9/19/2011 – USDJPY   – 128 pips

9/26/2011 -  AUDUSD  +677 pips

10/4/2011 – USDJPY  +51 pips

10/12/2011  -  EURGBP  +139 pips

10/21/2011  -  GBPUSD  +309 pips

10/21/2011  -  AUDUSD  +399 pips

That’s 1,477 pips to the good, ladies and gentlemen.  I’ve seen some of the other guys who call themselves “Trend Followers.”  I don’t know what they are, other than Internet Marketers, but their results certainly do not look like trend following results. 

Remember…these gains were made with extremely simple, low maintenance, low stress trades.  They took maybe 5 minutes to place, offered HOURS between the signal and the time the trade had to be entered or exited, and just plain worked out.  What more do you want?  Low stress, Simple to follow, PLENTY of time to get the trade entered once the signal is received, and finally PROFITABLE!

Interested?  Sign Up Today!

It’s no surprise that immediately following Memorial Day, I took a few losses on the trade copier account. No big deal. If you took only the losers, and none of the winners, you lost about 3%. If you took all of the trades, the string lost under 2% in equity. This is why I drone on and on about proper use of leverage and discipline.

In a couple of weeks, the smart money traders will bring their opinions, and their money, back into the market. Then we’ll see what happens. Until then, I’ll still place trades in the trade copier account, but they will be fewer, and I’ll exit them sooner.

My advice during summer is to focus more on trading education, and less on actual trading. It will yield much better results, and it’s a hell of a lot less stressful.

Good Luck!
Tim

Account:  003540927404

Swift:  BOFAUS3N

Routing #:  026009593

IBAN:  I have a United States bank and we do not participate in IBAN.

The Shooting Star is formed when the open, low and close are in a very tight range, while the high has created a long upper shadow.  This candle forms when buying failed, and selling took over during the session that created the candle.

This single candle pattern is helpful to traders because it gives an indication of where supply overcomes demand.  This point could also be called “resistance.”  It’s great to be able to identify this candle, but trading it is another thing altogether.  I love price action trading.  But to trade a reversal candle like the shooting star you must actually be in an established trend.  Otherwise, there’s nothing to reverse.  I’ve coached dozens of traders.  Many of these traders try to trade every spiky candle that they see!  Let me help you out here.

I only trade a Shooting Star when it follows at least three bullish candles.  This is my rule, and I never deviate from it.  As a result, I have a high percentage of winning trades using this pattern.

Entry:  I place a Sell Stop order a few pips below the low of the shooting star.  There’s just no point in placing a market order on this pattern.  Doing so is too risky!  Remember that a single bank order could have caused this formation, and when the market returns to normal, buying will overcome selling again.  Accept the larger stop loss and place the stop order.

Stop loss orders go a few pips above the high of the Shooting Star.  It’s that simple.

Targets should be at least 1:1 to your stop loss size.  Look for areas of support, defining points of trendlines, etc.  If you’re not trading into clear space, don’t place the order.  It’s not worth the risk, and there are plenty of trading opportunities for the price action trader!

Trendlines show a pattern of ascending or descending support and resistance, respectively.  I like to see at least three touches before I consider a trendline valid.  My reasoning is simple.  Two points don’t tell you anything except that there are two higher lows or two lower highs.  The third touch tells you that the trendline is valid and actionable.  If you want to trade a trendline bounce, you can watch price action around the trendline and place a trade on a confirmed pinbar, engulfing pattern, inside bar, or piercing pattern/DCC.  Just remember that if you are looking for a trnedline breakout, you really need to have at least three touches before you should consider the trendline valid.  The problem is one of market interest.  If the forces driving price movement are not looking at hte same trendline that you are, they may be looking at a different trendline that is slightly higher or lower than your analysis shows.

So, how many touches do we need to see before trading?  You can trade the third touch on a bounce, or the fourth touch on a breakout.  Either way, make sure that you are careful with your risk taking around trendlines.  There are many ways of reducing your risk.  I like to see a confluence of events before I place a trade.  Price action, trendline, key S/R, a valid fib, etc.  The more you have at a particular price, the better your odds of a winning trade.

Tim

There are basically four types of trades:

• Good Trades
• Bad Trades
• Winning Trades
• Losing Trades

Not all good trades win and not all bad trades lose.  It’s important to know the difference.  We’ve all placed bad trades that took profit.  How many times have you had a trade in that was obviously a mistake end up taking profit because of a news event or a market change-over anomaly?  Likewise, how many times have you placed a perfect trade, one of those one in a million opportunities with every type of confluence available, only to see it blow your stop loss in an illiquid market?

I’m going to ignore the difference between winning and losing trades.  You all know that difference pretty well.  I want to focus on the difference between a good trade and a bad trade.

Good trades are those trades that meet all of the criteria of your trading system.  It passes all of the filters, meets all of the positive criteria, and offers an attractive risk to reward ratio.  Taking these trades is a no-brainer.  Some of these trades will end up losing money.  If your system has a positive edge, the losses won’t matter.

