Success in Position Trading

July 29, 2006

My blog seems to be very negative lately in every way.  Take some time to read a more positive take on trading the market from a fellow visitor, Brent.  It seems he has found some possibilities in the position trading space.  This post is worth a read:  

Trading Results Are Bad

July 29, 2006

Looking at my trading results for the month of July doesn't leave me feeling any sense of accomplishment.  My results are actually embarrasing as they show that my trading is getting worse.  I'm down 401 pips this month and looking at all of my trades makes me wonder if I can make any money doing this no matter what side of the price action I'm on.  Looking more closely also makes me wonder if something is psychologically wrong with me as my habitude of shorting looks not to be coincidence.  Out of 15 trades this month, 14 were short.  Last month I made 8 trades and all 8 were short.  This is just strange and something I had not noticed until yesterday.  Performing a search on Google for this habit turns up nothing.  

Another thing that I cannot fully explain is that even though I've had a terrible month, I am still optimistic.  When I first started trading, one thing that I heard a lot of was, "The Trend is Your Friend." I remain optimistic because I realize that I've lost sight of this saying.  A lot of my trades have been counter-trend in nature and I've been trying to pick tops and bottoms.  Trying to do so is difficult if not impossible for even the most seasoned traders. 

Next week I will remain cognizant of the trend as I try to recover from this deficit. 

I am finding that the setup of my charts are reverting back to their previous state and I think that my attempt to analyze with a limited number of indicators may be a mistake.  For instance, more advanced traders can see momentum increasing or decreasing by price alone but I know that I just cannot do so with my limited experience.  I've been trying to get by with mainly support and resistance lines but I'm going to start using MACD and moving averages more.  

Squeeze and Metatrader Indicators

July 29, 2006

My mailbox gets flooded with requests for the eSignal indicator I wrote that emulates the TTM Squeeze indicator.  The TTM Squeeze indicator is offered for sale by John Carter on his website at .  My version is free but instead of responding to every email I get, I've added a new menu to the website where it is available for download.  In addition, I have added about 300 metatrader indicators for download.  This will be a repository for all to share indicators.  As long as you are a registered user, you can upload indicators.

To download indicators, go to the right menu item titled, "Metatrader Indicators" or visit:,com_docman/Itemid,203/

To download the Squeeze indicator, follow the same link but click eSignal Indicators. 

For those of you that ask whether this squeeze indicator can be used for metatrader or tradestation or any other platform, the answer is no.  It can only be used for eSignal.

I am in the process of writing a squeeze indicator for metatrader but I am still learning the MQL language so it may be a while until I release it.  I did just finish a simple indicator that plots 5 EMA's that John Carter uses on all of his charts so if this is of interest, download here:,com_docman/task,doc_download/gid,299/Itemid,203/  

Trade the News Profit This Week

July 28, 2006

This week, 3 automated trades went off during news releases with 2 of them reaping profit.  In this, week 7 of the FXEngines experiment, I profited a total of 41 pips to bring the 7 week total to +89 pips.  Wait until you see how much I lost this week with my manual trades…

This was the first week that I traded the Ultra-Aggressive strategy which is explained below:

This engine uses the NEWS SPIKE INSTANT signal for market entry. At the outset of a news event this strategy will
activate and begin evaluating market prices. As soon as a price spike
is sufficient to meet entry requirements, this strategy will
automatically enter. Once the engine enters the market, the exit
strategy will take over to both protect against excessive losses and
take profit.


This strategy uses an unusual exit method with a signal-based stop.  When a trade is entered, a 40 pip fixed stop is initially placed but this stop is not expected to be used.  Rather, the signal stop is expected to be used.  The signal is a breakout of 5 pips below the low (for a long trade) or above the high (for a short trade) for the last 30 minute bar.  So when the trade enters, it may enter at 1.2850 long with a fixed stop of 1.2810.  However, the low of the last 30 minute bar minus 5 pips may be 1.2832.  Is is in this way that the stop varies.  It will continue to change every 30 minutes to account for the most recent high or low, and if that price is hit an exit occurs immediately.

As I've said before, I'll continue on with this experiment.

John Carter Currency Market Overview

July 26, 2006

John Carter gives a nice and quick overview of what's going on in the currency market for tomorrow morning.

FYI, he loves LONG AUD/USD if we can get a bit of a pullback. 

Using ATR for Price Filtering

July 26, 2006

I was reading about using Average True Range for price filtering and stop losses and found the subject interesting.  The ATR is one indicator that I never really exposed myself to until now.  If you don't know what the ATR is, it is an indicator that measure volatility.

