10.4 A Complete System

[nanningbob]

Stay out of gbpxxx trades tonight and tomorrow as we have the Budget here and the Chancellor needs to do something drastic to save the ailing UK economy. Expect volatility....

That is good news. Yes we want volatility. Go GBP break up this mess. Go up, go down but please go somewhere.

[Nipponho]

Is this week profitable until now for 10.4 ? I lost for about 200 pips and now i am 100 pips in DD

This week and last week is very bad

[grimweasel]

Stay out of gbpxxx trades tonight and tomorrow as we have the Budget here and the Chancellor needs to do something drastic to save the ailing UK economy. Expect volatility....

That is good news. Yes we want volatility. Go GBP break up this mess. Go up, go down but please go somewhere.

Indeed Bob - but let Mr Market show his hand first! That is why we have 2 dojis on Cable for the post two days as the big boys are awaiting direction and news.

[grimweasel]

I went to a Investing / Spread Betting event in London this evening. David Jones from IG Index and Alpesh Patel (Famous trader and Hedge Fund Owner) both gave talks on spread betting. Whilst none of the tips below will be rocket science they will act as worthy reminders to all:

1. On Stocks stick to the daily TF and for Commodities and FX never go below H1. If you go lower than H1 you are treating the market like a fruit machine and you are trading for the wrong reasons - ie addicted gambler looking for excitement hits!!!


2. Most people start an account with £1000 and lose it by 'death by a thousand cuts' - they trade too frequently on lower TFs and bleed all their accounts away. Their largest account held £212M !!!!

3. David said that 80% of traders that he sees at IGindex (which has 80% UK market share) still try to beat the market and try picking tops and bottoms. Why people just don't trade pullbacks in the underlying trends amazes him!

4. Money management is key. Alpesh showed a graph and stats that showed the average hedge fund ROI per annum was 12.6%- so if you are making 2% a month you are beating the major hedge funds. It also showed that retail traders try to cut their wins and run their losses. They showed data from 12 million trades on one US trading site - and for example on eurusd winning traders took 56 pips out of the market but lost on losing trades 96 pips. They were too quick to take a small win instead of scaling into trades. They were then too slow to trim losses hoping the market came back and proved their egos correct. The graph was from dailyfx.com

5. They both advocated the 2% trade size rule. Alpesh then said he uses ATRx2 for his stop losses. Never anything more or less. So if you have gold currently trading with an ATR(5) of 13 pips then x2 is 26 pips. If you have an account balance of £5000 then 2% of that (max trade allowance) is £100. Therefore £100/26 = 4 give or take. So your opening trade size needs to be £4 per pip. You should all record your trades on a spread sheet - and add a simple calculator there that does this for you- it takes seconds and is worth the time.

6. David said the major reason retail clients lose money is because they try to aim for huge profits with mini stop losses. Too many lose MORE money by having tight stop losses than they would if they gave the trades room to breathe. That is why ATRx2 is so important. Back testing showed this was more profitable; most traders he said get the trade idea and direction right - they just lose all the time with tight stop losses!

7. Alpesh said you should momentum trade using momentum indicators on the Dow and FTSE 100 and then value scan and use your fundamental filters on the FTSE 250 where you would be looking for longer term holds (more investing)

8. A major reason why retail clients don't make money is not scaling in! They instead move stop losses up too tight and panic and take small profits. The reason the big traders win is that they scale into positions when a trend develops. As soon as you are in profit and it starts to break the high/low of the previous day - keep adding positions - and then sell ALL of those positions on the first day that closes or travels (intraday) below the previous day (in an uptrend for example) - this way you are maximising profits when the market is going in your favour. Look at a strong trend and you will see rarely in an uptrend will price break the low of the previous day. When it does sell. If it keeps breaking into new highs keep adding and then trail the stops up behind the previous day. That way you compound the profits and protection.

I hope these pointers help - David made a good point on closing. He said stop worrying about what we do (ie the Brokers) and worry more about what YOU are doing. IG do hedge but only if the market is hugely one sided and their VaR is out of kilter. Usually they don't bother as there are matching buyers and sellers but if the market gets too one sided they would hedge. He said forget about all the internet conspiracies ref stop hunts and brokers taking opposing trades. They need their clients to stay solvent as they make money from the spreads. Without the spreads and killing all their clients they'd have no business. So, he means, stop worrying about EXTERNAL factors that you have NO control over (ie Brokers, News, Economic Releases etc) and concentrate on what you DO have - your PLAN, SELF DISCIPLINE and CONTROL.

If I remember anything else I will post here....I expect many to ignore all this as Rookie traders are only interested in entry/exit and squiggly lines. The truth, as they all find out in the end, is that the Holy Grail in trading is YOU and your self discipline to act in your own best interests and stick to your trading plan and psychology rigidly!!!

