Showing posts with label forex. Show all posts
Showing posts with label forex. Show all posts

Long time no see

It's a time for an update. As you know this is fifth year that I write this blog, actual trading sometime longer, but here is documented my serious attempt at this business. Then you know that I'm basically unprofitable, it's enough to visit my results label. I'm also stubborn. Sometimes its bad in making trading mistakes, and good in not giving up. I'm really slow learner and it's taking me ages to implement steps that I schedule for myself.

I updated missing days in my blog of course only after really good last day so I don't have to only blush in shame.

Right now I'm fighting battle with myself on maximum daily stop loss. It's going on for some time now. My declared number is fifteen pips. My stops are six pips, so about 2.5R. Usually I get emotional around daily stop level so I go for one more trade, then another. Occasionally realization that I broke my rules bring me in revenge and extreme emotions mode. Then I enter successive trades in short span of time losing six by six by six pips in rage. That's the present.

At least I can say that I learned some lessons so far, so it's not only bad. First I had problems with entering in direction of the trend, in my first years. I was only counter trend trader. Which is common and very debilitating trading behavior at many beginning traders. So much is left on the table, waiting out while price is moving in a trend just to get that elusive reversal. Only if you get it and it develops in new trend you are long gone out and looking again for another reversal. I succeeded in changing myself and going with the trend, or more accurate in direction of a breakout. It took me long time but I'm proud of that step because it was first step that made at least some difference.

After that came hurdle of averaging down when in loss. It was awful. I would try to escape every loss by averaging down. So I had many positive days with small wins made with averaging when they should be losing days. Add to that winning days from the start and it all looked promising. Only to face one day when trend is strong, there are no bounces and I'm on wrong side. Those days would take weeks of effort and apparent success and put me deep in the red. I didn't know how to stop myself. Only HPT's advice worked to have in account only enough margin to trade with one position. So I basically started to trade full margin.
Well after that step my averaging break in discipline transformed in widening my stop. That was disaster also. So not long time ago I changed setting on my chart to make invisible my stop level making it impossible to just drag and drop line on my chart that I did until then. So now I'm at that phase. My discipline problem transformed in overtrading easily making thirty or so trades. Mostly losing ones, waiting for big winner that will wipe out losers.
So now I'm in that step trying to stop my day after reasonable loss, reasonable based on what I gain on a good day.

It's all discipline problem, same problem from averaging until now. I believe it's basically avoiding acceptance of being losing trader. Because what if I follow all the rules and still remain to be unsuccessful and unprofitable. It's defeat so I basically chose not to face it. Instead of being losing trader and still trade despite of my unsuccess and basically just learn.It would be more beneficial then this hide and seek game with my own discipline.

Lately I lost interest in blogging regularly mostly because of my terrible performance. It's embarrassing posting daily how horrible I'm doing. Also google cut me out from their adsense program so that materialistic motive was gone. I would like to thank for all the clicks in last four years that transcribed in around $1800. Maybe now when I stopped earning from talking about trading I can start to earn from trading.  :)

 In last year there is one other matter that brought me big frustration and that is change in market behavior on small time frames that I use. Moves are shorter on sub 1min charts, there is much less follow through after signal for me. So stops are much more frequent. I learned to trade specifically and I'm not good at all in different trading environment.

In my recent trading last few months after some good head start I started going in to losing spiral that stopped after I lost basically all what was left in my trading account. I lost steadily thought the year losing 84% until August. Then with some gambling for fun I doubled what was in account. Then I doubled it again to cut loss to around 32%. At the end of the October I broke down losing 80% bringing me back to August levels where I no longer consider it serious trading because of lack of relevant size of trades. I was totally depressed and probably hit the bottom because I started browsing through all my old trading materials that I read long time ago looking for a spark, looking for something. I didn't found anything new but my resolution to continue by any means be it rereading old books and articles resurrected my trading spirit. It was down and out and few days later it was like what can I do but continue from wherever I know. I didn't put any more money in account. Somehow I can strive for good trading using demo like account, so let it be for now.
Even if I'm making Scalp and Swing frustrated by my stubbornness I continue with my quest. If Solfest can fight his mut how can I sit and do nothing. If MBA can do all what he is doing with serious money I have to keep on. Finally if A Pip Throwing Party can scalp so amazingly there is a real chance for success in scalping.

