What's "normal" in forex?

[NVP]

I am trying to identify a changed market characteristic that tells me to get out - I don't need to do it predictively, real time will do. Intuitively and what all traders say and what all trading writers write, is that there are "changes" in market charcteristics or behaviour that will eventually suddenly throw your plans out, whether for entry or trade management. At that time, you should get out and re-set. They don't say what they're talking about, even retrospectively: I'm trying to work out at least one candidate.

I agree, all fx prices move simultaneously with respect to each other. That's exactly the issue. So there is some relationship between e.g. EUR/JPY and GBP/CAD. I don't necessarily have to learn what it is, as long as I can see if its proceeding "normally" or are we in a storm situation.

Tootally agree on trends. Just as a retrace may not be the end of a trend, I also never see retraces coming - if I look at the charts. But I'm eaten up with the notion there is more going on than the sum of a lot of TA and if I can get a scent of it I could keep a lot more profit per basket of trades.

I hope this isn't tedious, thanks for your thoughts. I'm excited that I'm getting caution but not being certified loony.

I use strengthmeters to monitor expansion and contraction in the G8 market ....for example on a 20ma setting attached on a daily TF you see areas where the market is expanded and will probably soon revert back to mean (reduce / exit positions) and also is compressed and will inevitably diverge very soon.......(prepare to trade the lead diverging bull/bear currencies)

works on any TF and dependent on settings you like ...........

follow the markets dynamics and signals.....go with the flow .....that all we can do :smart:

N

 

[tomorton]

Still playing around with "normality" to identify market and multi-market sea changes. Want simple and objective.

Still looking at this in terms of price movement over a week relative to the week's opening price and the 200EMA. So, "normal" behaviour would be when price opens the week above the 200EMA and closes the week higher: conversely, price opens below the 200EMA and closes lower. Disregarding the amount of % weekly change and individual daily changes: looking at last 10 weeks only to keep the data manageable and recent (only need a rough and ready guide).

From this, the most consistent trends show up but also a way of evaluating consistency of one against another, e.g. CHF/JPY shows 8 "normal" falling price weeks in the last 10, zero "normal" rising price weeks, whereas USD/JPY shows 2 "normal" bullish weeks, 3 "normal" bearish.

Alright, looking at these opposing examples' charts its obvious which is the better bear trend to short, but -

1. now I can log quantifiably why

2. I can quantify approximately how much better / worse, which could be useful down the line when I review old trades

3. I can hopefully see a point of change in market conditions as one trend weakens or the other strengthens.

Also works for comparing opposing trends, e.g. I can say (I think I can say) EUR/CAD is a slightly better long than AUD/JPY is a short (but is no better than USD/CHF) and is a much better long than EUR/AUD.

NB: 200 and 10 (EMA and weeks limit) are not magic numbers, other factors may better suit your trading strategy.

 

[fxstrategist]

Interesting opinions from all of you, always trying to keep an open mind.

 

[tomorton]

Why do people think forex is risky?

 

[j.n]

People losing money left and right is normal for forex. Trendlines are normal. Support and resistance levels, oscillators, moving averages and other indicators are normal. If you're asking what's normal for successful traders, who are in the vast minority, I would imagine every one of them, at one point, knew with absolute certainty that they were going to make money.

 

[EnlightenedJoe]

Why do people think forex is risky?

Because no one dares to call out a trade and show people it can be done. So people think it's all losers on the internet. Maybe you can show them otherwise.

No need to reveal your strat. Just show them you are making money. I will put in some trades on your call outs to benefit from them as well, and I promise I won't try to reverse engineer what you have got.

 

[tomorton]

Whether I reveal my strategy or don't reveal it won't affect the results. I am profitable. I have posted several places on T2W that I'm a trend-follower, trading daily charts, no off-chart indicators, just a MA or two to confirm trend and trend consistency in order to select target pairs. Entries then are made by limit / stop order on a handful of different patterns but I don't see these as very critical to the outcome. The entry signal I most use I credit to Marc Rivalland, using daily HL bars (set-up included in Sharescope Gold).

My favourite target selection criteria currently (these do flux a little) are, e.g. for a long trade -
1. closing price (London) above 200EMA
2. price has risen since 1mth prior
3. weekly bars have been clear of, wholly above, 50EMA for at least 2 last consecutive weeks

e.g. USD/JPY as potential Short at low of today 13/05, stop at high.

 

[csc2009]

Why do people think forex is risky?

Because plenty people lose their money over it, I guess.

 

[Captain Currency]

Howdy Tomorton, really enjoying reading this interesting thread with a coffee in hand, well done!

The titbit that's got me thinking over the past few days is the following:

Then, within 3-5 sessions, most of that profit has evaporated and never comes back. The signals are effectively dead and I get out with one third of the potential gain.

So much for conventional wisdom of running your winners.

Like a spark I'd imagine most of these clever sounding quotes serve to ignite us but reality and the challenges of trading volatile currencies soon kick in ...

When it comes to profit-taking an alternative drop of wisdom might be; do today what you can do / try to do again tomorrow rather than getting battered attempting to run your winners.

Hoping this thread has more to come,

Andy
Captain Currency

 

[tomorton]

Cheers Andy. I am indeed now setting take profit orders when I open a position - so at least I will be getting what I initially calculated was an acceptable take-home - and forget what might have been.

