but under most circumstances, the GBPUSD would be a short candidate here. Again, news pending, so who knows? But if I were forced to take a position going into the number, I'd choose short.

 

Best Wishes,

 

Thales

 

I understand and agree with you about the spread.

I don't understand though, why does a 5 tick bother your daughter if her average win is 50-60 pips as you have mentioned in the past.

Also I don't agree with the 6 pip handicap.

If Oanda has a 3 pip spread than that is my handicap.

One cannot include the spread twice.

If bid/ask is 100.00/100.03 than to enter long I would pay 100.03 and if I want to exit immediately I would get 100.00 so the handicap is only the spread once and not twice.

 

Please correct me if i am wrong.

 

Gabe

[thalestrader 14]

It was indeed a good trade idea, but I believe it would have been ticked out at BE.

 

I would have been ticked out at BE. My BE stop move point would have been 1.3253, and price traded to 1.3254 at our broker, so unless I had been away from the computer long enough to miss the bounce, I'd likely have gone to BE.

 

Best Wishes,

 

Thales

[thalestrader 14]

I don't understand though, why does a 5 tick bother your daughter if her average win is 50-60 pips as you have mentioned in the past.

 

She never liked the the 5 tick spread, and she would like it even less now that her trading is limited to the first hour or two of Tokyo becasue she leaves for school soon after the NY session gets underway. While we see some very nice moves in Tokyo from time to time, the range of the NY session is typically of greater extent. If you were to go back to some of the examples I posted of her trades, you will also see that she was trading swings of a higher degree than we find ourselves trading here day to day.

 

Also I don't agree with the 6 pip handicap. If Oanda has a 3 pip spread than that is my handicap. One cannot include the spread twice.

If bid/ask is 100.00/100.03 than to enter long I would pay 100.03 and if I want to exit immediately I would get 100.00 so the handicap is only the spread once and not twice.

 

Please correct me if i am wrong.

 

Suppose you and I are both looking to short the GBPUSD. We each see a low of 1.6586. My broker's spread is 1 pip, so I place a sell stop at 1.6584. Your broker's spread is 3 pips. But since you do not see the handicap, you place your sell stop at 1.6585. Price declines and your broker shows 6585/6588, and you are filled short. I am still flat, because at my broker the GU was 6587/6588. Price then rallies and stops you out.

 

Now the short opportunity presents itself again, and at the same entry price. This time, you know you have to set your sell stop at 1.6582. This way, you will only get filled if price does trade at 1.6585 in the real world, and not just in the world of your broker's internal electronic trading system. Price declines to 6585/6582. You are short at 82 and I am short at 84.

 

We both see that there is potential support at 1.6558. I set my PT for 1.6559. You forgot the lesson of the spread, but only partially, so you too set your PT at 1.6559. Price declines. My broker shows 1.6558/59 and I am filled with a +25 tick profit. Your broker shows the bid offer at 1.6557/60. You do not get filled. Price actually showed a lower bid at your broker than at mine, but because of the spread, you do not get your PT order filled. Price then rallies and stops you out at whatever your stop loss is at the time.

 

Or, perhaps you remembered the lesson of the spread as price decline. You change your PT order to 1.6561, and you do get filled there. I have a +25 tick profit, you also have a +25 tick profit, but you share 4 of those ticks with your broker, and you keep only +21 for yourself.

 

You think you only pay the spread once? You think it only has an impact if you buy and immediately close the position? You have bought the lie. But do not feel bad. Even experienced traders refuse to believe the edge they are ceding to the market maker. But the spread takes you coming and going. If you do not believe me, then try this: Next time you are going to trade the GBPUSD in your spot account, do the same trade in your futures account trading the 6B. It is much easier to make book trading the single tick spread 6B than it is on trading a three tick spread GBPUSD.

 

Best Wishes,

 

Thales

[brownsfan019 17]

Just to add my

 

This is the very reason I don't touch forex. You guys are trading the same thing, yet could have different results/charts/prints simply based on the product being traded. IMO trading is hard enough w/o adding in more things going against you which I think is being demonstrated here.

 

I just like clean, crisp charts with 1 centralized pricing location = futures.

[Gabe2004 10]

She never liked the the 5 tick spread, and she would like it even less now that her trading is limited to the first hour or two of Tokyo becasue she leaves for school soon after the NY session gets underway. While we see some very nice moves in Tokyo from time to time, the range of the NY session is typically of greater extent. If you were to go back to some of the examples I posted of her trades, you will also see that she was trading swings of a higher degree than we find ourselves trading here day to day.

 

 

 

Suppose you and I are both looking to short the GBPUSD. We each see a low of 1.6586. My broker's spread is 1 pip, so I place a sell stop at 1.6584. Your broker's spread is 3 pips. But since you do not see the handicap, you place your sell stop at 1.6585. Price declines and your broker shows 6585/6588, and you are filled short. I am still flat, because at my broker the GU was 6587/6588. Price then rallies and stops you out.

 

Now the short opportunity presents itself again, and at the same entry price. This time, you know you have to set your sell stop at 1.6582. This way, you will only get filled if price does trade at 1.6585 in the real world, and not just in the world of your broker's internal electronic trading system. Price declines to 6585/6582. You are short at 82 and I am short at 84.

