2009.03.17 TRO - NEVER LOSE AGAIN!!

[eudamonia]

Avery,

Another jewel set of indicators to SEE the emotions of the market. Thanks!

It's so funny...all these indicators to SEE the same thing. I've been trading this way for awhile, but this indicators make it clear.

Other folks,

For those of you who are struggling to figure this out from a money management perspective try this on for size.

Your theoretical account is $10000. You want to risk 4% per trade. That's $400. Start your first trade at 10K units, the second at 30K and the final trade at 90K. I personally like to target 15 pips on the EUR, with a total trade risk of 30 pips (I don't start my count until all 3 positions are on, and from my average position if the market moves 31 pips against me I'm out). All you need to make money with this setup is to win 7/10 trades. Personally, I'm finding the win ratio closer to 90%. I've been trading this type of setup for awhile, but without the indicators (just what I SEE). Using the indicators just makes it that more clear to me, that fading EXTREME MARKET EMOTION is the key to consistent profitability.

If you are wondering, the reason why we are martingaling into this position is because the further price moves on an extreme high or low, the greater the probability that it will reverse meaningfully. Does this work all the time? No, but it doesn't need to. Before anyone asks, yes this is the opposite of what you are told to do in all the trading books. Funny how that works, huh?

Edward

[Humble]

How do you identify when the push to the extreme is likely to have ended?

[noone22]

What does numbers 2 and 3 (in the yellow and pink circles) mean?

[lukx]

on what pairs I can use this system? I tried today on USD/CHF and EUR/USD and I didn't drain the banks but my account .

[TheRumpledOne]

I trade GBPUSD, EURUSD, USDCHF and USDJPY.

Post a chart showing your trades so we can figure out where you made an unprofitable decision.

[eudamonia]

If I had to guess it was this morning's move where Citi bank dumped their long Euro position.

Panic was in the air. Right around 5:00 a.m. I could see that emotions were out of control. Great time to buy and make some pips. But the last 3 hours were pretty crazy times if you didn't manage your position well.

Edward

[lukx]

Thank you TRO for taking look into my log, here it is:

284313 2009.03.27 07:10 sell 0.10 eurusd 1.3585 0.0000 1.3579 2009.03.27 07:21 1.3579 0.00 0.00 0.00 4.42 [tp]
284346 2009.03.27 07:40 buy 0.10 usdjpy 98.03 0.00 98.09 2009.03.27 09:41 98.09 0.00 0.00 0.00 4.52 [tp]
284380 2009.03.27 07:35 sell 0.10 eurgbp 0.9397 0.0000 0.9377 2009.03.27 07:39 0.9395 0.00 0.00 0.00 2.13
284637 2009.03.27 09:45 buy 0.10 eurusd 1.3548 0.0000 1.3553 2009.03.27 10:07 1.3553 0.00 0.00 0.00 3.69 [tp]
284644 2009.03.27 09:53 sell 0.10 usdchf 1.1280 0.0000 1.1274 2009.03.27 10:08 1.1274 0.00 0.00 0.00 3.92 [tp]
284753 2009.03.27 10:30 sell 0.10 usdchf 1.1304 0.0000 1.1299 2009.03.27 11:14 1.1388 0.00 0.00 0.00 -55.03 so: 100.0%/14.8/14.8
284761 2009.03.27 10:31 buy 0.10 eurusd 1.3491 0.0000 1.3496 2009.03.27 11:10 1.3431 0.00 0.00 0.00 -44.67 so: 99.0%/34.5/34.8
285087 2009.03.27 12:07 sell 0.05 usdchf 1.1376 0.0000 1.1299 2009.03.27 12:41 1.1399 0.00 0.00 0.00 -7.55

I try not to trade around any news but still it jumped hard. The semafors has been pushed hard.

[lukx]

I will try NO MERCY on Monday and see how it will work. I just want to say to TRO that he's doing awesome job and I hope he will keep on going. For all my poor trading outcome I can only blame myself.

[eudamonia]

lukx,

I guessed it. Looks like you got swept up in the madness from 3:00 a.m. PST to 5:00 a.m. PST.

What was your money management? Did you look at what I posted above about scaling into a position of this nature?

BTW, there were 2 retracements of note in this sizeable 2 hour downward push. If you had scaled in starting when you did using a martingale method (as I described above) you'd have made money. Alternatively, you could cut your losses at a predefined level (perhaps 20 pips or so).

The good news is that a move of this magnitude only happens 1 or 2 times a month. Now that you've seen it once, try to recall the power and the speed of this move. Notice how it differs from the daily fake out moves that quickly reverse.

The problem isn't the indicator. It's all about how you use it. Jumping to a new indicator won't fix the issue. What will fix the issue is two things: 1) money management, 2) reading the market's "emotion" (i.e. is this a push by institutions with real volume, or a locals fake out play?)

Good luck with your trading journey.

Edward

[fort2w]

Thanks TRO,
see if I understand based on your chart & rules:
LONG at 1.4037 (2nd green candle from right)
SHORT at 1.4046 (2nd red candle from right)