Hello Liam, glad to hear from you!
I understand now about the articles. Because the link was missing, I was thinking they are new articles.
The old ones, I have most of them clipped into a onenote notebook, I’ve studied them, underlining the important parts, adding my observations, etc. They are safe in my computer (I even have a backup), so it doesn’t matter if you take them down 🙂
I Imagine writing new books and articles should be very time consuming.
But I see some reason behind it.When you finish it will provide a passive income, which is always welcome. But in my view, the most important benefit you’ll draw from it is all the things you’re trying to explain will be clearer and better structured in your memory, and that’s invaluable.
If I may offer a bit of advice regarding how to explain things in your articles: you could try putting some numbers or letters on on your chart.
This way you can talk about pin bar 1 at the level “a”, about the move between 1 and 2, etc etc. It’s a small thing, but it is a lot easier to read this way, and maybe it would to write about.
You did something like that in “Finding True Supply And Demand Zones Using Oanda’s Order Book”, in the second chart, and it was easier to read.
I’m pretty happy about how backtest was going.
As always I had a difficult start, there were too many trees and I couldn’t see the forest. But in the end the puzzle was coming together rather well, I attached some screenshots 😀
I was risking more than the customary 1%, but that’s a rule I don’t believe in. maybe it was made for people without an edge, or maybe it was made by the brokers to be sure the new traders are bleeding for a long time. With a very big account it may work well, but even then, now that we have leveraged accounts, why would somebody keep all his funds with the broker?
For example, it’s ok for somebody with 10000 in his account to risk 100 every trade, but somebody with 1000 in his account (and 10000 under the mattress, reserved for trading) risking 100 every trade is crazy, and over trading, and over leveraged? i wouldn’t think that… It is a matter of minutes now to add funds to an account.
What’s good in being able to lose 100 trades in a row? that’s only for stupid people. If I were to lose more than 20 I would be back to study, testing or whatever else, not trading with 1% at risk.
I only look at the amount of money at risk, in euro, not in % (well, I know the % but it doesn’t matter now). If I’m okay with losing 50 € several trades in a row I will risk that, no matter if the account is big or small.
For testing I started with a 5$ risk and then, when winning a certain amount, I was increasing to 10, then 20, then 30.
My trading method is simple, a mix of what I’ve learned from you, from Lance Beggs and things I know from experience or various sources.
First, I identify structure on higher time frame (H1). Support, resistance, supply demand zones etc. I look for places were reactive traders, or breakout traders, or contrarian traders could be caught on the wrong side of a trade. That’s easy, I was one of them until short time ago, so I know how I used to think, haha.
The most important (and most difficult at the moment) is to follow and read the price action bar by bar, to be aware of what’s happening in the market and what side is in charge at the moment.
I try to identify places on chart where banks or institutional traders entered the market, where they took profits, etc.
I attached a chart with the GBPUSD trades from last Friday.
We had a downtrend, the last swing down I marked with a thick red line. Then the marked entered a consolidation phase, or a complex pullback. Anyways, bulls weren’t showing much strength.
Then, right at London open, we had candle 1, which caught my attention.
A sudden bullish move, going to the last important swing high. I put a sell order under candle 1, it got triggered but the trade wasn’t going well so I lost a few pips.
At 2, we had a similar scenario. I put a sell stop under the last bullish candle. All the retail traders who bought there were trapped and their exists pushed the price down. I was soon in profit. After the congestion at 3, when price started to fall again I moved my SL over candle 3.
I was stopped out but I recovered the loss from the first trade.
There I made a mistake, I should have exited sooner.
At 4 the same scenario.
RT buying a bullish breakout but the price melted, it couldn’t sustain over the resistance. It was clear for me the bank traders are selling in that area and the price will crash. It was the third time they sold, so maybe they were planning for a big move.
I haven’t got an entry at 4, price action was to choppy, but I was alert. At the point market “a” some suckers were buying again and that was my chance. I put a sell stop under candle a, with a 10 pips SL.
Price crashed, triggered my order, broke the support with ease, so I put my SL at break even. There was a bit of pause when price reached the swing low between 3 and 4 but I didn’t add to my position, I couldn’t find a clear opportunity.
At “b” it was a good pullback toward the broken support where again I should have added to my position, but I wa having lunch at that time and came a bit too late to the computer.
When price stalled at “d” I moved my SL at “c” and later I was stopped out for about 70 pips, 7 times the amount I risked.
I wasn’t really trading, just a bit bored with too much study so I wanted a bit of live action to check in practice what I’ve learned. I wasn’t risking big, only 10 euros each trade on a account a bit bigger than 1000, so approx 1% at risk.
Roughly that’s the method I’ll use to day trade the small account. I will look at EURUSD; USDJPY and GBPUSD. Won’t trade all 3, but depending on the general structure and how choppy the price action is I will choose a pair for the day.
As I told you in a previous email, I’m looking to implement a method of exiting the trades if they don’t prove themselves correct.
Until now I was waiting for the market to prove me wrong by touching my SL. But my method relies on other traders being wrong and their exits pushing the price in the direction I trade.
