4X Made Hard

Discussion in 'Journals' started by JR97, Aug 28, 2005.

  1. JR97


    I've been keeping a journal over at moneytech for the past few months. But I'd like to start mirroring it here where there seems to be more succesfull, experienced, and knowledgable traders.

    The system is based on a methed called Precision Trading System taught by Mel Raimen. He focuses primarily on stocks, but I found the system works great for Forex. I programmed my own version in Excel and have added quite a few more elements than taught in the PTS course.

    The basic setup I look for is trading in the direction of the price channels when price is at the extreme bounds of the channels on multiple time frames. The channels are nothing more than a mean and +-1, and +-2 standard deviations. The trigger is the green line (price) cross both the yellow(linear regression) and red (ema) coming up or down from the top or bottom of a channel in the direction of the channel. I then look for a simple 1-2-3 with the mean of the channel being the 2 point. Entries and targets are also gauged by finding confluence among pivots, fibs, and other traditional forms of TA.

    I also use traditional candlestick charts with a bollinger method to help confirm and analyze a given pair. Actually, I normally refer to the candle chart first and then use the Excel application to get in and out.

    In the past 8 weeks that I"ve been live with the system, I've had about a 85-90% win rate. But like with any system, it's how much to bet, when, and for how long that makes the difference. I can be very aggressive with adding on to profitable trades and have been able to pull out 900 pips out of a 300 point move on more than one occasion. On the downer side, last week I ignored the system and 2 losses set me back below b/e. Just goes to show that even a win% doesn't mean jack if you don't bet it right. But I was able to make that up and recover all of my profits from wed - fri. last week.
  2. JR97


    This is a trade example I documented a few weeks ago that shows the system and method. I normally swing and position trade, but if I see a scalper or short term setup, I'll take it.


    Here is an example of some Asian session EURUSD "scalping". Normally,
    you don't expect much in the way of movement during the Asian session
    for the EUR or GBP. However, I saw a setup when I was getting ready to
    leave work and I stuck around and traded both those pairs. I
    documented the EURUSD trade, but the GBP pretty much played out the same.

    Setup is price coming up off the bottom in an up channel in the
    direction of higher time frame channels. Ideally, the higher channels
    are either providing the same signal or are already in a move. Here,
    the 15M just confirmed, although in a down channel and the 1H is
    looking like it might confirm. A bit more risky, but since the daily
    is still showing strength, let's scalp it. Entry price 1.2353. Target
    is 1.2370. Failure target is 1.2340. Risking 13 pips for at least 17
    or so.


    After about an hour we finally get the action we were waiting for.
    Price nearly hit 1.2368.. 2 pips shy of the target. Success. Take
    profit now?


    The beauty of this system is being able to time exits, hold through
    consolidation, and find re-entry/add on points. The way to do this is
    to drop to lower time frame charts. Notice the 1H at the mean, the 30M
    at the top, 15M at the top, BUT the 5M at the bottom and turning up in
    an upchannel. The only down channel is the 30M. Mixed signals? Exiting
    here isn't a bad idea. I'm aggressive though. Normally I would add on
    to my position at this point because the 1H time frame is at the
    mean.. consolidation area and the 5M is showing signs of getting ready
    to launch with enough steam to breakthrough the 1H mean and 30M and
    15M top channels. I already tied up my add on capital in the GBP and
    managing 2 different pair and adding on is a bit more than I want to
    manage at this moment. If this were a swing trade, adding on would be
    a no brainer. But being a scalper trade and relatively shorter
    targets, I'll play it safe.


    Continuation through consolidation. It's a beautiful thing. If you're
    a pattern trader, notice the 15M. Classic 1-2-3 ala Ken Roberts and
    the World's Most Dangerous Money Manual? Target is Length of first leg
    from bottom of consolidation.. that makes the target in the 1.2380
    area. Which is also the target given by the 1H +1 line and a few pips
    off of the R1 pivot. Confluence.


    Hmmm... After some retrace and about 10-12 minutes of flat, is the
    move done? Close the trade? Let's drop to the smallest time frames:


    This a great example of using the system to gauge timing. Price can be
    flat and traverse the channel. Notice the 5M flat and approaching the
    mean. A reversal area? Notice the 1M approaching the -1 line. Again, a
    reversal area?


    Trading against the channel is always a risky prospect. Especially
    when every channel on the page is in the same direction. But it could
    be an exit area. I've to 10 pips that says price will do something
    when it hits the 1M -1 and the 5M mean. I'm still thinking long
    because of the confluence mentioned above.


    Looking good!

    Uh.... maybe not?



    Ok.. nothing to drastic. about 15 minutes of minor movement. But
    something did happen, eh? Now I'm expecting that long move since price
    wasn't able to reverse or retrace more than a handful of pips.


    45 minutes we got the long we were wating for. Nothing much in the way
    of our target.


