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| Silver Daily |
Friday, August 30, 2013
Pending Buy Order On Silver
August Trading Result + Brief Summary Of Trading Method
So finally I hit double digit % monthly return, though its only on a demo account. The following account was created at the start of Aug and here are the results after 1 month.
That amounts to about a 10% gain which is still far from my target (30%), but its the best I've achieved so far and we should celebrate little successes shouldn't we? :P Btw do ignore the win rate, it should be higher than that. I have a separate scalping account but due to carelessness I keep mistakenly entering trades on this account instead (about 3 or 4 such trades) and end up having to immediately close them for a small loss. Definitely not a mistake I want to make on a live account.
So anyway, the main point of this post is to describe a trading strategy which I'm totally convinced is highly profitable. The above result is based on this strategy, but I got distracted along the way and tried out lots of other stuff (especially scalping) and as a result missed out on many potential trades. I'm going to stick my neck out and say this - I honestly believe that this strategy when executed properly with a 2% risk per trade could possibly net 50% or more monthly. The strategy itself is simple, the psychology is not. And that is my biggest problem.
Ok back to the strategy, obviously it is too much to describe on a single post, but this FF thread by Alfonso has detailed description and videos on it. Initially I was skeptical of him because of all the fancy indicators, but damn he has got the concept nailed. Do not think it is anything new, it is pure supply demand concepts, it is Sam Seiden, it is ReadTheMarket, it is Kenneth Lee. The difference is this, he has ingeniously managed to tie everything in and create a very conservative rule based system. What I really like about him is that he pays huge attention to the higher time frames. A lot of S/D traders don't and end up getting killed.
I do not exactly follow Alfonso's rules but the core logic is this: wait for a trend to be established by the creation of new zones which engulfs an opposing zone, and then touch trade a retracement to that zone. In layman's terms we're trading a breakout pullback. Here are some example screenshots:
The secret to this strategy is this: super low risk, and as such freaking good RR. The initial stop would be placed just behind the zone of interest. I personally would then trail my stop beyond each newly created zone. Based on this, the EURJPY trade itself could potentially have netted 10R. 2% per trade = 20% on one trade. Needless to say I missed this one out :P Alfonso didn't, and he did net 10R on this. The other two trades would also have been multiple R winners. In hindsight I really don't know how I missed all these setups, I'll need to be more diligent and watch the charts more closely in the coming month.
The thing is this, an Engulf tells you price wants to go to the next zone. Placing a limit order at the source of the engulf is a super low risk high reward way to enter a trade. If this ends up as a loss, it means that either you were faked out or a trend change has occurred. Now a trend change usually occurs when price has reached an opposing higher time frame zone or S/R flip level, that is when you want to stay out. This also does not work in a ranging environment as lots of fakeouts will occur then (EURUSD in the past few weeks is a good example). There is obviously more to this, and I have a lot of odds enhancers (no trading before major news, watch for correlation with Dollar Index, watch all yen pairs as a whole, watch approach to zone, watch for confluence or chart patterns etc) but yep that is the basic idea.
That amounts to about a 10% gain which is still far from my target (30%), but its the best I've achieved so far and we should celebrate little successes shouldn't we? :P Btw do ignore the win rate, it should be higher than that. I have a separate scalping account but due to carelessness I keep mistakenly entering trades on this account instead (about 3 or 4 such trades) and end up having to immediately close them for a small loss. Definitely not a mistake I want to make on a live account.
So anyway, the main point of this post is to describe a trading strategy which I'm totally convinced is highly profitable. The above result is based on this strategy, but I got distracted along the way and tried out lots of other stuff (especially scalping) and as a result missed out on many potential trades. I'm going to stick my neck out and say this - I honestly believe that this strategy when executed properly with a 2% risk per trade could possibly net 50% or more monthly. The strategy itself is simple, the psychology is not. And that is my biggest problem.
Ok back to the strategy, obviously it is too much to describe on a single post, but this FF thread by Alfonso has detailed description and videos on it. Initially I was skeptical of him because of all the fancy indicators, but damn he has got the concept nailed. Do not think it is anything new, it is pure supply demand concepts, it is Sam Seiden, it is ReadTheMarket, it is Kenneth Lee. The difference is this, he has ingeniously managed to tie everything in and create a very conservative rule based system. What I really like about him is that he pays huge attention to the higher time frames. A lot of S/D traders don't and end up getting killed.
I do not exactly follow Alfonso's rules but the core logic is this: wait for a trend to be established by the creation of new zones which engulfs an opposing zone, and then touch trade a retracement to that zone. In layman's terms we're trading a breakout pullback. Here are some example screenshots:
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| EURJPY M30 |
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| AUDCAD H1 |
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| GBPAUD H1 |
The thing is this, an Engulf tells you price wants to go to the next zone. Placing a limit order at the source of the engulf is a super low risk high reward way to enter a trade. If this ends up as a loss, it means that either you were faked out or a trend change has occurred. Now a trend change usually occurs when price has reached an opposing higher time frame zone or S/R flip level, that is when you want to stay out. This also does not work in a ranging environment as lots of fakeouts will occur then (EURUSD in the past few weeks is a good example). There is obviously more to this, and I have a lot of odds enhancers (no trading before major news, watch for correlation with Dollar Index, watch all yen pairs as a whole, watch approach to zone, watch for confluence or chart patterns etc) but yep that is the basic idea.
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