Of course, this does mean I will be turfed out of winners more quickly but hey, I can always use that margin to get back in on something else. Ever the optimist......

 

[Zifapa]

The solution is to pull the cost of you total stoploss when you are in profit from the whole trade and let the rest ride to the predetermined point.

 

[millsy500]

Why do people think forex is risky?

I trade forex often and have done for a while. Forex is risky to a lot of people as they don't know what they're doing or understand what's actually going on.

My style is different to most as I concentrate on whats going on in the chart regarding buyers and sellers and where the liquidity is found as the big boys need it. Its taken a long time to develop the hard part trying to put what you've learned and know into a workable format.
I look at price action or the order flow for ex price acceleration (is it strength or weakness),how price approaches certain areas and where orders or stops are held and trying to gauge where retail are buying, price structure etc

 

[millsy500]

Cheers Andy. I am indeed now setting take profit orders when I open a position - so at least I will be getting what I initially calculated was an acceptable take-home - and forget what might have been.

Of course, this does mean I will be turfed out of winners more quickly but hey, I can always use that margin to get back in on something else. Ever the optimist......

I wouldn't be too concerned with trying to get the most pips out of moves but concentrate on reducing losing trade numbers, i know people who make a nice living out of 10 pips a day trading a decent size. Putting tp orders in with your opening orders is a good idea I do that often and as a day trader I'm more than happy with even just a couple of pips and class that as a good win.

 

[tomorton]

I wouldn't be too concerned with trying to get the most pips out of moves but concentrate on reducing losing trade numbers, i know people who make a nice living out of 10 pips a day trading a decent size. Putting tp orders in with your opening orders is a good idea I do that often and as a day trader I'm more than happy with even just a couple of pips and class that as a good win.

The deeper I dig into trading styles, the more I find successful traders taking their r:r into negative territory - so e.g. putting a stop at -50 and taking profit at +25. The books tell you not to do this and most people don't do it. But so what, most people lose. So doing just what most people do will get you the same result as most people.

 

[millsy500]

The deeper I dig into trading styles, the more I find successful traders taking their r:r into negative territory - so e.g. putting a stop at -50 and taking profit at +25. The books tell you not to do this and most people don't do it. But so what, most people lose. So doing just what most people do will get you the same result as most people.

I think your right. My day trading style allows me to know pretty quick if the trade is not working out to expectation and I'll manually close, it rarely hits the stop loss.

 

[vanillaman]

I see stops are a real major issue in Retail FX. I have made it my mission to tell you guys that you could be trading Vanilla Options instead. No stops needed, they are more sophisticated than Binary Options so not a scam and they are what you will find in the CBOE. I have traded Options for a good portion of career, this works out way but in terms of returns. I suppose derivatives have expanded in the institutional space as a result, in time retail will catch on.

No more leverage, no more margins, no stops and real potential t make cash. Volatility becomes your friend. Brokers can't really cheat you either. There is a great site that covers everything on real Options

Hope this helps you guys.

 

[tomorton]

What can vanilla options do that spreadbetting can't?

 

[NVP]

I see stops are a real major issue in Retail FX. I have made it my mission to tell you guys that you could be trading Vanilla Options instead. No stops needed, they are more sophisticated than Binary Options so not a scam and they are what you will find in the CBOE. I have traded Options for a good portion of career, this works out way but in terms of returns. I suppose derivatives have expanded in the institutional space as a result, in time retail will catch on.

No more leverage, no more margins, no stops and real potential t make cash. Volatility becomes your friend. Brokers can't really cheat you either. There is a great site that covers everything on real Options

Hope this helps you guys.

P

Hey V......when I link through I get a basic intro to forex page ?.....where's the option information ?......presumably by signing up ?

N

 

[vanillaman]

P

Hey V......when I link through I get a basic intro to forex page ?.....where's the option information ?......presumably by signing up ?

N

http://citymonopolist.com/trading-vanilla-options/vanilla-options-school/

No sign up required, it is just information blog. You need to learn first surely so above is the free school.

 

[vanillaman]

What can vanilla options do that spreadbetting can't?

Well that's simple, spread bets are bets on the underlying asset, that is open to manipulation by brokers, margin means any reasonable person requires a stop. This gets hunted or you are forced to risk more and still get stopped.

Options have only time and intrinsic value and it is really buying and selling the premium which derives value from the asset based on factors called "greeks".

So one you never need stops as your risk is the premium. So I could careless if Sterling trades between 1.4500 and 1.4600 on extreme volatility as long as my Option expires in the money I will profit.

I could choose to acquire Option with time value or one already with intrinsic value, either way I have no risk. Also leverage is not so important as the Option premium is valued against the asset. So for all intents their is no real margin or leverage unless you start writing Options, then that's different. So all in all, it is better than spot FX. All derivatives are.

Take today how many people lost money on Cable? Well, I had call Option on that and a Put Option one at the money and one out of the money to expire tomorrow 10am NY cut, so I limited my profit to remove directional risk, the only way I lose is if Cable does not trade under 1.4600 or over 1.4640. In effect it stands still plus I have till 10 NY time tomorrow to see it happen, worse case scenario I have close to neutral outcome. Now that's how everyone should be playing. No stress.