One way to use the ATR is for price filtering.  If you have a system that generates a certain buy or sell signal, it's always helpful to use some sort of price filtering so that your chances of being whipsawed are lessened.  Let's just say as an example that the MACD has generated a buy signal.  Instead of just buying right then and there, it would be beneficial to confirm this signal.  One way to do this is to get the daily ATR of the currency you're trading.  For example, the 21 day ATR of the GBP/USD today was 140.  If a long signal went off at a certain price bar, you would first find the high of the bar.  Let's say that high is 1.8435.  The close of this bar was 1.8425.  So if you were NOT using price filtering, you would have bought at 1.8425.  But since we will use ATR for price filtering, we will say that if we get a long signal, we will buy at the high of the bar + 15% of the daily ATR.  15% of 140 is 21.  So we take the high of the bar, 1.8435 and add 15% of ATR which is 21.  We get 1.8456 and this is the price that we will buy at.  Today, the GBP/USD shot up to about 1.8550 after that price bar so if we did NOT use price filtering, we could have caught 125 pips.  If we used price filtering, we would have caught only 94 pips.  In this case, the price continued to trend up but many times, this will not happen and if you bought at 1.8425 after a bullish candle was exhibited, you may find that the price will reverse or and you'll get whipsawed.  If you use price filtering, your chances of getting whipsawed are lessened.  

Another way to use the ATR is for stop losses.  I know some people are of the thought that technical levels such as support or resistance should be used as stop loss levels but they don't always have to be.  Going from the above example, if we wanted to place a volatility stop, we could say that we are going to use a stop 30% of the daily ATR.  This would be 140 x .30 = 42 pips.  So we could use a 42 pip stop from our entry point of 1.8456 which is 1.8414.  Bear in mind that these are just examples and you could obviously modify the percentages or the entire method altogether.

Yet another way to use the ATR is for support or resistance line penetrations.  Instead of entering a position if price penetrates a trend line, you could enter using a certain percentage of the daily ATR from the trend line price.  So if a support line break occured at 1.8400, instead of just selling at 1.8400 or 1.8395, you could sell at 15% of the daily ATR below this line.  If the ATR was 140, you would sell 21 pips below 1.8400 at 1.8379.  Once again, this could save you from making a trade that doesn't continue in your direction.

I’m Not A Swing Trader

July 26, 2006

Even though most of my trades are supposedly swing trades, I don't think I know the first thing about swing trading.  In fact, I don't know the first thing about price action.  Well, I know a little but certainly not enough to be successful.  I was reading through the forums last night and came across a webinar by Linda Raschke on price action and swing trading.  Reading articles and forums are great but watching videos can teach you so much more.

I found this video to be very helpful and I'll post the notes I took while I watched it:

  • Trends
    have greater odds of continuation than reversals
  • a trend
    seldom reverses without warning


  • once a
    trend is established, it takes considerable power and time to turn it
  • a major
    trend seldom reverses without warning
  • the
    absence of any pattern or swing in the price implies a continuation of trend
  • trends
    tend to begin out of a low volatility environment

Very important

  • momentum
    precedes price
  • if
    momentum makes a new high or low, the odds are that the price high or low is
    still to come
  • a
    trader should look to establish a position on the first reaction following a
    momentum high/low
  • there
    are usually at least 3 impulse moves in the direction of a trend

How to
see if momentum decreasing or increasing?

  • by eye,
    when downswing is greater than previous upswing, market is telling you that
    supply demand imbalance to downside
  • when last
    downswing greater than previous downside, momentum is increasing
  • when last
    downswing is less than previous downswing, lessening momentum
  • lessening
    momentum doesn't imply reversal, just that you may see some consolidation
  • need lower
    lows in indicator (momentum) and lower lows in price
  • the
    longer the sideways line, the greater the potential move


  • what
    is the trend on the current time frame?
  • what
    is the trend on higher time frame?
  • what
    are support and resistance levels?
  • is
    the market in a trading range or trending following a breakout from a range? 
  • is
    the market in a range, is it moving from the high of the range to the low or
    low to high?
  • if
    the market is trending, is there an increase in momentum or a decrease in
  1. what is the main play – based on existing
    structure; looking for small or bigger play
  2. risk
    defined by swing lows or swing highs
  • higher
    high and higher low after downtrend indicates a possible reversal.  Warning!!!!  At the point that the higher high is taken out, we have a reversal
  • flag
    formation occur in trending market
  • trading
    with the trend

bull and bear flags

  • do
    not look for flag formations in a trading range environment
  • do
    not look for flag formations after a buy/sell climax
  • work the
    market from 1 side

I would recommend you check out the webinar yourself:

The Latest From Rob Booker

July 25, 2006

I get a ton of requests from a lot of you asking about Rob Booker as a mentor and I've responded to probably all of them.  I'm in the process of adding a FAQ (Frequency Asked Questions) to the site so that you have the information at your fingertips. 

