I began my quest this week attempting to merge what looked like a promising “swing for the fences” style of trading with my tried and true guerilla trading techniques. As a result, I started myself out in a -$13.00 hole when I was supposed to be up $5.50 as of day three. But it was not all for naught. This morning I finally got all my settings calibrated just right, thanks in large part to a proprietary indicator I’ve labeled as my “Trigger Line.” They say there is no holy grail in trading, so I guess I will just have to think of it as my Deuteronomy 8:18(a) indicator. My “swing for the fences charts” also helped me settle on what I’m calling the “TRUE” Intraday Trend Line—another key component in getting everything calibrated correctly. Thanks to these (and other supplemental) chart graphics, I am now down only -$7.78 after making ten trades using this final version of my system (I made four additional trades while typing this entry). There are still several hours left to trade, so I might even be able to reduce my loss to $0.00 before the day is over. At any rate, it looks like a 3% daily return (or more) instead of just 1.8% is quite realistic, in which case, my $100 opening balance should multiply much more quickly. Make no mistake however, this more than likely final method I have adopted is still a guerilla trading approach to buying and selling foreign currency pairs, compiling pips a handful at a time. There is no escaping or denying the fact that exchange rates are constantly zigzagging up and down—and if one is able to capitalize on this reality, it only makes sense to do so. And because of the accuracy of the intraday trend line, instead of getting stopped out when swinging for the fences because of a reversal in the intraday trend, my flexible bias (thanks to the agility of guerilla trading) changes right along with the market’s sentiment. Also, instead of avoiding trading on Friday (as I used to do) because the rates have a way of continuing to head in the same direction for abnormal and bizarre lengths of time, the indicators pictured above keep me closely attuned to the markets. Using the system is very simple. If the TRUE Intraday Trend Line is sloping upwards, I enter a long position when price drops below the lower Trigger Line and set my stop loss at 0.1% (?) below the Trigger Line. I take profit when price rises above the upper Trigger Line. If the TRUE Intraday Trend Line is sloping downwards, I simply do the opposite. Trading in this manner essentially means my targets are always hit without my ever being stopped out of any trades, though today I simply set my take-profit targets five pips beyond my entry levels. (I’ve yet to actually see what happens when trading exactly as described in the previous paragraph, but it will probably a little less than double how much I make from each trade.)
"Compounding to a billion (or two) though is just being a sarcastic and dumb commenter" Not so fast... I know someone who has compounded $1000 into $2 billion, between the time he was 18 and 58. That's after tax.
Possible insights into how to correctly use standard (and my new proprietary) indicators to day trade the Forex market: Had I already established and been religiously abiding by the above guidelines, I probably would have brought my three days’ worth of losses back to profitability just from this morning’s trading alone. Instead, I got trapped upside down in two positions following news out of North Korea and am now waiting and hoping to get out of those two trades without incurring more loss. So far the market has cut about 40 pips away from my downside, with about another 20 pips left to go.
One of my two “bonehead” trades is just about to bail me out, thank the Lord! Now if the other would be so kind as to do the same, I can start over again fresh tomorrow. The worst part is, my initial basic instructions for using my new dynamic, self-adjusting, trigger envelope indicator specifically said to enter trades in the same direction as the day-to-day (but actually, it should be intermediate) trend—but I forgot all about that. Hopefully I will never forget again!!! (P.S. I could have made so much money today—relatively speaking—had I just played my cards right. But I just started with this new configuration, so I will forgive myself this time.)
As this circled portion of the chart below suggests, following my guidelines did not result in an improvement in my performance, as I had anticipated. In analyzing why, I attributed it to the system not functioning properly in ranging markets. This was not good. I say this because I already have a way of using the principles on which I base my trading in a manner resulting in an average daily success rate somewhere around 90%, but it limits me to one trade per day, per currency pair, with only a couple of them qualifying each day (or a handful at the most), and usually only toward the end of the New York session. So the whole purpose of my current endeavor is to make modifications that empower me to trade any pair successfully, anytime, whether the market is range bound or trending (so that my profits will begin compounding quickly). I found that the problem was solved by getting rid of ALL my proprietary indicators and ALL but two of the simple moving average envelopes. At that point, my performance began to improve (see the area outside the red circle). I then returned to the previous version of my charts and analyzed what I should keep (what might still be useful) and what I was mistaken in thinking I should use. As a result, I got rid of the orange moving average I identified previously as a bias indicator as well as all other moving averages that were of a shorter duration, given that I could obtain the same information simply by looking at the candlesticks themselves, rendering all these moving averages redundant. I also got rid of the erratic looking green (proprietary) moving average. I kept the smooth one though, but its function changed from representing the short-term trend to serving as the new bias/sentiment indicator, depending on whether its location was situated above or below the new (proprietary) black squiggly line, which is what I am now using to convey the intraday trend. Nonetheless, the central key on which everything rests remains the positional relationship between the exchange rate and two carefully selected simple moving average envelopes—an extremely simple system, but one that I hope will be deceptive in terms of how successful those who are sophisticated traders might think it could be, and how successful it actually is.
The previous chart seemed to be working, but it had some shortcomings. So I want to see if the chart above, which was generated from the chart just mention, works out better for me, or if I should go back to the chart on which it was based. One of the key envelopes I referenced before was associated with the intermediate trend, which I think of as a quasi day-to-day trend line that follows price more closely than the general overall day-to-day trend line. However, I replaced it with a blue and crimson envelope constructed from that black squiggly line that conveys the intraday trend. I replace the other key envelope with the zigzagging envelope you see with the thin green bands, but because it’s haphazard personality makes it difficult to figure out what it is doing, I reintroduced my dynamic trigger envelope (with the thicker green bands) to better guide my eyes. I feel that when viewed together, these three (four?) envelopes make it pretty obvious in which direction price is headed generally speaking. All three of them measure some aspect of average price range, so I’m anticipating this fact, along with the accompanying sense of price’s (the exchange rate’s) general trajectory, will empower me to enter positions/execute trades whenever the short-term trend reverses direction to join the prevailing trend. I also added the dashed-black moving average, which is the general overall day-to-day trend line. I know I had suspended its use for some time in favor of the intermediate (quasi day-to-day) trend-line, which follows price more closely, but when all is said and done, unless the general overall day-to-day trend is reversing direction, it ultimately dictates where price is going to end up, so I think I might want to only enter trades when the black moving average is clearly headed in one direction or the other, and the trade I’m executing matches that direction. (The lower panel remained the same and is still based on the same two key envelopes from before.) P.S. I also reintroduced the orange moving average I identified previously as a bias indicator in the form of the light green moving average in the middle of the narrowest envelope.
It just occurred to me how I can use just the two key envelopes I mentioned yesterday to make extremely simple, common-sense trades, using an approximately 2:1 reward-to-risk ratio that will mean profitability even if I’m right only half the time; where it will be obvious if circumstances turn against me so that I can exit doubtful situations even before my stop loss is hit. Whether it will actually work in practice is another matter, but the approach seems perfectly rational and logical, so I’m already giving it a try, having short CHFJPY @112.32. Yeah, this seems to be working out pretty well. Plus, if I switch to a version of the chart that uses my proprietary indicators (which calculate short- and intermediate-term average price ranges) I can pocket my gains on surges and reenter the positions on pullbacks to guarantee that I always make at least some profit and also milk every possible penny out of each trade as possible.