Order types: Buy and Sell


There are 2 order types in the forex market:


  • Instant Execution ( on market price )
  • Pending Orders - limit and stop orders


Market Order

A market order is an order to buy or sell at the current market price.The execution of the order is instantaneous.

Limit Orders

A limit order is an order placed to buy or sell at a certain price. The order essentially contains two variables, price and duration. The trader specifies the price at which he wishes to buy/sell a certain currency pair and also specifies the duration that the order should remain active.

Stop orders

A stop order is also an order placed to buy or sell at a certain price. The order contains the same two variables, price and duration. The main difference between a limit order and a stop order is that stop orders are usually used to limit loss potential on a transaction whilst limit orders are used to enter the market, add to a pre-existing position and profit taking.





Both, Stop Orders and Limit Orders, have the following options:

GTC (Good till cancelled): A GTC order remains active in the market until the trader decides to cancel it. The dealer will not cancel the order at any time therefore it is the customer's responsibility to remember that he possesses the order.

GFD (Good for the day)
: A GFD order remains active in the market until the end of the trading day. Since foreign exchange is an ongoing market the end of day must be a set hour.




Best Regards,  
^^_Lord_Ice_^^


Japanese Candlesticks. Candlesticks Patterns.

Japanese Candlestick ( or Heikin Ashi Candlesticks ) charts are one of the oldest type of charts used for price prediction. They date back to the 1700s, when they were used for predicting rice prices. In this next section we’ll briefly look at some Japanese candlestick patterns, which are in wide use today.
Below I have provided a brief description and appearance of many candlestick patterns. I am sure there are many more but you have to drawn the line somewhere, right?
Candlesticks allow you to gain an insight into the interaction between buyers and sellers, and can therefore be used to analyse stocks, commodities, or forex.
Before we continue let’s quickly digress to the basics - candlesticks are constructed as follows:




The body of the candlestick is called the ‘real body’, and it represents the range between the open and closing prices. Notice how the open and the close can be at either end of the body of the candlestick. You need to know how your charting software displays the difference. Generally, a hollow candlestick body represents the close being higher than the open. Conversely, a shaded or solid candlestick body represents the close being lower than the open. Often a hollow candlestick will be referred to as a ‘bullish candle(stick)’ and a solid candlestick as a ‘bearish candle(stick)’. These two terms are used often in the explanatory text below.
One more thing to note; above and below the body of a candlestick there are usually thin lines. These are known as shadows (or wicks). These represent the price extremes of a particular period i.e. the upper shadow represents the high for that period, while the lower shadow represents the low.
A note about candlestick patterns. In my opinion, their application is limited to the short term (1 week or so). In other words, 1 pattern is not going to influence what happens to that price in 1 month's time. Notwithstanding that, they can be quite effective - here they are below.

Candlestick Patterns

 Bearish 3 Method Formation
A large black candlestick followed by three smaller candles that are within the range of the first candle. These are followed by another large black candle. This five period pattern is seen as a continuation pattern of the already bearish sentiment.
Bearish Harami
A large bullish candlestick engulfs a smaller black bodied candle. Its interpretation is similar to that of an inside day, in that it foreshadows an explosive move. Moreover, when preceded by an uptrend this pattern is bearish.
Bearish Harami Cross
A large bullish candlestick engulfs a doji (refer to doji below). This indicates indecision after a strong move and can precede a trend reversal.
Big Black Candle
A large bearish candlestick; where the close is lower than the open.
Big White Candle
A large bullish candlestick; where the close is higher than the open.
Black Body
Simply, a candlestick that has closed lower than it opened. This differs from that of a big black candlestick in that its length is unimportant.