Bad trades are those trades that you take and later (or even at the time of entering) realize that they do not meet your criteria, or that one or more of your filters was violated.  We’ve all done this from time to time.  Very few traders can tell me with a straight face that they’ve never tried to catch a falling knife or got impatient when waiting for a solid 1-2-3 to complete.  It happens.  Get over it.

The key to surviving the bad trades is to suck it up, take the hit, and exit the trade.  Don’t wait for break-even, and don’t even think about adding to your position.  Get out of the trade the second you realize that you’ve made a mistake.  Trust me.  I’ve seen this dozens of times.  A client, mentee, or good friend comes to me looking for advice.  The guy’s into a bad trade in a big way and it’s 1,000+ pips against him.  Every time it looks like a turn-around, the guy added to the position.  The problem with this scenario is that the turn-around is usually imagined.

The key to entering good trades is simple.  Follow your rules 100%, only trade a system with a positive edge and enter every trade that meets the criteria and fits the filters.  Once you are in these trades, you stay in them until your trade meets the system’s guidelines for an exit.

Knowing the difference between good and bad trades is a key skill to master for any trader.  Your actions in both of these trading situations will determine your success as a trader.

Establishing the correct position size is difficult for most traders.  Even experienced traders screw this up all the time and it’s so simple.  Brokerages, forex trading system designers, and a number of “gurus” will tell you to risk “only 2%” per trade.  The question becomes, 2% of what?  2% of my open equity?  2% of my total account equity?  What about accounting for current risk?  All of these questions must be answered in the fixed percentage scenario.  I apply a much more advanced money management plan to intraday trading, but it doesn’t have to be that hard.

In my trend following trades, I ALWAYS figure that I’m probably wrong when I enter the trade.  That’s right.  I always think I am wrong, every time I enter a trade.  This forces me to use sound leverage.  In my trend following systems, I typically use 1:1 leverage.  That means that for every 1,000.00 in my account, I will trade 1,000 units.  To save you some figuring, that’s about a dime a pip on the majors for every thousand dollars I have in available equity.  That doesn’t sounds like a lot, does it?  What that means, however, is that for every 100 pips I earn, I increase my equity by 1%.  That becomes HUGE over the course of a year in a trend following system.  Take a serious look at my trading results before you make up your mind.  I think that when you do, you’ll see that 1:1 leverage is more than adequate to build serious wealth.

I’ll talk more about the mindset in a later post.  For now, just review your past performance and apply a 1:1 leverage to each trade.  How did you do?  Look at my performance and apply the 1:1 leverage.  How did I do in 2009?  Did I beat your fund manager, 401K, IRA?  Keep in mind that one of those pairs, a big one, was traded at 5:1 leverage!  I almost never trade at 5:1 leverage, but the stop loss was so small on the first trade that I was willing to take a chance.  I still thought I was wrong, but it made financial sense to increase the leverage.

Good Luck!

Tim

First, I want to caution everyone about increasing your leverage too much.  We’ve had a lot of great trades lately (295 pips this week on the trade copier alone).  Sometimes, clients want to increase their position size at this point.  It’s fine to increase your leverage slightly.  Just keep in mind that over-use of leverage stops you from being able to take a spike.  It can also cause you to lose all of your gains on a small loser. 

I’d also like to explain to everyone that I operate within my trading plan.  That plan includes weekly maximums for wins and losses.  I target 2% per week in overall equity increase.  After that, I stop trading the trade copier account.  If I have open trades when the 2% mark is met, I let them run, but I won’t expse your account to further risk beyond that point.  I base the equity increase on a 1:1 leverage per trade.  That means a 1% equity increase per 100 pips (about).  That’s the leverage I recommend as your maximum.  What you do, is beyond my control.  I know that many of you are trading at much higher leverage.

With regard to email.  I reply to email at least three times per day.  I make it a point to answer email around NY open (about 7:30 AM CT), then again while I am looking at the Helix trades (Between 4:00 – 6:00 PM CT) and then again around Midnight CT.  Sometimes I will look at email throughout the day, but that’s not the norm. 

Finally, as I was reviewing some accounts, I noticed that some of you had (perhaps accidently) shut off your email delivery from this mailing list.  I figure it was accidental because some of you have actually mentioned that you missed an email, etc.  This is a GREAT reason to use Yahoo Messenger.  It’s the best add-on for email.  Everything signal-related that I send on this mailing distribution, is also sent to everyone on my Yahoo Messenger list.  Please keep in mind that my Yahoo Messenger is not on the computer in my office.  I keep it running on one of my VPS.  I don’t typically use it to chat.  (I’ll chat with you if I am on the VPS and see you trying to get my attention.)  But please understand that I am NOT IGNORING YOU if I don’t answer.  I just have not seen your message.   

I guess that’s enough for now.  I want to thank all of you for your continued support.  I certainly enjoy trading with each and every one of you!

Thank you!

Tim