If this doesn’t happen fast, maybe my idea or my timing was wrong and it is better if I take my loss and get out, even if the price didn’t reached my SL.
I will keep using a SL as usual and sure there will be situations when I’ll take a full stop, but I think on average my loses will became smaller, maybe half smaller. That would have a good impact on the profit and on the equity curve. Maybe another side effect will be that it will allow me to trade bigger positions, but with the same loses, and with bigger winners…
I’m also looking for a way to add to my trades. It won’t be possible to add to every trade, but when possible I want to squeeze as much profit as I can.
Imagine a clear downtrend on the daily chart, and then 2 bullish days.
Of course on my trading timeframe the trend will be up, but I won’t have big expectations from my long trades. 2 or maybe 3 times the amount at risk would be perfect. But in the 3rd day the uptrend slows down, the bears start to appear… maybe it forms a supply zone. When a bearish setup presents itself, I keep in mind the possibility that the daily downtrend may be about to resume.
So I will leave the take profit open for my short transaction.
If it is proved correct and the price moves down maybe the H1 chart shows bearish signs and I will manage the transaction on H1 chart instead of M5. Kind of a domino effect, you get the idea. A 200 pips move (nothing spectacular on the daily chart with a bit of patience) could bring 20 times the amount risked, if I managed a short with a 10 pips SL.
Hope what I wrote earlier explains how I backtested and how I want to trade. For the big(ger) account I’ll use the same strategy, on different timeframes. I’ll trade H4 charts, following more pairs. I’ll see later how is more profitable, but I’ll like in time to use more the bigger time frame charts, so I’ll have more time to fish and learn to play guitar, haha.
Anyways, I stopped doing back test trades.
If you read the book I sent you , YTC Price Action Trader volume 5, page 30, he recommends a very interesting way of training.
No trades at first, just looking at the markets, trying to understand a lot of details.
I discarded this at first and started to test.
But then I’ve read some books from Daniel Coyle, “The Talent Code” and “The Little Book of Talent”. Excellent books about a better way to practice and get good at something. That convinced me to do what Lance recommended, so here I am, taking screenshots of old charts, drawing S/R levels, S/D zones, annotating them, observing details, etc etc.
Forex tester and OneNote are my most used software at the moment…
Slooooow and boring like hell at the begining, but later I’ve started to see the benefits.
There are so many ways the price can interact with a level and no teacher can explain them all to me. But now I’m learning by myself, and I think I’m slowly getting better at reading the market and finding the imbalances in strength between bulls and bears.
I’m not sure I’ll be able to complete this stage until next year.
I’m a bit disappointing about it, but I know it’s better to start well prepared, so I’m ready to wait as long as it takes, I know I will make up for the “lost” time.
Cheers, have a good day!
My Response:
Hello,
You’re absolutely right!
The articles and books have been incredibly helpful in clarifying my understanding of trading concepts. Before creating the website, I had hundreds of pages of handwritten notes capturing my learning process. Now, with the site, I have a centralized resource to revisit.
It’s made everything so much clearer!
Appreciate your tip about including more articles within my content. Another reader mentioned this recently, so I’ll definitely incorporate that into my future writing.
Your GBP/USD trade analysis was spot on!
It’s great that your overall thinking and analysis led you to a winning trade, even with a few initial losses along the way. I like your strategy, too. My only slight concern is the use of support and resistance levels. I find them a bit tricky because you can’t be absolutely certain if a drawn level represents true support or resistance.
It’s possible to misinterpret price action at those levels, leading to false signals.
Back-testing is something which I’ll have to more of.
There are some things now which I want to test but I just haven’t got around to it. For example: weather ther the significant swing lows and highs that form as a result of the bank traders placing trades during reversals form around significant round numbers ? because if they do, it can aid in understanding where any additional swings might end up forming during reversals.
One of my all-time favorite traders is Victor Niederhoffer.
He’s a fascinating figure who used statistics to uncover correlations between real-world events and stock prices. In his book, “The Education of a Speculator,” he even mentions finding a link between the construction or naming of new US sports stadiums and stock market performance!
It’s incredible the kind of connections he explored. I highly recommend his book, especially since you enjoy testing and analyzing data.
It might spark some new ideas for your own research.
After all, Niederhoffer was a tremendously successful hedge fund manager, so he clearly knows a thing or two about the markets.
I completely agree with your perspective on the 1% rule.
While risking enough to withstand 100 consecutive losses seems excessive, it does have a psychological benefit. Knowing you can survive a significant losing streak helps alleviate pressure and prevents emotional decision-making, which can lead to even more losses.
On the other hand, risking a larger percentage per trade intensifies the impact of each loss, potentially creating a cycle of anxiety and poor choices.
The ideal risk level depends on your strategy and trading frequency.
If you’re trading infrequently, like with daily pin bars, the risk of a long losing streak is lower, so you might be comfortable with a slightly higher risk per trade.
Adding to trades is definitely a tricky maneuver.
When it works, the profits are immense, but timing those additions perfectly is challenging. I agree, keeping the added trade sizes consistent is a smart approach. It provides more flexibility in entry and stop-loss placement, reducing the pressure to get everything exactly right.
Cheers,
PAN.