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mitsubishi

Beyond Taylor

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Thanks bobc,have you any thoughts on SILVER'S post above?.I can't get my head around that part of the book.:confused: anyone?

 

Hi mitsubishi

Both Silver and I were shocked by WHY's post "Why Taylor"

I personally felt that an authouity like WHY was flippant, and I was wasting my time, and zdo was right.

I dont think Silvers home language is English

I thought he was refering to measurement.......arrow.

Maybe Silver can answer.

regards

bobc

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Gentlemen,

I hope I have not made too many spelling and grammar errors that have lead Bob to identify me as a non-native speaker;) Just let me know and I will proof read my future posts.

 

My question was not about a measurement,to be precise, it was about the positioning of the arrowheads on the line next to the date row. Taylor sees the real trend between buyday low and sell short high,but those arrowheads are not appearing in such frequency and his description of the line isnt telling me anything.The point is within those arrows is where Taylor defines his trading range and I have not yet been able to incorporate that part in my book.:(

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Gentlemen,

I hope I have not made too many spelling and grammar errors that have lead Bob to identify me as a non-native speaker;) Just let me know and I will proof read my future posts.

 

My question was not about a measurement,to be precise, it was about the positioning of the arrowheads on the line next to the date row. Taylor sees the real trend between buyday low and sell short high,but those arrowheads are not appearing in such frequency and his description of the line isnt telling me anything.The point is within those arrows is where Taylor defines his trading range and I have not yet been able to incorporate that part in my book.:(

 

Yes,i have a real problem understanding this part and i have not really had the time to go over it,which was why i was hoping someone could help the re-reading process.I'm torn on the one hand between our natural desire to hear simple explanations for things and the fact that we are missing a trick if we don't grasp the finer details.

Another thing i've always had a problem with is why measure say the rally as you describe,from buy low to the sell high-why not to the actual top of the swing if the following short sell day prints a higher high?

I was thinking maybe the main players don't go short immediately when they cover their longs on the sell day,but let the last buyers-the bag holders take it up a bit higher and there is where they go short. Perhaps this is how Taylor saw it and hence how he measured it. Any one have any thoughts on that?

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Hi mitsubishi

Both Silver and I were shocked by WHY's post "Why Taylor"

I personally felt that an authouity like WHY was flippant, and I was wasting my time, and zdo was right.

I dont think Silvers home language is English

I thought he was refering to measurement.......arrow.

Maybe Silver can answer.

regards

bobc

 

Shocked?...well i must watch my language here,don't you know that i have signed a truce agreement that requires me to keep the peace? Notwithstanding that,i still have my battleships parked off the coast of HaWHYee..should they be needed...

 

"but aside from that,i swear that i will not be the first one to break the agreement we've made today"

Besides,i'd rather be shocking than ignored.

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Gentlemen,

I hope I have not made too many spelling and grammar errors that have lead Bob to identify me as a non-native speaker;) Just let me know and I will proof read my future posts.

 

My question was not about a measurement,to be precise, it was about the positioning of the arrowheads on the line next to the date row. Taylor sees the real trend between buyday low and sell short high,but those arrowheads are not appearing in such frequency and his description of the line isnt telling me anything.The point is within those arrows is where Taylor defines his trading range and I have not yet been able to incorporate that part in my book.:(

 

Dear Silver

Dont worry about any grammatical errors. I would hate to try and post in Apache.

ON A LESS SERIOUS NOTE

I used to watch Roy Rogers and Silver in the late 1950's

Silver saved Roy lots of times!!!

Silver also collected the arrowheads of broken arrows and fitted them to new shafts .

Do you see the confusion?

Talor used arrows, not arrowheads.Or maybe he used arrowheads , not arrows..

King regards

bobc

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Here are some explanations. May help. If not just disregard.Gotta run as soon as I am out of the taylor play. I am looking to exit Taylor around 1392 if it looks like it will make there. Sooner if not. You may call my wedge a descending triangle. That is fine call it whatever you want. Tech triangle is probally more correct. Just thought I would add this before anybody gets all out of shape over my labeling. The point is it is a continuation pattern in this case.

5aa710e3961e1_ESScalpingOpportunities3-29-2012.jpg.871d04669cf00b079cc8cac0fefccf9e.jpg

Edited by WHY?

