Comment by talisman on January 12, 2013 at 3:05am

i ve come to the conclusion you are very smart.  what took you a year took me over 4 years.  i have a very similar approach, i m still honing my skills but it is at long last coming together. 

very much enjoyed these posts, you ve definitely said a few things worth paying attention too. 

Comment by Peter jcp on January 12, 2013 at 11:46am

Hi Romano – continuing from part one on what we need on our charts to be successful. A few horizontal lines are working for you and I can understand how and your explanation makes sense.

However for me – they are just not enough for the accuracy and consistency I require on an hour to hour – session to session – day by day basis. – but that does not make your method wrong – because I think near naked charts might suit at least 50% of traders – and as we are all different its down to our own “method statement”  - or summary of what we are after.

I know you understand my scalping technique logic and quite rightly – it’s not for all traders and for even to have moderate success – you need to be an experienced trader understand PA and money flows.

I think my unusual trading methodology that dictates what I need, is originally based on the “weather forecast” method of predicting;-)

I can go outside in the UK – any time of the day or night – and be 95% successful at guessing the weather for the next 10 mins or even 30 mins. Ask me to guess for tomorrow and I might be 70% successful – ask me to guess next week and I might be 65% and for 3 months time – 50/50.

Now I know God or anybody upstairs is not deliberating trying to trick us – ie showing bright sun and warm weather and then 15 mins later snow and hail storms – which happens in forex  trading – ie complete opposites ;-))

But you will always have a higher probability not trying to guess a week or month or quarter ahead – but instead the next hour or less – when during that time there should not be any assassinations or wars or national bankruptcies etc.

Next part of my logic is every single pips as a value. To a large bank it might be a million dollars a pip – so a 4 pip move is $4 million – and I could live with that ;-) but unfortunately I have not got enough funds to place a million a pip. Value pips - and don't think 20 -30 pip either way are not worth while.

Moving on – besides every single pip having a value – so too as time. It’s my Birthday this week as I get nearer to my sixth decade – every second and every minute seems to take more importance - unlike when I was only in my 20’s. So time is valuable – you need to pack a lot into every hour or day.

So in my trading strategy – I am after short term moves with big money – small stops and packing as much as I can in that time – to maximise my results – after all I am doing it for money ;-)

Therefore near naked charts alone cannot do it for me.

I need to understand – game play theory – where are all the stops? – where is all the money? – what’s the least expected move?

I need a stop watch – yes I have been trading with one for over four years – I need to know exact times of movements- especially with all the bots these days etc etc. Its an important part of my trading decision.

I need as small as stops as possible – because I expect to lose ( there is no 100% holy grail) but the quicker I can find out with the least time lost – the better for making next decision..

Naked charts now let me down here – like all charts they are the past – they are history – history does repeat itself – but the players do their best to change it ;-))

So conclusion for me – charts are only 30-40% of the equation - time of the day and the day and the date all important + game play theory – make another 25% then money management can be the difference between success and failure.

You could say I need to scalp between your horizontal lines at least every 20 pip rise – adding on more each trade and then either “peeling” or scalping opposite way at main S & R’s.

If a great medium / long term trader does say 8 trades a month – say 100 per annum  - and makes say 10 -12000 pips with a 70% accuracy – you would have to say that’s good. But if that method involves stops of say 100 or 150 pips – then it is at least 10 times as less efficient. I don’t mean I will make 120,000 pips in a year – but I will be able to use a lot higher lot size – compound quicker and grow the account so much quicker – even on just half those pips – ie less then 6000 in year. But instead more than likely I will achieve more pips.

I have tried near naked chart trading for a month once – and I just could not get what I needed. I think now if I spent 6 months on it – I would get better – but give me the “bells and whistles” – the air conditioning – sat nav – automatic parking – cruise control – massage seats etc any day lol

PS - even a Ferrari as launch control - anti lock brakes -adjustable suspension - etc - naked is  so last year lol

 

Regards

 

Peter

Comment by talisman on January 12, 2013 at 12:35pm

hi peter-good post, very thorough explanation.  something i would add, and a reason many people cant scalp effectively,  is they cannot think fast enough.  speaking for myself i am somewhat prewired to be a slow methodical thinker.  i couldnt scalp to save my soul, i just dont have it in me.  one of the cornerstones to success in forex ( or anything ) is to understand yourself.  cultivate your strengths not your weakness'.

i like working with horizontal lines because they are more objective than diagonal.  i dont try to to predict , i try to see zones of interest where something will happen, i dont know what will happen for sure, but i know something will happen. either a break out or a rejection. 