Bullish 3 Method Formation
The inverse of the “Bearish 3 Method Formation”; where a large white candlestick is followed by three smaller candles. These candles are within the range of the first candlestick. This five period pattern is seen as a continuation pattern of the already bullish sentiment.
Bullish Harami
A large bearish candlestick engulfs a smaller white bodied candle. When preceded by a downtrend, this is considered a bullish pattern.
Bullish Harami Cross
A large bearish candlestick engulfs a doji (explained below). It’s important to note that when a pattern includes a doji its significance is increased. Therefore, its interpretation is similar to the Bullish Harami, only it’s considered more powerful.
Dark Cloud Cover
This is a two period pattern where a long white candlestick is followed by a black candle. The black candlestick opens higher than the close of the initial candle and penetrates 50% or more of its body. This is a bearish reversal pattern.
Doji
The open and close are the same, representing indecision. This indecision can be the precursor to an explosive move.
Doji Star
A doji that has gapped above or below the previous candlestick. This can be a potential reversal signal, since it too shows indecision.
Engulfing Bearish Line
This is considered to be a key reversal pattern; it’s where a small white candlestick is engulfed by a large bearish candle. This is seen as a top reversal signal.
Engulfing Bullish Line
This too is considered a key reversal pattern; it’s where a small black candlestick is engulfed by a large bullish candle. An ‘Engulfing Bullish Line’ is seen as a bottom reversal signal.
Evening Doji Star
A three period pattern where a large white candlestick is followed by a doji. This doji has gapped above the white candlestick. A third black candlestick follows and pierces the initial white candlestick. This is considered to be one of the most reliable key reversal patterns, especially at new highs.
Evening Star
A pattern similar to the ‘Evening Doji Star’, except the second candle isn’t a doji. Instead it can have a small body (white or black). This is seen as a key reversal signal however, its significance is decreased since it doesn’t involve a doji.
Falling Window
This is effectively what is known as a gap down.
Gravestone Doji
A doji where the open and close are at the low of the period. Its appearance is similar to that of a gravestone, hence it’s name. Moreover, as a gravestone is seen as sombre, so too is its interpretation. It’s a bearish top reversal pattern.
Hammer
A small body (white or black) that closes near its high with a long lower shadow. There is typically no upper shadow, or a very small one. This is a reversal pattern that can be either bullish or bearish, depending on its placement.
Hanging Man
This formation is similar to that of the “Hammer”, however, the difference being the length of the lower shadow. The hanging man exhibits a shadow, two or three times the height of the main body of the candlestick. This length gives it greater significance as a reversal pattern.
Inverted Black Hammer
A small black body that closes near its low with a long upper shadow. There is typically no lower shadow, or a very small one. This is a reversal pattern that can be either bullish or bearish, depending on its placement.
Inverted Hammer
As the name indicates this is the inverse of the “Hammer.” A small body (white or black) is near the low with a long upper shadow. There is typically no lower shadow, or a very small one. This is a reversal pattern that can be either bullish or bearish, depending on its placement.
Long Legged Doji
A Doji pattern with very long upper and lower shadows. This indicates market indecision.
Long Lower Shadow
A candlestick (black or white) where its lower shadow is two-thirds or more of the total candle’s range. This indicates rejection of lower prices and is therefore seen as a bullish signal.
Long Upper Shadow
A candlestick (black or white) where its uppper shadow is two-thirds or more of the total candle’s range. Opposite to the “Long Lower Shadow”, this shows rejection of higher prices and is therefore seen as a bearish signal.
Morning Doji Star
The inverse of the Evening Doji Star; the Morning Doji Star is a three period pattern where a large black candlestick is followed by a doji. This doji has gapped below the black candlestick. A third white candlestick follows and pierces the initial black candlestick. This is considered to be one of the most reliable key reversal patterns, especially at new lows.
Morning Star
This formation is not as powerful as the “Morning Doji Star” however it is still a key reversal signal. It’s where a black candlestick is followed by a candle, of either colour, that has gapped below it. A third white candlestick follows and pierces the initial black candlestick. This is similar to an island pattern on standard bar charts.
On Neck-Line
A black candlestick is followed by a small white candle. The small white candlestick’s close is near the low of the black candlestick. This indicates a continuation of an already bearish sentiment.
Piercing Line
A two period pattern where a long black candlestick is followed by a white candlestick. The white candlestick opens lower than the close of the initial candlestick and penetrates 50% or more of its body. If the low of the white candlestick is broken, in subsequent periods, the market usually continues to move downward.
Rising Window
This the same as a gap up.
Separating Lines
In an uptrend, a black candlestick is followed by a white candle with the same opening price. In a downtrend, a white candlestick is followed by a black candle with the same opening price. Both these situations are seen as continuation patterns.
Shaven Bottom
A candlestick, of either colour, with no lower shadow. This is a reversal pattern that can be either bullish or bearish, depending on its placement.
Shaven Head
A candlestick, of either colour, with no upper shadow. This is a reversal pattern that can be either bullish or bearish, depending on its placement.
Shooting Star
A small bodied candlestick with a long upper shadow and little or no lower shadow. Usually this is a top reversal signal, however, this depends on its placement.
Spinning Top
This pattern is similar to the doji however there is a greater range from the opening to the closing price. Additionally, the candlestick can be of either colour and it indicates market indecision.
Three Black Crows
Three long black candlesticks with consecutively lower closes that close near or at their low prices. Obviously numerous large black candlesticks have bearish implications.
Three White Soldiers
The inverse of the “Three Black Crows”; exhibits three white candlesticks with consecutively higher closes that close near or at their high prices. Obviously numerous large white candlesticks have bullish implications.
Tweezer Bottoms
The lower shadows of two or more candlesticks at the same price level. The size and colour of these candles are insignificant. This indicates support and can be used as a spring board to higher prices; on the other hand, if this spring board is broken (the low is breached) this can kick start a downtrend.
Tweezer Tops
The highs of two or more candlesticks are at the same price level. This indicates rejection of higher prices and is therefore seen as a top reversal.
White Body
A candlestick that has closed higher than it opened. This differs from that of a big white candlestick in that its length is unimportant. This is a bullish signal.