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Dear Silver

Dont worry about any grammatical errors. I would hate to try and post in Apache.

ON A LESS SERIOUS NOTE

I used to watch Roy Rogers and Silver in the late 1950's

Silver saved Roy lots of times!!!

Silver also collected the arrowheads of broken arrows and fitted them to new shafts .

Do you see the confusion?

Talor used arrows, not arrowheads.Or maybe he used arrowheads , not arrows..

King regards

bobc

 

Perfect comparison,I see the very point.It is indeed these nuances that cause most trouble for me.Ok,so the correct word is arrowheads then:)

 

Mit,

I think the measurement from buyday low to sell day instead of short sell high is to catch the main thrust,that will, if big enough, cause the late buyers to jump aboard and give a higher probability for a higher high on short sell day.I understand it as a tool to anticipate.However,what you say sounds very plausible and could be thoughts that lead T to the way of measuring.

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One other word. I don't leave all these drawings on my chart as the day progresses. Most of them I don't even draw on the chart as the patterns are obvious to me. In the details sometimes i get lost seeing the forrest for the trees hence my two MA's to help me quickly determine the intermediate trend, the immediate trend, and price location in relation to the trends.

 

If I do draw a pattern when price leaves the pattern then it is, usually, very quickly off my chart. I lke a clean chart. Just 5 minute and the 2 MA's. If there are any lines I may leave on for a while they are resistance and support which should be obvious as to why.

 

I wish the Taylor trade would get over with I have something else to do.

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Here are some explanations. May help. If not just disregard.Gotta run as soon as I am out of the taylor play. I am looking to exit Taylor around 1392 if it looks like it will make there. Sooner if not. You may call my wedge a descending triangle. That is fine call it whatever you want. Tech triangle is probally more correct. Just thought I would add this before anybody gets all out of shape over my labeling. The point is it is a continuation pattern in this case.

 

Hi WHY

Nice chart and explanation

Lots of patterns.

Wheres the TTT?

I am NOT criticizing you

I am looking for guidance

regards

bobc

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Here are some explanations. May help. If not just disregard.Gotta run as soon as I am out of the taylor play. I am looking to exit Taylor around 1392 if it looks like it will make there. Sooner if not. You may call my wedge a descending triangle. That is fine call it whatever you want. Tech triangle is probally more correct. Just thought I would add this before anybody gets all out of shape over my labeling. The point is it is a continuation pattern in this case.

 

I agree with the Taylor comment on your chart regarding buy violation (post #156)

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Why? Who needs Taylor. A price chart is all you need. There is no grail. Not even price action is the holy grail. It can be misread and more than often than not it is misread. In fact price itself is a lagging indicator even though many times it is called a leading indicator. May I ask what are you trying to accomplish by looking at price?
I was being sarcastic in the little skirmishes with Mitt. I may look and sound like a jack rabbit jumping around but really i am a plugger. Anyone who can can plug thru Taylors stuff for years and Brooks stuff ...well you can't be flippant. I do get bored waiting on Taylor plays so i decided ...why get bored... learn to do some scalping. Hurst really makes me think about these things. You know how much more money can be made grabbing a good part of the little cycles as opposed to the buy and hold all day long or into the next day. So me thinks ..well why can't I do both? Take my longer taylor position but also play the scalps and I ain't sitting there twittling my thumbs waiting for a Taylor play. I am doing something profitible as I wait. Of course, that requires a good scalping methodolgy. So I looked around and found Brooks. His first first book was very hard (ike Taylor) He has three out now and they are a series and easier to study but you still gotta want to dig into them them to understand his concepts and like Taylors stuff you have to really get into his mode of expression to follow his logic and thinking process, but I will say it is well worth it. I have studied Taylor since before year 2000 and every time I read it I get inspired usually with new ideas or someting I had read before really sinks in that didn't on a previous read. Same on re-reads with Brooks.

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Hi WHY

Nice chart and explanation

Lots of patterns.

Wheres the TTT?

I am NOT criticizing you

I am looking for guidance

regards

bobc

Bob, I don't chart out Taylor grafically like Mitt does as I don't have to do that because I have my own software that keeps me on track as far as cycles and certain key numbers..etc. I will try and give an explanation of my Taylor play today.

