USD/CDN simple two legged pullback entry with trend

A nice example of a simple 2 legged pull back entry with trend, and some explanation of the thought process.

to determine trend, simply need 2 or more HHs, after which you look for the first 2 legged reversal.  the 2 legged reversal should not extend beyond the most recent HL, if it does it negates this particular set up and may even indicate a trend reversal.  if you look at the previous reversal from bear to bull you can see the 2 legged pullback would not have been traded, and did in fact end up in a trend reversal.

while it is somewhat discretionary, the distance from the extreme of the pull back to the swing high ( in this case ) should ideally offer 1:2 rr or better.  even if the current trend hesitates there is a high probability of making it to the swing high before reacting into the range.

this is a simple strategy that is purely pa based , and when basic guidelines and discipline are followed gives more pips than it loses over a series of trades.entry is after a candle close in the desired direction after it is determined to be a 2 legged correction ( point D is farther than B ) 

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Comment by Romano on May 31, 2013 at 7:15pm

What an excellent post Talisman and I am very glad to finally see something from you. HH/HL goes also well with liquidity:

I didnt traded it though(wasnt too sure about price action), but I did EU for quick 25pips that I just closed before market close:

Have a nice weekend and post more of your stuff in future!

Best regards

Comment by talisman on May 31, 2013 at 7:20pm

@thanks romano, your encouragement means a lot to me.

Comment by talisman on June 3, 2013 at 1:08am

following along as this trade moves forward it moves into locked in profit.  i cleaned this chart up and deleted all the notation on it.  i had just put it there for clarity and description for those interested.  i dont usually put much on charts, i can pretty much see what i need to see by now.

Comment by talisman on June 3, 2013 at 12:05pm

this trade closed with a small profit.  not a homerun by any means but a nice example of day in day out simple trading.

Comment by talisman on June 3, 2013 at 3:14pm

@peter-this trade did not have rr of greater than 2 , actually it was about 1.  i like to show trades as they evolve no matter what happens.  i dont get to hung up on individual results and try to look at a group of trades collectively.  my stats are by no means impressive thats for sure.  i do know that most statistics indicate that close to 90 % of people outright fail at currency trading, that puts me in the top 10 % since im still here after 5 years live.

most people that get into forex are trying to exponentially grow very small amounts of money.  my way of doing things would not work for them for sure.

lf i look at last month ( may ) i had only 8 trades.  5 were losers and 3 were winners and there was no breakevens. no breakevens is a little unusual but thats what it was.  on the 8 trades i was net gain 200 pips .  this is a very typical month for me.  these kind of numbers have very little appeal to most people getting into this, but then again most people fail.

i focus on minimum drawdown within a positive excpectancy.  most people find this boring, but then again most people fail.  once you actually determine you have a positive expectancy the amount of pips you gain doesnt matter as much because you as the trader determine the value of that pip.  i could easily live off 200 pips a month.  the reason is the maximum drawdown my very conservative method generates.  understanding this concept is again somewhat of a dry endeavor so most people never take the time to "get it ".

the other day i had asked you how a new trader should break into the trading game. you firmly believed they should go where the higher potential money is, which is intraday.  i respect that , and i respect your success, but in my mind most people will become a part of the 90 % if they go that route.  you would be the exception and not the rule on this.  i would speculate that of the people that make it to the top 10 % more will be like me than like you. 

Comment by talisman on June 3, 2013 at 3:26pm

it was mentioned in another post how one measure of success in trading is to manage an incorrect directional bias profitably.  this uc trade may be a good example of that.  if the pair breaks point D it i will look for short trades, completely changing my bias, and completely negating my original thoughts.  one must always be open to what the market is actually doing, not get caught in the rut of believing it should do something .

Comment by talisman on June 3, 2013 at 5:01pm
I do Indeed have losing months . Your attempt to calculate my rr on winners is a little incorrect because it doesn't take into account stops that have been moved up but still in loss. It is uncommon for me to have rr over 3.
Like I say it's not to glamourous , and I do constantly look for improvements. As far as how most successful retail forex traders trade I really don't know, I was just guessing.
Thx for your thoughts
Comment by talisman on June 4, 2013 at 3:04am

a very similar set up in eur/aus.  note that point C must be lower than point A ( HH ).  i have no idea what will happen for sure so we ll watch and see. 

Comment by talisman on June 4, 2013 at 12:02pm

definitely a candidate for the trend is your freind club

Comment by talisman on June 4, 2013 at 3:44pm

hi peter-i dont usually put much weight on very specific trendlines.  im not 100 percent sure what you wanted to demonstrate with your trend line .  it could be that the trend has been broken and is looking to retest then continue bearish, it could be that we are entering a wedge area and could expect it to break up or down from that wedge, could be just about anything. 

romano touched on some extremely interesting points in his recent post on trendlines.  first thing that i found interesting was his metaphor for living trends which was obvious to him was not obvious to others. most agree with his message but identify with different metaphors, basically specific interpretation is personal.  secondly , we have no idea when the bird will flinch, the cat will jump, the snake will coil, all of which will have an effect that is difficult to predict.

you have shown the trend as a continuous line, i see it more as a trend that has paused and is in a consolidation, which i tried to show in the original chart. 

most people use indicators, pa, ma , etc  in one way or another to find candidates for entry, i have specific things i cull out to determine entries.  this is opposite and counter intuitive to most approaches to trading.  when you try to understand what i m doing spend more time looking at what i m not doing is the easiest way to explain it. to give another example i ll use lisa because she has a very consistant approach.  we all know she uses a relatively straight forward ma crossover method to assist her trading.  she is successful.  somebody else tries it and it doesn t work.  why? she has personalized it, we know what she is doing but we dont know what shes not doing. 

anyways, i appreciate your feedback. i have attached another chart with a similar trend and resistance , just slightly tweaked, another point romano talked about in his post recently. trends lines are way to subjective to be shared effectively imho. 

 

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