Getting back to basics- trading false breakouts and candlestick reversals

[TAjammy]

Im just thinking, why the need to over-complicate trading? why should i plaster my chart with indicators which (for me) create indecision? So i went back to basics, and i watched some videos and they pointed out that trading breakouts, although sometimes produces great rewards, is often a risky endeavour, but we should trade the pullback, and trade the retracement.

So i think trading reversals using candlesticks, with tight stops (the previous candle's high )is the way to go.

I will focus on hammers and the hanging man, while at the same time trading false/retracing breakouts

i'll work on some examples in the next post

 

[TAjammy]

dammit, can't get these images to post, anyway. if you take a good look at the chart, i wrote 1,2 and 3.

1) break of new highs- don't buy here!
2)break of breakouts' highs by retracement- buy here! (or if you want go long as soon as the retracement bounces of previous support)
3)be wary of reversal candles-only exit whenever a reversal candle is confirmed, as you can see there is a slight inverted hammer near the top, but it wasn't confirmed so keep holding, keep holding until a white candle closes lower than a previous green candle-there is your exit.

 

[cr6196]

This appears to be less like nonsensical drivel so take a look at these, if your looking for simple, effective trading T2W has some great threads:

http://www.trade2win.com/boards/trading-journals/54554-entry-risk-exit-reward.html
http://www.trade2win.com/boards/forex-discussion/54114-trading-price-wasp-stylee.html

If you search around here you'll find the answer to what your looking for....

 

[TAjammy]

shall not click those links, sticking to this simple,effective method !i agree i was getting out of my depth in my earlier posts

 

[TAjammy]

ok il post some pictures of the candlestick reversals- with stop loss information

ps: can someone tell me how to post a picture? i tried the url image thing and it posts a blank space

will also post trades where i wouldn't have entered/where you would lose money

edit:losing is a part of trading

 

[cr6196]

go advanced-manage attachments

 

[TAjammy]

ok here's an example

doji trading- doji shows a sign of reversal . DON'T FORGET REVERSAL PATTERNS ARE ONLY EFFECTIVE WHILE IN A TREND. so in this example, we see the uptrend, yeh? box 1 ticked. Then we see the reversal candle-in this case the doji.box 2 ticked.

Now the matter of entry, it is too risky to enter short at that doji, first you must wait for confirmation, confirmation (to me) is one bar in the opposite direction of the trend, i would then enter short at the open of the next bar, and put a stop at the top of the previous bar-in this case the stop is quite loose, and more risky than i'd like but hey.

so now that entry is dealt with, we have to exit. Keep holding on until THE CLOSEOF THE NEXT BAR IS HIGHER THAN THE LOW OF THE PREVIOUS BAR. And in this case the open of the next bar is above the open of the previous bar- time to exit.

A word about encountering reversal patterns on the way down in that trade, or in any other trade:
IF YOU SEE A REVERSAL CANDLE (E.G. HAMMER HANGING MAN DOJI) ONLY EXIT THE POSITION IF THE NEXT CANDLE DOES INDEED REVERSE FORM THE PRIOR TREND. IF YOU ENCOUNTER A REVERSAL CANDLE AND THE NEXT BAR DOESN'T REVERSE THE PRIOR TREND YOU HAVE NO REASON TO CLOSE THE POSITION. sorry about caps but it's quite important

 

[TAjammy]

Another recent opportunity here- the inverted hammer, so again you have the trend in place.
Now we come across 2 inverted hammers-big sign of a reversal, go short, NO, wait for confirmation. As you can see i would have entered at the open of the bar after the confirmation bar, with a stop above the previous bar's high (sorry these stops aren't very tight, have't thought of a way around that yet), ride your profits until you see a reversal candle, followed by a confirmation bar, as you can see iwould have exited as soon as that inverted hammer candle opened above the previous candle , a good time to exit.

 

[fayalac]

Could you define exactly what you mean with "tight stops"

 

[TAjammy]

tight stops, i.e. close to the price of entry, an aggressive way to control risk

 

[fayalac]

Extremelly agressive in my opinion. Most of the times when you read a trend it tells you for example - at 1 and 5 min charts - go short, you can also visually interpret that trend so you wait the better moment to enter your position at the ticker, you do it and most of the times it can go back, what i have done is to get out of the position - a tigth stop - and wait for another moment then i go back in and go, and go, and go, and after i get disperate and decided not to take that position it goes short, these is the basic problem, i also use candlesticks and everything else. So the main question remains, what is a tight stop?.

 

[cr6196]

this is ****e

 

[TAjammy]

ok, a tight stop is a stop as close to the point where the setup becomes a failure as possible

 

[TAjammy]

this is ****e

why do you say that?

 

[cr6196]

just try it and see, this wont work by itself though

 

[TAjammy]

ok, i will, in a few hours the forex market opens yeh?, well i bet i can make 30 pips by the end of today using candlestick reversals only.

If you don't agree with this system, ok, then go out to all of the other systems which are out of date by the time they are tested, go ahead, chase some magical formula, using 5 indicators at once which will beat the market all the time, only requiring 5-10 minutes of your time each day, oh, the rest of the time, yeh you guessed it- you'll be buying yachts and mansions with the profits from this system you chase.

 

[cr6196]

i didnt say it was impossible to to use this system, but the success won't be anything to do with the system, you seem to believe that most times your setup emerges it signals a reversal...worrying. You also appear to have slightly psychopathic quality of inventing the way i trade in your mind...you couldnt be further wrong, ive settled the way i trade and im happy.

your really in for a big fall, your extremely narrow minded which is dangerous in trading and you seem to be persistent in the belief that you know best, you dont know who i am, i could be raking 300 grand a week, or nothing, but you dont know that.

i know a few people who trade just using indicators extremely successfully, some people use none, a trait that they all have though is humility and an open mind. Your arrogant ignorance is alarming, you should be asking questions but instead you lecture people about how S/R always works etc...even if you dont believe them you would be extremely foolish to disregard what they say.

 

[TAjammy]

you were the first one to say this is s***e
'you seem to believe that most times your setup emerges it signals a reversal'
if you read the earlier posts, you'll see i said that i'll post the times when this syetm won't work, i know it doesn't work all the time,

 

[cr6196]

it is ****e cos it is highly unlikely you'll be able to use it...look read my above post and learn. I'll add this piece of advice about your system (although i doubt you could make any system work with your personality):
Candlesticks do work, but you have to be highly selective, the places they appear are far more important (there is a massive thread dedicated to this here but being so ignorant you probablly wouldnt have found it), also doing this on 5min timescale greatly reduces your chances of success and their relevance and therefore, effectiveness. I have tried to help you!

 

[TAjammy]

ok, i understand, but i never said i'm limiting this to 5 minute timescale, i merely posted examples which happened to be on a 5 minute timescale.pls, i am very open to new concepts, hence why i made a thread of making a simpler system, as i tried using a lot of indicators, it didn't work for me really. So i looked around threads and videos and they suggested that i try no indicators , just some trendlines etc. So i'm trying to do that now, it works better for me than any indicator system does, i'm open to hearing about any suggestions to improve this system, not whether it's s***e