 

3-28 was a Taylor buy day (per my count), There was a Taylor short play to be made on 3-28 with the high being made first. I missed it (won't go into detail as to why right now). But it was there. Now 3-28 closed somewhat weak. My software labeled 3-29 as a Sell day. The weak close of 3-28 alerted me to watch for a BV (buying day low violation) per Taylor. Hence, today 3-29 I was waiting for a decline to emerge early in the session. That would have also alerted me to possible multiple scalping opportunities. Taylors rules state that on a BV you go long when tape gets dull on a decline below the low of the previous buy day. Since the previous buy day was 3-28 and the low was 1392 then according to Taylors rules I would go long as close to the bottom of the decline below 1392 and then I must exit that long on any rally back up to 1392 or hang on for more if the rally is especially strong. So I am long at 1387 and waiting for a rally to 1392. That isn't much but that is what you try to capture on a sell day BV. Sometimes the market comes roaring back and one can hold a sell day BV for much more profit. Right now we are in a range just below the 1392 level. If price doesn't break out of this range soon I may just exit the long and grab what I can as I have many things to do today. Hope this explanation helps.

 

I may post something tonight on Hurst. Some times the net profit on scalps can surpass the Taylor play of the day.

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I was being sarcastic in the little skirmishes with Mitt. I may look and sound like a jack rabbit jumping around but really i am a plugger. Anyone who can can plug thru Taylors stuff for years and Brooks stuff ...well you can't be flippant. I do get bored waiting on Taylor plays so i decided ...why get bored... learn to do some scalping. Hurst really makes me think about these things. You know how much more money can be made grabbing a good part of the little cycles as opposed to the buy and hold all day long or into the next day. So me thinks ..well why can't I do both? Take my longer taylor position but also play the scalps and I ain't sitting there twittling my thumbs waiting for a Taylor play. I am doing something profitible as I wait. Of course, that requires a good scalping methodolgy. So I looked around and found Brooks. His first first book was very hard (ike Taylor) He has three out now and they are a series and easier to study but you still gotta want to dig into them them to understand his concepts and like Taylors stuff you have to really get into his mode of expression to follow his logic and thinking process, but I will say it is well worth it. I have studied Taylor since before year 2000 and every time I read it I get inspired usually with new ideas or someting I had read before really sinks in that didn't on a previous read. Same on re-reads with Brooks.

 

 

Dear WHY,

I have spent over two years studying Brooks.

I know price action backwards.

And I make a consistant profit.

But I dont make a million!!

There is something missing.

I believe all markets move in WIDE consolidation , between reports/news/ results/politics, etc

Its all random for weeks and months.

WIDE sideways movement

And you can trade this WIDE sideways movement profitably.

But you wont make a million

The market will suddenly make a BIG move and then go back to sideways

How do I find that BIG move.?

TTT?

Patterns?

Fundamentals? Hello.

Kind regards

bobc

 

And then

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I was being sarcastic in the little skirmishes with Mitt. I may look and sound like a jack rabbit jumping around but really i am a plugger. Anyone who can can plug thru Taylors stuff for years and Brooks stuff ...well you can't be flippant. I do get bored waiting on Taylor plays so i decided ...why get bored... learn to do some scalping. Hurst really makes me think about these things. You know how much more money can be made grabbing a good part of the little cycles as opposed to the buy and hold all day long or into the next day. So me thinks ..well why can't I do both? Take my longer taylor position but also play the scalps and I ain't sitting there twittling my thumbs waiting for a Taylor play. I am doing something profitible as I wait. Of course, that requires a good scalping methodolgy. So I looked around and found Brooks. His first first book was very hard (ike Taylor) He has three out now and they are a series and easier to study but you still gotta want to dig into them them to understand his concepts and like Taylors stuff you have to really get into his mode of expression to follow his logic and thinking process, but I will say it is well worth it. I have studied Taylor since before year 2000 and every time I read it I get inspired usually with new ideas or someting I had read before really sinks in that didn't on a previous read. Same on re-reads with Brooks.

 

We actually have a quite a bit of common ground. I like to get a good swing position and be able to do day trades while i'm holding it.Scalps are for me too small time frame,but the point is if you can see/take money go for it.