Comment by Romano on January 12, 2013 at 2:33pm

Peter, thanks for your post. You know I am in no position to "educate" you about anything simply because you are much better trader than I am. However, there are few things you dont understand so let me explain:

You dont need big SL if you keep trade longer. I am NOT trading standard S/R levels, I am trading liquidity levels. These are TINY spots. I wrote in your last blog post few days back how I could reach 1:20 RR, I simply identified good liquidity pool - better than I even thought. Well I actually suspected but decided to close much sooner. It was on 1h chart and my SL was 10 pips however price didnt even went against me more than 2 pips, with this understanding of liquidity levels I was able to nail it.

You can have same small SL as with your current strategy and you can even have better RR, much better. But it is not like you thing, you are not trying to get standard "setup", double top or bottom, or price turning. You are to learn and understand how market works and where could possibly big money put their orders and why - also where they could offload them. Then its not standard naked chart anymore, you are not watching naked price action or some candles setup - although you can also that of course. In that my case above, I got all of it.

So, when u know what to look for and become good at this, you wouldnt feel lost like now and timeframe wouldnt matter, you could same way identify spots where reaction is and could categorize them if these levels are short term turning point, medium or major reversal.

You can trade daily or weekly like this with so tight SL as normally medium or even short swing traders use. And because you were able to estimate possible liquidity levels and theirs strength, you could with good success forecast far beyond your 30min.  

This all of course apply only after you understand how things work and get good at it. I was yesterday just watching 1min chart thinking where price may possibly go and how it may behave. I applied same thinking. Guess what, most of those moves I was right, with some did not reached exact level I thought but came very close. Success rate and RR would be incredible and room for SL would be maybe within 2 pips. I will give it some more time and then start trading it on small TF as well.

Notice however that I am into this only since about this december!!! And first half I was not even trading because I was visiting Switzerland. So basically in just few recent weeks I came from a guy that needed indicators and never felt sure whats going on to a guy that literally just started and is still newbie and learning this and I already see really huge results, not to mention finally knowing whats *really* going on and feeling much better and confident. 

By now u know where to look so if u find your time do it and then tell me how u feel about it, but even if u dont - u are already very successful so as long as u`re ok with what u got - no worry. I would also like to mention that I used most of the time before 15min chart and so when I first time tried to trade directly from 1h it was very uneasy feeling, took me few days.

So I know where u are now and how u feel about it and other things, but even with that u are one of best traders I ever met Peter and better than me - at least for now ^_`

Bottom line is that this particular kind of trading is not like typical naked trading and have nothing to do with most or all of difficulties and problems that u mentioned and there is a LOT to analyze from it if u trade this way. Since no indicator give u info where possible liquidity lies and is itself following price not vice-versa, they are simply just overlays without any meaning and big money that really move market would hardly use them because they need specific levels where liquidity is so that they can open big positions. 

To my previous part 1 post comments I would like to thank Leon and dev and that I agree with them, Leon I went through same experience as u man! ^_`

Talisman thank you, you are flattening me now but know than I am no smarter than any of u and by no means claiming to be better trader, I actually only started this but see big results already and future, thats why I share. 

Best regards to all of u my friends

Comment by Romano on January 12, 2013 at 2:46pm

There is one more thing I would like to add:

As important as current spot liquidity levels are(where price may turn), the others are just as important. Imagine you are big player who can move market, say you have enough money to move 100 pips and u see there in 80pips reasonable liquidity level - would u open position in that direction? Of course u would! And you would know you could offload it and close it to opposite players and make 80pips because there would be enough liquidity to close all your positions and not get stuck!! Thats why if u see near liquidity level that feel significant, almost always you can bet price may go there, thats why I already 2 weeks ago after huge drop suspected we may go back to 3400 or near. Not because some "price action" but because of this.

Hope it helps, best regards.

Comment by Uschi on January 12, 2013 at 4:26pm

hi romano, thank you for posting your ideas/history and evoke this very interesting discussion, to which i feel to add also my thoughts.

first: i started trading not looking even at a chart: red prices = sell ; blue prices = buy 

well, it didn´t work, but all further refinements, in the duration, didn´t work as well.

So where is the difference,between trading from only price movement to a sophisticated method?

My experience, so far is this: money management is without doubt crucial, but the best money management, (and with this i do  not want  to undervalue what MM) can give, is to protect you from losses; but for winning, in my opinion the most important thing is belief, or better faith, not faith in winning, (yes also, but this comes later) but faith in your system or method or strategy or even advisor,

i for my self have made the experience, that so often i was right, my lines, my MA´s were perfect, the advices i were following were perfect, but .. I WAS FULL OF DOUBT, and this is not unfounded, because, here i quote peter:

"Now I know God or anybody upstairs is not deliberating trying to trick us – ie showing bright sun and warm weather and then 15 mins later snow and hail storms – which happens in forex trading – ie complete opposites ;-)) "

what i want to say with this: you can not discuss the right method, etc, which for everybody is different, but you m u s t  really believe in your method and at the same time you must be prepared that it doesn´t work - quite a contradiction, isn´t it?