    Target surpassed and then some. Now price is way over extended and a
    retrace is almost inevitable. However, the question remains.. will
    price retest the high or somewhere near it? I'm thinking it might. My
    stop is raised to 1.2370 to lock in the original target and I'm
    looking to put on a squeeze play by raising my stop and looking at
    taking profit at 1.2390-1.2395.


    Woh... stopped out? Almost. Doesn't matter though. Everything beyond
    1.2370 is bonus.

    Price started to freak out in our vice:

    And I"m out at 1.2388. As I was making notes about the trade, I
    noticed something kinda weird. Check out the 1M chart in the next chart:


    Somebody not like me taking 30 pips? Right back at ya buddy... scoreboard.

  3. Question:

    On the few failures that you have, if you reversed what would have happened?

    Perhaps this could be a very high probability set up that you could watch for on the simulator. Trade your regular system on it and when you get a failure switch to real on the reversal.

    I just recently discovered this method of trading and am having some fun with it.

    Michael B.
  4. JR97


    This is another example from last week that shows a good add opportunity.



    Here is the play by play of last night's move from bottom to top, retrace and exit.

    Double bottom on the daily in an up channel, up turn on the 4H in an up channel. 1H and 15M are down, but turning up. Status is green on 15m, 1h, and that's all I need to go long. Actually, I was long at 1.2160 when I jumped the gun. (if you look at the 15M and where the green, yellow, and feint grey line, touched 1.2160.. that was me. Primary target is 1.2260 based on 4H +1 and Upfractal, and R1 daily pivot and SM1 weekly pivot level.


    Price is now at 1H mean and top of 15M channel. As per usual, consolidation is expected as well as possible reversal and pattern failure. If the pattern fails, we are still profitable.


    Contiuation past 1H mean. That's a good sign. All 3 15M trend direction index lines are above zero and in the green. Momentum is now on our side. It was about 4:00 am MST. Damn tired so I went home at this point with trailing stops on the Interbank FX account and locked in profits on the O A N D A account.


    Came back into the office and saw that the interbank fx trailing stops closed out for 69 pips and GBPUSD closed out for 76 pips. Nice eh? O A N D A positions (5 of them) still open and going strong. I also spotted a nice add on opportunity when price pulled back to the 72% fib, a pivot level, and bottom of a the 15M up channel. Better to wait for confirmation and not jump the gun,though.


    Confirmation and 61% fib. A better and higher probability fib.


    Primary target is retested. Looking for exit signals.


    And I"m out at 1.2261. Time for lunch and taking profits. I'll be looking for more signs to go long again.

    I should add that I was very aggressive on the overall euro position. At one point, almost all of my available margin was out there towards the end. I did absorb some drawdown on from last wed. through mon. and even closed a few of the trades to free up capital to buy at a lower price. There's a fine line between averaging down losses and scaling in at lower prices. I think I came close to crossing that line a few times last week, but there were no signs to reverse my opinion on the overall direction of the dollar. Just a matter of waiting out consolidation and direction indecision.
  5. JR97


    On the time frames I trade, on most of the failures, reversal wouln't have netted much if anything at all. They were just bad execution and bad stops. The exception being the major dollar thrust we saw a few weeks ago. I got stupid on that one. The system did show long the dollar all the way, but I chose to fight it.

    However, I've found that even failed patterns are still profitable if I stick to the basic trade setup. It's only when I don't take the exit sign that the trade becomes a loss. Actually, every realized loss I've taken would have been profitable in the end had I waited out a retrace or consolidation.
  6. Thanks JR...

    I find that it is important when system trading to analyse the failures. I have learned recently that they reveal a lot, especially if your system has the high winrate yours does.

    Michael B.

  7. TGM



    Any momentum based system will work on forex. Especially, these days. Way to use your head. I would bet the method makes more money in forex than anything else. You should also apply the models to the Mini crude market.

    These screenshots you are putting up are all from excel???
  8. JR97


    All of those screenshots were from excel. When I start posting current trades, I'll also post candle charts occasionally.

    I have used a proxy of the system on oil a few times before trying to help a friend get out of some full size oil contracts a few months ago. They chose to ignore my suggestions and lost their ass. But it really opened my eyes to how other markets behave in relation to forex. Forex is so tempermental sometimes. Whereas with those oil trades, price behaved almost to the T on how I anticipated it. But until I get some real trading capital under my belt, I'm stuck in Retail Forex land.
  9. TGM


    I trade a similar model and have for ten years intraday. It is a multiple timeframe momentum model and they are not uncommon. What I have found is that the markets that work best are usually either in a BIG secular bull market like stocks in the late 90's or like crude now and/or forex. Forex has always worked well. Works even better now that everything is electronic. If you stick to forex and then go to where there is volatility and volume you will always be doing well.

    On another note ---you are one hell of and excel programmer. I am impressed. Was it difficult for you to do all that? Are trading prop for someplace?
  10. Nice method it looks very technically sound and it makes a lot of sense.

    Thanks for sharing!

    I use a similiar method with Keltner channels, fibs, ema's etc....

    The most difficult thing I find with trend following methods is finding good markets to trade.
    #10     Aug 28, 2005