Also i like your analysis last night of how today might play out.It is,so far the kind of day you anticipated.One question you didn't answer is the ranges and levels..is that ES or cash?

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Dear WHY,

I have spent over two years studying Brooks.

I know price action backwards.

And I make a consistant profit.

But I dont make a million!!

There is something missing.

I believe all markets move in WIDE consolidation , between reports/news/ results/politics, etc

Its all random for weeks and months.

WIDE sideways movement

And you can trade this WIDE sideways movement profitably.

But you wont make a million

The market will suddenly make a BIG move and then go back to sideways

How do I find that BIG move.?

TTT?

Patterns?

Fundamentals? Hello.

Kind regards

bobc

 

And then

 

Bob..tut tut,don't you know that in order to make a million one must begin with 2 million.Have you not read your trading 101?

Heres a few ideas

if Prechter is short,then remortgage your house and go full in long.

Next time you see all time highs coupled with the words "the sub prime market is contained" and "this time it's different"

Remortgage your house and go full in short

If jim cramer says don't sell bear stearns bear stearns is fine..

Remortgage your house and go full in short

 

the correct maths is

dumb idiot-correct analysis + 2xmortgage = 1 million :):cool:

 

Then book a round of golf with your stockbroker...;)

Edited by mitsubishi

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Dear WHY,

I have spent over two years studying Brooks.

I know price action backwards.

And I make a consistant profit.

But I dont make a million!!

There is something missing.

I believe all markets move in WIDE consolidation , between reports/news/ results/politics, etc

Its all random for weeks and months.

WIDE sideways movement

And you can trade this WIDE sideways movement profitably.

But you wont make a million

The market will suddenly make a BIG move and then go back to sideways

How do I find that BIG move.?

TTT?

Patterns?

Fundamentals? Hello.

Kind regards

bobc

 

And then

Finally a bit of a breakout. watching it closely as I type. My Taylor target has been met but I might get greedy.;)

 

So you have read brooks! Good! have you studies his three new books. Much much better in my opinion.

 

Bob I am not sure I can answer your question. Probally, because I have never really been interested in the bigger moves over several days or weeks. However, I would refer you to what Taylor called "swing trading" which is really long term trend trading. You can find info on this is chapter XIV of his book and a few other places in his book. He also used a thrre day method discussed in chapter XIII. This I call the swing method. He also used a daytrading method. My interest has always been in the day trading and swing trading methods espoused by Taylor. I have not tested his Trend Trading method. Why don't you study chapter XIV and other parts in the book that refer to it and test it out since you are interested in the bigger moves. I would be interested in knowing what you find out. If you have any questions regarding the methodology of his Trend Trading (remember he calls it swing trading) the fire away and any way I can help I will. Somewhere I have a post about the page numbers that discuss this loger trend trading method of his. Might be in this thread or another taylor thread???

 

I am out of the Taylor position at 1393.50. I just can't keep watching it. I have to go. May post some more stuff tonight. 6.5 points. It will probally go into a flag here and keep on up as price is now above both 89 SMA and 20 EMA indicating bias is slightly to the long side but I would rather see 20 EMA above the 89 and price a good distance above them to. But I just can't stay here waiting and looking. It could even reverse back down. Who knows?

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We actually have a quite a bit of common ground. I like to get a good swing position and be able to do day trades while i'm holding it.Scalps are for me too small time frame,but the point is if you can see/take money go for it.

Also i like your analysis last night of how today might play out.It is,so far the kind of day you anticipated.One question you didn't answer is the ranges and levels..is that ES or cash?

It all ES. Are you still holding the remainder of your 1398 position? Unless you can see some upward momentum this afternnoon it may be a tough row to plow. I might would take anything the market would give as if you are still holding it then you have been in a drawdown of over 10 points. But don't listen to me. Just as soon as I say something like this the market will soar. The perversity of the markets! I am outa of here. Gotta g.

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It all ES. Are you still holding the remainder of your 1398 position? Unless you can see some upward momentum this afternnoon it may be a tough row to plow. I might would take anything the market would give as if you are still holding it then you have been in a drawdown of over 10 points. But don't listen to me. Just as soon as I say something like this the market will soar. The perversity of the markets! I am outa of here. Gotta g.