Here, we come back to MM, but MM is a long term factor, something that can turn out right in the future and is therefore kind of futile , but trading happens always in the now.

These are just some of my thoughts, thank you for reading

Comment by Romano on January 12, 2013 at 4:41pm

Hehe thanks Leon and Lisa. 

Lisa feeling of market is IMO also important, despite others saying its just guessing and that its bad. At least if u`re good at it. I also see u like art, I strongly recommend you to see my other blog post named "kind of investment nobody talk about".  - not necessary that you would invest in it but u may enjoy some *very special* pics there... ^_`

Hello Leon, I posted 2nd only few minutes after 1st, I may continue about few more specifics regarding this subject in future if I can find enough time, I am starting to feel that I owe you all little bit more after I touched this sensitive subject. When I have time and some good ideas how to properly describe and show thing how I see them now, we will see...

Comment by Romano on January 12, 2013 at 6:31pm

Hello Uschi, first you are beautiful Italian white cat so I am bit wet now... but to the point:

What I describe is not strategy how to trade but what should matter when designing one. Would you feel more confident if you know - even in such cases where you got some trades wrong and hit SL, how market really work(supply and demand) and used your strategy designed around these fundamentals? 

Of course, there are many people here that are successful and use indicators for years - to those I have no right to say anything and it doesnt really matter as long as they can make consistent money. 

But I think too many others are lost in this so maybe should reconsider and rethink back some basic principles, what really matter:

- Somewhere on the chart, price become attractive to buy, elsewhere to sell.

- It doesnt matter what happen in between, how "scary" it look or how "bad" candles and price action look, how it whipsaw etc., only what matter is to be able to find those peaks - either for short or long term.

- Every time price go somewhere, it goes there for a reason >> to pick up liquidity(unless vis. later).

- Every time price turn opposite it does it for a reason >> it hit liquidity(even for small reaction).

- Liquidity level is stronger if at the same times previous traders close their position there or even reverse with those who waited there.

- Usually when price turn for only temporary reaction before resuming main trend, it tend to go back to at least previous liquidity level(or cascade them before it get too strong) to pick up strength again. 

- If price never reached certain level before so there is no past record on it, it generally go until big players found enough herd to be able to offload all positions back or until central banks intervene. This can be seen on monthly chart very often. They may also set predefined target that unfortunately nobody know about yet because there is no history.

So with this in mind you need to ask:

Where does this put my RSI, MACD, Stoch. or other stuff in? How much are they really "respected" in regard to whats going on in the chart? Arent they all just overlays with random hit/miss ratio? Why price crossed SMA 50 and then came back and continued trend? - to reach next one: SMA 100? Or maybe to reach important liquidity pool to pick up strength? Does any indicator, ANY show you where those pools are? Because if not, what matter? Do you want to trade ghosts? Do you really need 20 MAs to tell you there is an uptrend forming - something that u can see without them just fine? Is market linear or does it behave "erratic"? How you know when range-bound price action start and when it end and when to apply right indicators accordingly? If price retrace, would u rather find out what levels it want to reach and where it should most likely turn back and trade on that, or would you trust more your RSI/MACD when their lines go to OB/OS level? Do you really believe more indicators enhance probability in some way? More importantly: *do you believe that if more traders use same indicator, that it enhance its probability*? If you know how market works, why would u use something thats not fundamentally based around its principe? If you had so much money that u can move market yourself, but need someone on the other side to buy your position and then again to close your position, !*where would you place your orders*!? Would you place them at same indicator signal and in same direction as herd? - but to whom would u sell then? 

These and more such questions should hint you some pre-understanding. I hope I dont look like a smartass who think he suddenly figured out how market works on his own, or someone who try to force idea to others. Because I am not any of that. And those who can trade fine already should completely ignore my post. But for the rest, I recommend just spent days watching your charts and ask yourself: when it comes to figuring out what next market move will be, what actually matter?

Hope it help, best regard my beautiful cat ;)

Comment by Romano on January 12, 2013 at 9:17pm

Guys, there was a term used for traders that tend to customize indicators default value to fit their specific chart they currently use, does anyone know how its called? I want to post one more blog post connected to this and have forgotten - thanks.

Comment by Max on January 12, 2013 at 9:47pm

Hey, can't be bothered to read, but I am going to read now!

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