[MurphyMan]

I went to a Investing / Spread Betting event in London this evening. David Jones from IG Index and Alpesh Patel (Famous trader and Hedge Fund Owner) both gave talks on spread betting. Whilst none of the tips below will be rocket science they will act as worthy reminders to all:

Excellent post. I will include it in the next Bob'e Pearls edition in Dummies.

[grimweasel]

I went to a Investing / Spread Betting event in London this evening. David Jones from IG Index and Alpesh Patel (Famous trader and Hedge Fund Owner) both gave talks on spread betting. Whilst none of the tips below will be rocket science they will act as worthy reminders to all:

Excellent post. I will include it in the next Bob'e Pearls edition in Dummies.

Thanks Murph - just another trader helping like minded traders - I learnt all I know from forums like this and a a few seminars and business school along the way.

If I had to read only 3 thread it would be Trade_Dante and his introduction to trading a few years back on Trade2Win, then Strat's Price Action at Support and Resistance thread of FF and then here we have a great forum too with NBob, Steve and Captain Jack.

David Jones did mention that it took him 3 -4 years to become profitable and now he just trades price action with an MA and using support and resistance. All you need to know about a security is right there on the bare price chart - candles and an MA to keep you on the right side of the time frame above. So if you use a 10ema as your weekly trend indicator then on the daily it's your 50ema. That's why I use it in my adaptation of Bob's system as I like to stay out on the higher time frames. H4 is too smaller TF for me!!

[nanningbob]

I went to a Investing / Spread Betting event in London this evening. David Jones from IG Index and Alpesh Patel (Famous trader and Hedge Fund Owner) both gave talks on spread betting. Whilst none of the tips below will be rocket science they will act as worthy reminders to all:

Excellent post. I will include it in the next Bob'e Pearls edition in Dummies.

Thanks Murph - just another trader helping like minded traders - I learnt all I know from forums like this and a a few seminars and business school along the way.

If I had to read only 3 thread it would be Trade_Dante and his introduction to trading a few years back on Trade2Win, then Strat's Price Action at Support and Resistance thread of FF and then here we have a great forum too with NBob, Steve and Captain Jack.

David Jones did mention that it took him 3 -4 years to become profitable and now he just trades price action with an MA and using support and resistance. All you need to know about a security is right there on the bare price chart - candles and an MA to keep you on the right side of the time frame above. So if you use a 10ema as your weekly trend indicator then on the daily it's your 50ema. That's why I use it in my adaptation of Bob's system as I like to stay out on the higher time frames. H4 is too smaller TF for me!!

Good stuff. Appreciate your adding in. I think I try to teach most of that but even I learned something. I especially liked the part of how much these guys try to make every month and what truly profitable people do. Trade small and add to their positions, give your trade room to breath. Have a definite place to close out the trade. Even though I use the 4H chart it has that Monthly MA I follow. I also carry that to the 1H in 10.5. Thank you for posting and please keep feeding us, I really appreciate your comments.

[nanningbob]

Stay out of gbpxxx trades tonight and tomorrow as we have the Budget here and the Chancellor needs to do something drastic to save the ailing UK economy. Expect volatility....

That is good news. Yes we want volatility. Go GBP break up this mess. Go up, go down but please go somewhere.

Indeed Bob - but let Mr Market show his hand first! That is why we have 2 dojis on Cable for the post two days as the big boys are awaiting direction and news.

That is why I placed the gbp/nzd trade. It is a 50/50 guess trade. If it enters very small SL but if it takes big reward. Sometimes you just take a good gamble, it is like the guys who play poker and have an ace in their hand. They will place a bet on it hoping the flop will give them something. If it does they go big, if it doesnt they cut their losses. I see in the gbp/nzd and ace and I will place my small bet. When the flop comes up, news story, I can add or close. Those are the kind of trades that can turn around a very so so week. Otherwise I have to wait for the market to show its hand.

[nanningbob]

A note on letting your winners run, that discovery maybe in Baludas indi on the 10.4 info page. The lines that break out into the weakest and strongest, those are the ones you will want to let run and the ones that stay in the center you will just profit. That maybe the best indi ever for letting you know, what to let run and what to just profit. Right now I am just taking profit. When I see a breakout in those lines I am going to try to ride the winner.

Here is how the system is playing out.
Monthly is based on the 2 MA open x 4 weeks x 5 days x 6 4H periods or 240 MA
Weekly is the weekly pivots mids and S/R lines. Take the crossing of those lines back into the monthly trend.
Daily is the 10.4 page lines showing both strength of trend and history of the trend plus the strength and weakness of each currency group.
4H signals from the RSI 2 indi.

10.5 takes its signals from Sto 5 on the 1H chart back into the monthly trend.

Combined you have a very top down decision making process that should help your trading career.

[nanningbob]

I am taking the gbp nzd both ways below pivot as a sell back into the trend. As a buy above the WRM1 as a 10.4 trade going into a new trend? May whatever the GBP decide I will be in there. Worst case is it keeps bouncing back and forth across the 240 line.