I spent the first couple years looking for the holy grail through indicators, fibonacci, gann, elliott wave, fancy expensive indicator packages for ninjatrader, systems from the “gurus”, etc …

Recently I spent a couple months with Al Brooks’ new books, studying them. For all you pure price action traders out there, this is a great price action blog that I highly recommend. I feel that Al is the real deal and his new books are way easier to grasp then his first one.

Some important things that I learned from Al:

• the day is controlled by program traders, if you’re trading on the 1 minute to 15 minute (or equivalent range bar or renko), you’re up against computers
• at the close of every bar, there are buyers and sellers (programs)  coming in. According to Al, 80% of the time (on these smaller timeframes) your chance of making 20 pips with a 20 pip stop is 50:50.  In rare moments you can get an edge of 70% or higher, he considers a 60% edge to be substantial
• as a trader you are up against the smartest people in the world, institutions have huge amounts of money to hire the brightest people to take YOUR money

Back to the title of my post. I started trading for a while using some methods from Al. Sometimes it worked absolutely brilliantly. Other times it didn’t work at all. (of course he says that, he feels a 60% chance of winning is fab and it is, most casinos only have a 55% edge).  The key is consistency. After a little while I needed to man up and get real about my strengths and weaknesses.

What I learned about myself trading Al’s style (besides the fact that it doesn’t work at all as good with FX in my opinion — he trades eminis) is that I am just not great at trading discretionally. Because I want the action, I will see things the way that I want to see them – not as they are.  I also don’t want to be glued to the screen all the time. He spent 20 years in his room staring at his laptop. I want to spend the next 20 years traveling the world staring at beautiful locations…

So, then I went back to what has always made sense to me, getting off of time and smoothing out price.

One of the mistakes that I made earlier on was staying on too low of a frame. Now I only work with range bar charts that are 20 pips and higher.

Through divine synchronicity, one day a couple months back I was looking for an indy and found a small nugget of info that made a huge difference for me. It was the straw that broke the camel’s back, the camel of limitation. I like action and now I get it, I’m always in. (almost always).  More to come… Peace.

The vast majority of metatrader brokers will scam you. They might not do it right away, months can go by with good service but then one day they get you. I’m sure you have heard about this in all types of online forums. ForexPeaceArmy does a nice job of reporting bad brokers and also filing complaints on behalf of users.

Personally I use Oanda for FX and am very satisfied with their service. I don’t utilize their charting, mainly I use NinjaTrader and for some purposes MT4. Another broker I use for trading indexes is Capital Spreads and I’m happy with them so far. Nice tight 1 pip spreads on the 5 markets that I trade: Euro, Aussie, Yen, FTSE, DAX.

PS. I’m not promoting the plugin that he’s offering, I haven’t checked it out as I don’t use MT4 for my trading. Those types can be useful if you do use MT4 but if you’re computer crashes or you lose internet connection you could be in the market without a stop…

Disclaimer: This trade may or may not work out, if you decide to take any action based on this it is solely YOUR responsibility.

Here’s a couple more reasons why I’m feeling good about this trade:

Euro 50 Range Chart
Dollar Index 50 Range Chart

Both look like they have completed their Spike and Channel patterns.

In the 3 years that I’ve been trading forex and learning to trade, there’s been a lot of lessons – each with varying degrees of usefulness. One of the things that has really helped which I heard quite a few times before I implemented it, is to focus on trading just one pair at a time. As newer traders we’re wanting to trade our way to financial freedom and there’s this impulse to trade multiple pairs so that there are more opportunities. The challenge with this approach is that unless our trading system is truly a dynamite butt-kicker which works in all market conditions, the level of quality setups drops.

Click on this link to see my multi time frame and renko charts. This is all for the Euro, from the top left is the 3 minute, 15 minute, 1 hour, 10 pip renko, from the bottom left is 20 pip renko, 4 hour and daily. (I took this screenshot on my laptop so it’s cut off at the bottom).

This gives me a great overview of what’s happening with the Euro which I like to trade because the spreads are super low (0.9 with Oanda) which is great for scalping , it has a great daily range (lots of movement each day) and I can also watch the dollar index for additional info.

We are bombarded with so much information that it is overwhelming and it is confusing at first to do multi-time frame analysis because the signals seem contradictory.

As you focus and watch from this perspective more and more you will get used to the rhythms of the market. If you’ve been fortunate enough to gain some experience slugging it out and taking your losses, you’ll start to get a feel for the personality of the pair.

There’s a great saying “scared money never wins”, the markets kick our butts because of greed and fear.

Everyone wants to sell tops or buy bottoms and make tons of pips but remember picking bottoms makes for stinky fingers. So many traders were short on the Euro last week and it’s just kept going up and up and up. If you were watching all these charts at once and trading what you see, it’s pretty hard to get not see that the market is going up.

One of the things that hurt me the most before with trading is that I would make trades with big stop losses risking say 3 or 4% of my account, but then as the market moved I would move my stop thinking it couldn’t go up anymore and then it would just keep going up and up and I would take a big loss. I don’t imagine I’m the only guy out there who’s done that. Making sure that I never do that again has been very helpful in keeping my account from suffering any big losses.