 

Still holding...looks bullish to me 2nd half of day and if we close down slightly today then that will be three down days in a row,more likely up friday.But who knows? I was hoping i could add around 1385-87 but always doubted it would get there today.So far i'm happy with my tactics.

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So far i'm happy with my tactics.
Well I'll be. I don't think I could stand the market against me nearly 12 points. I guess that just shows you there are different types of traders. I would have jumped ship and waited for better positioning, something I think Taylor would have done also. So far you have taken alot of risk for little reward but payoff may come tomm. I hope so, as it hurts me to think about it..12 points! Maybe tomm you will make a killing and it will have been worth the wait and the pain.

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I am out of the Taylor position at 1393.50. I just can't keep watching it. I have to go. May post some more stuff tonight. 6.5 points. It will probally go into a flag here and keep on up as price is now above both 89 SMA and 20 EMA indicating bias is slightly to the long side but I would rather see 20 EMA above the 89 and price a good distance above them to. But I just can't stay here waiting and looking. It could even reverse back down. Who knows?

Well it looks like it did what I anticipated. I missed out on another 5 or 6 points as I see that it formed a wedge/flag then broke out again to the upside. That would have been at least 11 points captured on the Taylor BV today if I could have stayed here trading but anyway I'm OK with capturing 6.5 Taylor trade plus the scalps.

5aa710e45d588_AfternoonscalpingOpportunitiesES3-29-2012.jpg.fc2f9e2bc0189b2ba61d14cfe6c9656e.jpg

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Well I'll be. I don't think I could stand the market against me nearly 12 points. I guess that just shows you there are different types of traders. I would have jumped ship and waited for better positioning, something I think Taylor would have done also. So far you have taken alot of risk for little reward but payoff may come tomm. I hope so, as it hurts me to think about it..12 points! Maybe tomm you will make a killing and it will have been worth the wait and the pain.

 

 

Pain? are you serious? I closed half my position for 7 points gain last night,and the other half is 5 points in profit.Had the market dropped to 85-87 i would have got an entry which would have shown some kind of bounce there where i could have got flat at the average price 92.5 or some other variation of managing a position.It is called price rotation.You couldn't stand that kind of move and Taylor may have done something different...ok,as you say there are different types of traders,and they use different time frames.You had to dig out a daily chart yesterday to remind yourself what the context is.It's pretty simple it's a bull market.I trade the big picture.I've traded defensively,within my plan,risk tolerance and my analysis.I laid every step out in the last few posts,and so far i'd say it's going pretty much to plan wouldn't you say? If i zoom in to a lower time frame,looks to me like we got a few bears trapped today.I'd hate to be a bear in a bull market i think they'd know more about pain than me this year.

I spent 2 hours cleaning/polishing the car in the beautiful weather today.I didn't notice any pain at all.Still,i'm glad you're keeping you're fingers crossed for me.

Edited by mitsubishi
spelling

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Well guys I may disappear for a few weeks. I gotta do some other things and all this posting takes time and I ain't very bright so I have to peck the keyboard. I'll check back in occasionally and maybe add a post here and there. Just study the charts and posts and you will see how I trade Taylor and scalp at the same time. Why let time waste? Do both, if you think you might like scalping. Anyway, hope something was said that helps someone. Trading can be kept simple but it is hard work. I try to keep it simple for me and uncluttered but use these techiques that allow me to scalp, and trade the Taylor moves, at the same time.

 

Here is forecast for tomm. It is a SS day in my Taylor count. I see it trading up first. It may or may not penetrate the high of 3-29 of 1404 but who knows. If it trades up early and gets close to 1404 I read the tape using techniques I gleaned from Arms, Taylor, Gann, Williams, Brooks, Droke and a few others. That would take too long to explain but in short I let the tape dictate to me my entry point. My pre-market Taylor analysis gives me a view on what may happen and helps me determine the day of the cycle. But the tape tells the real and final story so I fine tune my entries to it as I make my Taylor entries and exits. Anyway, the Taylor strategy calls for shorting any penetration of 1404 once the tape indicates it to be good to do so. My forecast give three possible highs with the highest being 1407.16. IF the price action takes place early in the session. If it doesn't make it early (like during night session or first couple hours after day session) then short when the decline begins but that will take some tape reading skills to determine that. If it makes or penetrates the high in the night session and looks like it may continue on up then I would wait and see how it goes and maybe even wait for the day session before shorting. However, if I think the high was made in the night session I will not hestitate to short in the night session. Whatever, happens if you take a short position on a SS day always be flat by the end of the day. That is Taylors rules. If there is no decline then pass on any Taylor trade for that day unless you have a mechanism that lets you recalculate the days on a the fly and work on the new info.