I thought I'd attach the latest PDF Chart School from Rob Booker.  You have to be one of his students to get it but I'm posting it here.  For those of you that may be interested in signing up with him, it may give you a little idea of what to expect.

pdf Rob Booker Chart School 25/07/2006,16:25 157.17 Kb

The Best Traders on Oanda Forums

July 25, 2006

I know it isn't easy to define who are the best forex traders because really, you only know how good you are.  Knowing this, I posted to the Oanda forum asking the more informed and experienced users who the most "successful" or experienced traders were.

I received a response with traders whose member names were
~chaffcombe , blueingreen, oldhand, craigatk, altman, Airoekhion, and danielgsx.  I wanted this information because I really want to concentrate on reading posts by them with the hope of learning more.

The post that caught my eye asked the question, "Right tools for trends and ranges?"  The post is located here:;f=15;t=004808;p=1

There are a lot of recommendations but I was watching what oldhand had to say:

While I agree with the "eyeball" indicator, I'd have to disagree about
the value of "indicators" taken by many. For example, s/r lines,
whether horizontal or angled are probably used by all traders to
greater or lesser degree and they are just as much "indicators" as
MACD/RSI/CCI etc. Trend lines and channels in my experience being the
strongest of all devices to suggest high probability directional clues.
What about moving averages? The 100/200 SMAs in virtually all time
frames are a must for any trader to track. The 200 SMA especially on
weeklies and dailies is a must and to ignore such an indicator or be
oblivious to it is guaranteed to lead to mis-steps on trades. Not
knowing Fib levels for your price analysis is likewise operating with
one eye closed.

"indicators" inform about some objective underlying reality about price
patterns or simply are self-fullfilling reations of various trading
segments is a question that can never be answered one way or another.
But, the fact that the majority of traders rely upon the variety of
indicators to make decisions is not in doubt. Your best trades are
always going to be when a variety of indicators, whether moving
averages, Fib levels, trend lines etc all line up at certain points and
within different time frames. For example, if you see price touch a
channel line on the daily and let's say the 3 hour, and RSI is in over
sold/bought territory, and a Fib level is at the same point, and MACD
or Momemtum paint a divergence, price is going to react in a major way
and predictably. Why? Simple really. The different trader segments,
some weekly or daily players relying lets say on channel lines, and
another segment relying on Fib levels, and another on RSI levels and so
on, are going to all react at that point causing a counter price
movement. How far price will move is very difficult to predict but
direction is not.

So, I'd say a study and attention to indicators is a must for any trader and well worth the effort.

Ultra-Aggressive News Trade

July 25, 2006

I mentioned last week that I was going to continue using the FXEngines "trade the news" platform since it has been slightly profitable over the last 6 weeks.  I received a lot of comments about this platform during this time and it seems like some of you who jumped on the ship quickly jumped off.  This is totally understandable considering the broker issues encountered during highly volatile news reports and just the simple fact that the platform never seemed to capture those huge moves.  Over the weekend, I decided to subscribe to the ultra-aggressive engine which by the description is obviously very aggressive in entering the market if a price spike is encountered.  What this means is that I will be trading every US news event automatically.

Today was the Consumer Confidence report and it turned out to be the most profitable trade since I started using this platform.  One visitor to this site said that it seems like the platform doesn't perform well during highly volatile moves but does have more success during medium volatility moves.  That turned out to be correct today as I was able to capture 60 pips short on the EUR/USD.  I manually closed this trade out so I could have captured more or less depending on future movement.  So in this, my 7th week, I stand at +108 pips using this platform.  It certainly isn't the perfect system but as I said last week, it is my only consistently profitable system.  For some of the bashing I've given it, it really hasn't been all that bad.  I know I'm saying this after a nice win but take a look at the weekly P&L:

Week 1 -> +58 pips

Week 2 -> +22 pips

Week 3 -> -51 pips

Week 4 -> +19 pips

Week 5 -> +3 pips

Week 6 -> -3 pips

Week 7 -> +60 pips

This shows 5 profitable weeks and 2 unprofitable.

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