 

We both see that there is potential support at 1.6558. I set my PT for 1.6559. You forgot the lesson of the spread, but only partially, so you too set your PT at 1.6559. Price declines. My broker shows 1.6558/59 and I am filled with a +25 tick profit. Your broker shows the bid offer at 1.6557/60. You do not get filled. Price actually showed a lower bid at your broker than at mine, but because of the spread, you do not get your PT order filled. Price then rallies and stops you out at whatever your stop loss is at the time.

 

Or, perhaps you remembered the lesson of the spread as price decline. You change your PT order to 1.6561, and you do get filled there. I have a +25 tick profit, you also have a +25 tick profit, but you share 4 of those ticks with your broker, and you keep only +21 for yourself.

 

You think you only pay the spread once? You think it only has an impact if you buy and immediately close the position? You have bought the lie. But do not feel bad. Even experienced traders refuse to believe the edge they are ceding to the market maker. But the spread takes you coming and going. If you do not believe me, then try this: Next time you are going to trade the GBPUSD in your spot account, do the same trade in your futures account trading the 6B. It is much easier to make book trading the single tick spread 6B than it is on trading a three tick spread GBPUSD.

 

Best Wishes,

 

Thales

If you are short @ 1.6584 and I am short @ 1.6582 then if your broker shows 1.6558/59 and u set your stop to 1.6559 then in this example to be fair you should set my stop to 1.6560 and not 1.6561 which will give you a profit of 1.6584-1.6559=25pips and for me it will be 1.6582-1.6560=22 pips. but we don't really know whether my broker will not print 1.6556/1.6559in which case my profit will be 23 pips.

But even with your example the difference between us will be the spread difference between our brokers +/- 1 pip.

 

Gabe

[BlowFish 10]

I understand and agree with you about the spread.

I don't understand though, why does a 5 tick bother your daughter if her average win is 50-

 

Giving 10% of your winnings away is bad enough but think of all the 10 point stops that cost you an an extra 50%. If the money itself isn't enough the mental pressure (as I mentioned when we where talking about slippage) are significant too.

 

The big issue (to me) is you are taking a bet on a price that is being set by the bookie.

 

All this is surmountable by targeting larger swings .... the smaller the swings you target the bigger the effect of the shenanigans and the more likely a profitable approach is going to fail.

[Gabe2004 10]

Just to add my

 

This is the very reason I don't touch forex. You guys are trading the same thing, yet could have different results/charts/prints simply based on the product being traded. IMO trading is hard enough w/o adding in more things going against you which I think is being demonstrated here.

 

I just like clean, crisp charts with 1 centralized pricing location = futures.

 

Since I noticed that some currency pairs move alot during the London open, is there enough liquidity in the futures market during those hours to trade the futures an no the spot?

 

Gabe

[brownsfan019 17]

Since I noticed that some currency pairs move alot during the London open, is there enough liquidity in the futures market during those hours to trade the futures an no the spot?

 

Gabe

 

No idea - you'd have to pull up some charts and see.

[Cory2679 11]

I'm still having a really hard time pulling the trigger on my live account. I considered opening a small forex account to work up to full size, but when I played around on a demo account for a little while, I soon remembered why I trade currency futures rather than spot forex, and would never go back.

 

I saw an excellent GU trade this morning, only to let it make 25 ticks or so without me...I was afraid because there was what appeared to be a losing trade a short while before it.

 

I'm watching a setup on the EU (which I didn't take) that would have been a 9 tick loser, which will no doubt keep me out of the next potential winning trade out of fear.

 

I'm so frustrated with myself. I haven't taken a single trade this week.

 

I'm currently watching the JPY/USD (6J), possibly looking for a break of 1.1286 for the short...

[BlowFish 10]

Since I noticed that some currency pairs move alot during the London open, is there enough liquidity in the futures market during those hours to trade the futures an no the spot?

 

Gabe

 

Assuming you are not trading massive size yes.....not sure about the new mini futures ....no experience of those (yet).

[Cory2679 11]

I'm currently watching the JPY/USD (6J), possibly looking for a break of 1.1286 for the short...

 

Interesting to note...I've posted a 4 hour chart of the last 200 days, and the JPY/USD (6J) is approaching the 200 day high.

[thalestrader 14]

I'm still having a really hard time pulling the trigger on my live account. I considered opening a small forex account to work up to full size, but when I played around on a demo account for a little while, I soon remembered why I trade currency futures rather than spot forex, and would never go back.

 

I much prefer futures to spot too.

 

I saw an excellent GU trade this morning, only to let it make 25 ticks or so without me...I was afraid because there was what appeared to be a losing trade a short while before it.

 

I'm watching a setup on the EU (which I didn't take) that would have been a 9 tick loser, which will no doubt keep me out of the next potential winning trade out of fear.

 

I'm so frustrated with myself. I haven't taken a single trade this week.

 

You are setting yourself up to only be in losing trades.

 

Best Wishes,

 

Thales

[forrestang 10]

With the risk of pulling this thread off topic, for you guys having all these problems with your brokers and the spot FX..... YOU NEED TO SWITCH BROKERS!!! Period!!!

 

The spreads you guys speak of, with these phantom fills, it's ridiculous. You wouldn't deal with it on a futures broker.... Or with a real life situation, if you were paying money for internet that was constantly down, would you continue to keep it if other options are available?