 

My scalping techiques .....well most can be found in Brooks 3 volume set. One can then make minor modifications/adjustments. Anyone interested in scalping 1 to 3 points multiple times per day ....well I would strongly suggest they study Brooks well. Read his books several times. Don't buy his first book. Very hard to understand. Go to Amazon and order his new three volume set. You can also get them on PDF from Wiley Books, I believe. Mark them up. Study them for months. Next trade his concepts on a sim for 3 to 6months every day until you can get convinced. Then go live. He claims all you need to make money in the markets are in his 3 volume set. That is a bold statement. But, he is correct. However, it does take time and practice to get good at it (Brooks methodolgy). Don't think you will read the 3 vol in 3 weeks and start make money trading. You will have to study his techniques over and over and trade on a sim over and over until they become second nature. Please don't forget to use the 89 SMA and the 20 EMA if you scalp. The first is a concept I give you to help in scalping. Please use it. Don't just trust your eyeballs. Watch the relationship between the 2 MA's, their relationship to price and the distance they are from each other and from price. They tell a story about the trend and you generally want to be scalping the trend. They will give you some confidence if you feel a bit disoriented one day while scalping. If you scalp counter trend then you better be nimble as jack on your feet and don't take much. Grab what it gives you and move on. Scalping WITH trend produces much more high probability, and safe scalps.

 

To Learn Classical Tape Reading then read and study:

 

1) Tom Williams (The Undeclared Secrets that Drive the Stock Market on.. the net as a pdf or buy his book Master the Market..you don't need the VSA software. Just learn the concepts)

 

2) Gann (the Truth of the Stock Market Tape..can be gotton at libraries)

 

3) Tape Reading for the 21st Century by Cliff Drokes..buy directly from his website as Amazon will charge you an arm and a leg. Cliff has it for under 20.00)

 

4) Brooks books for a view on what I would call classical tape reading bar by bar (thats not pub by pub for you UK people) using candlesticks. Of course, his books also to learn great scalping techiques. He also has a website ..brookspriceaction I believe it is.

 

5) Rollo Tape and other books by same author

 

6) Of course, the Livermore Remin. book is a great read and worth reading multiple times

 

8) ARMS Equivolume for some concepts on Volume. I think there is a ARMS website with some free downloads. One download is called Armsbookwcontents.pdf. I don't remember the site. If you can't find it with google send me a private message and I will help.

 

8) Finally don't forget Taylor. His book can be found at Traders press but I also like the pdf version (can be bought at Traders press and much cleaner than the free scanned version floating around on the net) and use the free PDF-Viewer program (google download and install) to mark it up and make notes on my digital copy. My hard copy is falling apart after so many years of reading and marking.

 