There’s a cool free ebook by Rob Booker available on the net called Strategy 10, it’s about learning how to consistently bag 10 pips a day. That’s pretty easy to do and it can make you tons of money if you scale up properly. It’s a lot harder to bag 50 pips a day, somedays we do but other days we lose. I think that we can easily get 10 – 20 pips per day if we don’t get too greedy and quit when we’re ahead.

It’s been 3 years now, finally I have a concise written plan complete with the know-how, experience, and discipline. Nothing can stop me in 2011!

My primary Forex Strategy this year is trading the London Close.  This strategy is so good that I will risk 3% of my account per trade. UPDATE – UPON FURTHER EXAMINATION I FEEL THAT THEY HAVE “FUDGED” THE NUMBERS AND IT DOES NOT PERFORM AS ADVERTISED

I have 2 secondary trading strategies that I will also implement however the risks for these are only between 1 and 2%. I will  share some very advanced money management strategies over the next couple months.

I’m planning on having EA #3 finished by the end of May and after a successful 3 month live test it will ready to trade the rest of the year. Sometime around May or June I will start offering managed forex accounts to my friends and family, the non-automated trading will all be done through Oanda my favorite and most trusted broker, I will be using the Collective with mt4 for the automated trading.

If you haven’t been able to get consistently profitable yet, take some time to see the big picture and analyze what needs to change. One of the big things that is helping me is that I only trade the London Close during a 2 to 3 hour window per day. During this time I am completely focused on just this one strategy (taking trades on 6 pairs) and I have complete confidence in what I’m doing.

I still take other types of trades but these ones are classified as lower probability and therefore I use a smaller lot size.I’m going to attempt to make a weekly update to the blog here on Sundays and share how I did each week.

Last week was a slow start as I was only able to trade on 3 days and one day there was no trades, I had 2 wins and 1 loss for +20 pips.

Have a great week!

To start with, the statistics are bunk. I should have known by the k-mart spreadsheet, where’s the real proof?!  The reason the win rate is so incredibly high is because sometimes she waits a few hours for another entry and then gets back the loss. Yah, right. If that is so, then it should be reflected in the spreadsheet.

Forex is full of scams, they always make it look as real as possible. Remember, most people who know do, most people who can’t, teach.  There are some exceptions but they’re super rare.

Please disregard my former post below, I’m leaving it on here for now..

Today I have something very special to share with you…

Recently a friend recommended a Forex strategy to me: London Close Forex

In a nutshell: A 60 year old trader Shirley Hudson developed this strategy over a 3 year period as she noticed a pattern unfolding at the end of the London close. You only trade it during a 3 hour window per day.

Shirley has been trading this for the last year and a half and has won 90% of her trades.

My first thought after hearing about the 90% win rate was “this must be BS“, but my friend assured me that it was real. As it turns out, he is a friend of Vic Noble from Forexmentor and Vic has been coaching Shirley for the last 4 years. He’s seen her go from a struggling trader like most of us to winning over 90% of her trades.

Basically the strategy works with the Average Daily Range, most currencies will hit their average daily range each day. The way it’s measured is from the day before. So let’s say that on Monday the average daily range for the euro is 150 pips. On Tuesday we see that the market is going down and that the daily high was 1.3300, this means that there is a strong likelihood that the market will hit it’s average daily range at 1.3150.

On most days after the market hits it’s average daily range, it will go back inside the range. Shirley has developed a very precise way of trading as the market goes back inside the range.

I am trading this now, one of the best parts is you only need to look for trades during 2-3 hours per day, between 7am and 10am P.S.T.  (10am -1pm E.S.T.)  Shirley looks for trades on about 10 pairs. In my opinion this is the best forex strategy that I have seen and I have investigated over 100 strategies in the last 3 years.

As always if you are going to trade this, take your time and start slow. Even though it may very well be the best forex strategy that you have ever seen, don’t go crazy and start risking 10% of your account on each trade. It can and will have losing streaks like everything else. Proper money management is crucial to your success.

I will be posting updates on my London Close trades and also sharing a very advanced money management strategy that is powerful and compliments this strategy beautifully.

To our success!

I’m not too proud to say that although I’ve known about them and used them for well over a year – I haven’t been using them like a pro. Like most things, there is so much information and misinformation out there – its easy to get totally lost and confused.

If you’re not familiar – the name Fibonacci comes from Leonardo de Pisa, who was the son of Guilielmo Bonacci. In Italian, “figlio” means son,  therefore you get “Tiglio Bonacci”, which was shortened through the years to Fibonacci. He is one of the most famous mathematicians and came up with the fibonacci sequence. Long story short – fibonacci principles are found all throughout life from the great pyramids to the proportions of your body to this beautiful shell…

Back to trading – there’s the 38%, 62%, 50%, 78%, 23.6% fibos, etc, etc.  There are all types of advanced courses and methodologies and I have taken quite a few. So, did they help me become profitable?  Nope.