Best Regards,

^^_Lord_Ice_^^









Fibonacci Retracement


In finance, Fibonacci retracements is a method of technical analysis for determining support and resistance levels. They are named after their use of the Fibonacci sequence. Fibonacci retracement is based on the idea that markets will retrace a predictable portion of a move, after which they will continue to move in the original direction.

Fibonacci retracement is created by taking two extreme points on a chart and dividing the vertical distance by the key Fibonacci ratios. 0.0% is considered to be the start of the retracement, while 100.0% is a complete reversal to the original part of the move. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels.
  
Fibonacci ratios

The key Fibonacci ratio of 0.618 is derived by dividing any number in the sequence by the number that immediately follows it. For example: 8/13 is approximately 0.6154, and 55/89 is approximately 0.6180.


 The 0.382 ratio is found by dividing any number in the sequence by the number that is found two places to the right. For example: 34/89 is approximately 0.3820.


The 0.236 ratio is found by dividing any number in the sequence by the number that is three places to the right. For example: 55/233 is approximately 0.2361.






Other important ratios are: 50%, 76.3%, 78.6%



* If you really want to understand the importance of fibonacci in trading read this post until the end. Fibonacci numbers and golden ratios are everywhere.

The mathematician Fibonacci

Leonardo Pisano Bigollo (c. 1170 – c. 1250) also known as Leonardo of Pisa, Leonardo Pisano, Leonardo Bonacci, Leonardo Fibonacci, or, most commonly, simply Fibonacci, was an Italian mathematician, considered by some "the most talented western mathematician of the Middle Ages."

Fibonacci is best known to the modern world for the spreading of the Hindu-Arabic numeral system in Europe, primarily through the publication in the early 13th century of his Book of Calculation, the Liber Abaci; and for a number sequence named after him known as the Fibonacci numbers, which he did not discover but used as an example in the Liber Abaci.


Fibonacci numbers

In mathematics, the Fibonacci numbers are the numbers in the following integer sequence:
 

0,\;1,\;1,\;2,\;3,\;5,\;8,\;13,\;21,\;34,\;55,\;89,\;144,\; \....\; (sequence A000045 in OEIS).

By definition, the first two numbers in the Fibonacci sequence are 0 and 1, and each subsequent number is the sum of the previous two.

 source: http://en.wikipedia.org/wiki/Fibonacci_number

 

Golden ratio

In mathematics and the arts, two quantities are in the golden ratio if the ratio of the sum of the quantities to the larger quantity is equal to the ratio of the larger quantity to the smaller one. The golden ratio is an irrational mathematical constant, approximately 1.61803398874989.[1] Other names frequently used for the golden ratio are the golden section (Latin: sectio aurea) and golden mean.[2][3][4] Other terms encountered include extreme and mean ratio,[5] medial section, divine proportion, divine section (Latin: sectio divina), golden proportion, golden cut,[6] golden number, and mean of Phidias.[7][8][9] In this article the golden ratio is denoted by the Greek lowercase letter phi (φ), while its reciprocal, \frac{1}{\varphi} or φ − 1, is denoted by the uppercase variant Phi (Φ).

The figure on the right illustrates the geometric relationship that defines this constant. Expressed algebraically:

 

 
 

 

This equation has one positive solution in the set of algebraic irrational numbers:



 

 

source: http://en.wikipedia.org/wiki/Golden_ratio

 

Fibonacci and Golden Ratio in nature, architecture and art:

 










Best Regards,

^^_Lord_Ice_^^