All of the above are worth studing to learn the art of tape reading from a chart as opposed to tape reading on the DOM or time and sales..etc. These concepts propounded in these books will help you tremendously in developing a skill for tape reading from a chart which will in turn help you pick correct entries for Taylor trading. If you pick wrong entries for Taylor trading you will be forced to go through big drawdowns. If you get the day of the cycle wrong you won't make as much money as you could have made but Taylor will still work for you. I just can't stand big drawdowns. I do not like the pain. I grovel over a substancial loss.. paper or real. I hate losses.. paper or real. I know I have to accept them but STILL I do not like them and try my hardest to have as few as I can but when necessary I will quickly take a small loss knowing I can always get back in. And small losses don't eat at me. I have had my share of big losses in my journey and they eat at me for days and weeks on end. Tape reading from charts is a skill that takes time to develop. Give yourself 2 to 3 years to practice it well. But, you need the basic concepts planted in your brain. The books I just mentioned will give you those concepts. You have to plant them in your own brain. Nobody else can, or will, do that for you. Once they are planted there, and you have practiced them long enough, they will become second nature..like riding a bicyle. You will not have to think about every concept. Your brain will drive the car and do that for you. But that will take a few years to develop IF you work hard at it. But, the payoff is worth the effort. One more thing. Pick one or two things to trade and learn those instruments well. Do not jump around from market to market. Pick one or two as you plant the conepts in your brain and practice them. Why? Your brain will automatically learn the style of movements in those markets and will begin to correlate the concepts you are learning and apply them in that particular market. If at first, while learning the concepts, you jump from market to market it will take you much longer to learn how to apply them. After a few years you will be able to apply them in most any market. Spend alot of screen time just watching your one or two markets with nothing but 5 minute chart and the two moving averages, with volume. Please overcome any "I don't need volume to trade mindset"..Alot of that is out there on forums but please just think about it. Volume represents money..big money. Why would you want to ignore that element in your trading? Don't try to trade at first. Just get the screen time in. Hours and hours. Days and days. You are training your brain to pick out the patterns of that particular market. Then, when you begin to apply the concepts you have been studying you won't have to be conciously trying to decide if this move will continue or not. Your brain will let you know the probabilities. Get alot of just screen time in. If you work a regular job just record the sessions and watch them on weekends over and over...not even trying to apply watch you are learning. That will come later. You are just training your brain to pick out and read the movements of one or two instruments. Later you will apply what you are learning on a sim and then after that live

 

Look guys if I can do it most anyone can. I didn't finish college. I read alot but but am not that smart. Really. Just your average bloke as you people in the UK might say.

 

Trade well, see you around.

5aa710e4610e3_ForecastESfor3-30-2012.jpg.fe16748d9c53d04c45167fabe9dfe5c0.jpg

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Pain? are you serious? I closed half my position for 7 points gain last night,and the other half is 5 points in profit.Had the market dropped to 85-87 i would have got an entry which would have shown some kind of bounce there where i could have got flat at the average price 92.5 or some other variation of managing a position.It is called price rotation.You couldn't stand that kind of move and Taylor may have done something different...ok,as you say there are different types of traders,and they use different time frames.You had to dig out a daily chart yesterday to remind yourself what the context is.It's pretty simple it's a bull market.I trade the big picture.I've traded defensively,within my plan,risk tolerance and my analysis.I laid every step out in the last few posts,and so far i'd say it's going pretty much to plan wouldn't you say? If i zoom in to a lower time frame,looks to me like we got a few bears trapped today.I'd hate to be a bear in a bull market i think they'd know more about pain than me this year.

I spent 2 hours cleaning/polishing the car in the beautiful weather today.I didn't notice any pain at all.Still,i'm glad you're keeping you're fingers crossed for me.

If you are saying you didn't go thru no 10 or 12 point drawdown then I guess I must have been reading your posts wrong or got mixed up, or something. I was thinking at the time you sold last night that you might have been 2 or 3 points up and that you carried the rest of your position through this draw down today. But I take your word for it. I must have just gotton mixed up on your posts. No big drawdown and you are in the money. Good trading. Hope the rest of your position makes you a bundle tomm. Hey Mitt, good talking to, and interacting with you on this thread. Always good to bump up against others ideas and concepts. We never stop learning do we? Your concepts can help other traders. I hope mine can help someone too. See you around.

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If you are saying you didn't go thru no 10 or 12 point drawdown then I guess I must have been reading your posts wrong or got mixed up, or something. I was thinking at the time you sold last night that you might have been 2 or 3 points up and that you carried the rest of your position through this draw down today. But I take your word for it. I must have just gotton mixed up on your posts. No big drawdown and you are in the money. Good trading. Hope the rest of your position makes you a bundle tomm. Hey Mitt, good talking to, and interacting with you on this thread. Always good to bump up against others ideas and concepts. We never stop learning do we? Your concepts can help other traders. I hope mine can help someone too. See you around.

 

Just to clarify and confirm what i posted earlier.........

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Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair     Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. dont forget- like subscribe Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com     View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com
    • Waiting for one constructive comment from you guys..anyone dont forget to like and subscribe
    • enjoy.. good profits in forex dont forget to like and subscribe          
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