There is good news and bad news. The bad news is that the trade I made yesterday resulted in a significant loss. The good news is that it might be the last significant loss I ever experience. I entered a long position when I thought AUDJPY was ready to start climbing again after hitting a support level, but I made the mistake of remaining in the trade when that exchange rate resumed its decline. I considered exiting the position when the rate climbed back up toward break even. This would have meant experiencing about a $1.00 loss, which I would have found acceptable. However, when I did this previously, the relevant pair not only went on to break even, who would have actually returned a profit if I had not dropped out, so this time I remained in the trade. This was a fatal error, however, in that this was as high as AUDJPY ever got, and the pair later stopped me out for a -$4.55 loss. But perhaps this was for the best. In seeking to avoid the same situation in the future, I found that using a particular proprietary “envelope” on a 15-minute chart would have not only communicated that I should have never entered a long position, but even seemed to do an almost flawless job of suggesting when that intraday trend was reversing up or down. So I applied/transferred the same principles to a one-minute chart, resulting in proprietary dynamic support/resistance indicators that would’ve discouraged me from entering the long position too early (when AUDJPY was essentially neutral) and would have gone on to reveal exactly when the moment was right to buy into the pair (when its rate began to climb the “stair steps” up instead of down). This is how the indicators look as I am actually using them… So far, they have enabled me to reduce my loss from -$4.55 to -$2.59, but I’m hoping to, at the very least, get below -$2.00 by the end of the New York session. There is virtually no lag with these indicators and I can’t imagine coming up with any way to improve on the precision and accuracy they are demonstrating (I know the very instant the intraday trend switches from bullish to bearish and back again). So barring the unexpected, going forward I will be doing virtually all my trading using one-minute charts loaded with the tools you see above.
NZD/USD is now at 0.7254. End of this paper trade. Good luck with your journals. PS: Buyers could be at 0.7248, where it is now.
I don’t see myself ever changing the essence of the following chart because I’m really happy with it and have no real complaints. However, I had a problem today when AUDUSD and AUDJPY initially would not commit to a particular direction. AUDUSD did later on, but I refuse to believe what I was seeing, forgetting that it was Friday (when rates often go on an extended run) and thinking that if I jumped in the trend would immediately reverse direction. Of course, when I finally did yield and shorted the pair, that’s exactly what happened. The thought occurred to me belatedly… “Dude! As long as these other pairs are bouncing back and forth within a tight range, go ahead and trade them that way, selling them at the top and buying them at the bottom of the channel for a handful of pips each way!” This worked some of the time, but not all of the time, any it struck me as a rather imprecise and inefficient means of eking out a profit, which was not a guaranteed outcome anyway. Since the levels between which the market makers (or the trading algorithms, or whoever is behind rates trading within a limited range) were so obvious, I decided to do a statistical analysis to determine where the boundaries were set vs. where the rates would finally choose one direction or the other to travel for at least a short amount of time…constituting at least a moderate amount of distance (For why not avoid the chop zones altogether?). I then plotted these levels on my charts, but it was a bit messy, so I removed all unnecessary indicators. The result was the red and green lines you see below. Though its appearance is quite different, this chart is, in essence, looking at the same thing as the one at the top, with everything from the prior chart summarized in the lower panel indicators—my “market bias oscillators.” Using the chart is simple. Sell the asset whenever the candlesticks drop below the red dynamic support line—provided the two bias oscillators indicate that the market is bearish. Buy the asset whenever the candlesticks climb above the green dynamic resistance line—provided the sentiment oscillators indicate that the market is bullish. There will be false positives, but their size will be relatively small in comparison to the valid runs above or below the designated triggers, so they should not really be a problem, which is good enough in theory, but I will have to wait until next week to see if this actually pans out in practice. (P.S. I also added dotted lines where it might make sense to automatically pocket a minimum amount of profit before deciding whether to go for more so that even the false positives [or most of them, at least] end up being a plus.) (P.S.S. Another idea I that just now occurred to me is that if I double the distance from the dotted lines to the dynamic support/resistance levels, it might end up designating zones where the odds of price reversing direction come close to a statistical certainty.)
…but it only comes into play when a currency pair is experiencing a mega trend—not “with.” P.S. The arbiter line wasn’t added. It was already there.