Over the last couple weeks I have been introduced to the principles of legendary trader Joe Dinapoli. I highly recommend his book Dinapoli Levels which is very comprehensive and yet easy to understand. Joe has shown me an easy and smart way to use fibs. I don’t use all of his techniques (I really dislike stochastics), but I’ve adopted a couple and wow are they good. Joe’s been trading since the 70′s and really knows his stuff. AND – he keeps it simple which is really important.

What I’ve learned recently will help me capitalize on situations where the “dumb money” is getting clobbered and also help me pick up lots of easy pips everyday.  I highly recommend Joe’s book and video seminars.

Whether you believe in it or not, Fibonacci is a huge part of trading and not knowing about these key levels is like driving your car blind – you’re going to get hurt!  Before I knew about these levels but I wasn’t really getting how to trade with them properly.  I’m not going to get into the specifics of it here, best for you to go right to the source. All I can say is that my fibonacci trading is a lot simpler and a lot more profitable. Thanks Joe!

A quote from Joe’s book:

“Conservative Carl had purchased some unriped bananas the day before. That was enough risk for him so he decided to sit this one out.”

So far I got it working for either the 2001-2006 tick data or the 2004-2009 data (two different mt4 installs), I wasn’t able to put them together all in one file.  For newer tick data there is some available on the forex tester website under data sources. That’s a handy piece of software by the way as you can use it for visual backtesting, it’s like you have a rewind and fast-forward button and can actually enter instant and pending orders, stops, etc and it keeps track of your wins/losses. The only thing I don’t like is that you can’t use custom indicators, just the usual ones that come with mt4.

Here is a link to a forum where someone uploaded a bunch of tick data for e/j a/j g/j and more. You have to do a bit of work but it’s doable. Tip: Most of the links are expired but the megaupload links still work. More Tick Data

I’ve been investigating dozens of ea’s this year and they’ve all been jokes imho. For example there is a managed program that has been doing 50-100% per month for the last 6 months. I’ve been following it with interest. Last week they had a 50% drawdown. (That means that they lost 1/2 the account).  Of course they justify it by saying that it’s doubled a few times already, everyone is still up. Nonsense!!

Just like when you’re a kid and someone twists your arm – we all have a point where we yell Uncle!  Is that when you’ve lost 50% of your account?!  I think that is ridiculous.

Here’s another system that’s listed on MyFxBook which I’ve been watching, its’ an automated system which has done over 200% the last 2 months: Spytrader – Yesterday I was watching it and at one point he had 5 trades open on his 750$ live account and I saw it down 150$ (600$ equity), luckily the euro turned back up and he got out with a small loss but what if the euro would have gone another 30 pips south, would he have let his live 750$ account go to 500$,  400$ ?  Where’s the Uncle point?

AND – what’s up with MyFxBook’s drawdown statistics, it still shows the DD as 3.43%, I witnessed the account go down 20%.  Maybe that’s because the account is already so far in positive it’s not affected. This statistic is not good for me anymore. I don’t know about you but if I saw my live 10,000$ account which has been gaining nicely is all of a sudden down to 7000$ equity in one day’s trading session I would flip.

Introducing: Quantified Risk.   “You know exactly where your Uncle point is for each trade”.

Think about it, who cares if you win 98% of your trades if the 2% losers blow up your account?

In betting language there’s a concept called Flat Betting and an old saying that “no system which doesn’t work in flat betting is worth its salt”. I really like this and if you can get back to simplicity you’ll see that you just need to have an edge. I’m confident after my research years ago on gambling that there is no edge to be found at the casino except for maybe card counting which is not my thing. With Forex you lose some edge everytime you get in a trade by paying the spread to the broker. However, it’s so open-ended that you CAN find a system which has a 60 or 70% win rate. Once you’ve found this and a way to execute consistently you are set.

I’m also testing a 3 step martingale at the moment but here’s the difference: I know that on step#1 I’m risking 1% of my account and then step#2 I’,m risking 2% of my account and step#3 I’m risking 3% of my account. So if I lose the 3 step series I’m down 6%.  Then I can look at how often statistically will I lose the series. Let say for every 30 wins I get 1 series loss, I still have a profit of 24% for that round.  This is Quantified Risk.

It’s possible also that -25% of your account is your Quantified Risk level, but in this case you will have probabilities and statistics in your favor.

Another factor is Risk of Ruin – at 6% loss each time for the mini martingale series, I would have to lose a dozen or so times to ruin my account. Important to factor this in also, It might end up not being worth the risk of ruin and I will stay with flat betting.

I”m so shocked at how many joke systems are out there, is it because the internet is full of scammers who just want to sell broken shovels to unsuspecting gold diggers? Or, is it because few of us take the time and energy to really understand the game.

This is where magic happens!  I’m loving trading manually lately, staying up all night playing tunes and making nice gains, gotta love it. After 2 years of tough work to get here, now it’s gravy time!

Update on Ultimate – 2 weeks ago it made close to 300 pips, last week it made 250 pips and then lost all 250,  Ouch. I realize that I need another filter so that it just trades with the “general trend” which for me is above/below the 77 ema. Why 77?  I like it and it works =)  I’ve got to do some more testing before I send it to my programmer for the upgrade but after 8 hours of visual renko backtesting yesterday, I just wanna trade…