I applied the same principles from post #106 to the next higher time frame (chart) and the results seemed to be just as valid. I therefore translated and transferred all of that information (graphics) back down to the lower time frame, which resulted in a somewhat messy chart (see below) but one that definitely looks superior, so I’ll just have to deal with. Hopefully it will get easier to use with practice, or I’ll figure out ways to clean it up or organize it with use. One of the things I really like about it is that it clarifies why a pair is ranging when it is doing so. It either means that price is no longer rising in the middle of an uptrend, or is no longer falling in the middle of a downtrend. This would mean that in the first situation, I would only be entering long positions at the bottom of the range. Consequently, instead of only working some of the time, the strategy/technique should now work virtually all of the time. Being able to see what is going on in both timeframes simultaneously introduces the precision and efficiency that this tactic was lacking previously—and it would seem to remove any excuse whatsoever for not making gains in trending markets by advising against abandoning positions that are ultimately destined to move in the direction initially anticipated. If I’m not deluding myself with a bunch of hogwash, perhaps next week will initiate an era in which I actually begin benefiting from what I believe in very strongly, but appear to have been implementing extremely poorly.
I thought NZDUSD was crossing above the red indicator, so I entered a long position where you see the first blue circle. Note however that, let’s call it the red bias indicator, had dropped down slightly. The same was true of the floor, or the lower band, of the white dynamic support/resistance channel (or envelope). Perhaps that should have warned me that NZDUSD was switching from bullish to bearish, or at least that this was a possibility, and that the best course of action for me to take at the moment was to remain on the sidelines and observe. In any event, realizing that I had possibly overlooked such a signal, I got as close as I could to breakeven (where you see this second blue circle). This resulted in a loss of -29¢. At that point, everything was definitely conveying a reversal to the downside, so I entered a short position. I went off to watch the television show “Counterpart,” and when I came back the trade was in profit territory. I therefore locked in what I had at the time, which recouped 21¢ of my loss, so that I was now down only -8¢. I shorted the pair once again, and then went off to watch the show “Homeland.” When I came back this time, my take-profit target had been hit, yielding another $1.01, putting me ahead 93¢. What all this means is that this configuration is operating in precisely the manner I'd hoped it would, and I see no reason why it should not continue to do so. The only thing I think I should change is perhaps doubling my take-profit target to 20 pips when I’m going to execute a trade and then walk away at a turning point where a particular pair is reversing its intraday trend.
Because of my first 10 days of trading while engaged in an effort to develop a “more frequent trade” version of my strategy, I am now trading with limited margin, which means I can only enter one position at a time and am unable to trade all of the pairs. But even with these disadvantages, I have managed about a 4% daily return on my current balance and a 2.61% return on $100. This is with a 75% daily success rate, which I think I can get much closer to 100% as I become more “expert” at using this brand new approach. Something else I regard as a very positive sign is the fact that my average profit trade was greater than my average loss trade—an expectation I was unable to meet with much success in the past. I’m also evaluating the following “cleaner version” of the setup, which is actually depicting the same data, but in a much simplified format. I’m thinking I would enter a long position when the bold dashed line and the jagged red line are both sloping upward AND the thin black line is crossing over the thin gray line, and do the opposite for entering short positions.
I’m finished trading for the day, and I do believe that which I initiated on November 5, 2011 saw its complete fulfillment today, Monday, March 19, 2018. The setup I configured on Friday (or over the weekend—I forget which it was) should enable me to trade throughout the day instead of limiting me to when price has reached specific levels under designated market conditions. I believe it conveys with precision, accuracy, and validity the direction that exchange rates are likely to take in the not-too-distant future. It is my conviction that this setup alerts me immediately if and when the market turns against me, thereby minimizing my potential losses. And because of all this, I trust it will finally enabled me to trade in a manner that results in my average profitable trade being greater than my average loss trade. There is therefore no reason for me to experiment with any other version of my system any further and I can stop what I’ve been doing ever since November 2015 (i.e., fine tuning my original multiple simple moving average envelope strategy). I might make an adjustment here or there, but it will be with respect to THIS system I’m using today. I now have no desire whatsoever to give a second thought to any other systems that might occur to me.