Smooth Equity Curve - How to maintain it



Do you want consistently smoothly rising equity curve?

If YEs, then you need to learn to use Risk Management technique. It should be  in line with your trading strategy and trading edge in the market. The First step towards a consistently growing and smoother equity curve is to  Define your Drawdown threshold.

The Higher the drawdown threshold the more bumpy and jerky your equity curve will be. To keep it smoother you should a lower max draw down limit.

Lets use an analogy of a car driving along a bumpy road like in the picture below. The car is travelling on bumpy road, it is by no means smooth and can never be smooth. Trading will always sustain losses. Every bump is a trading loss.


Image result for car on a bumpy road cartoon

Consistently Winning Trading is a result of using a strategy that has an edge in the market. It's a strategy that gives you a higher probability of winning over a set of trades over a longer period of time.

The successful application of the winning method determines what is the direction of the proverbial car journey, losing trades are the bumps in the road, risk per trade is highs/depth of the bump, the amount of pressure on the gas pedal i.e. the speed of the car will determine how bumpy the ride is going to be.  The bigger your risk per trade the more impact the bump/ditch will have on the quality of your ride. If you take too strong bumps along the road, too many times, it might shorten the health of your car.

An Acceptable Drawdown Limit - What is it? 

Most prop firms and professional traders would not want to go anything below 3-5%. But depending on their strategy a figure as big as 10% would still be acceptable but as said before, the higher the number the more "bumpy" it will be. 5% is a GOOD figure. It keeps the curve very smooth. So, e.g. if a method has 50% win rate there is an 80% chance of 5 consecutive losing trades.




There is a 50% chance of losing 6 trades consecutively. That means, within 50 trades there is a 50% chance that you might lose 6% of your account @1% risk per trade. I don't know how many times can this happen within one batch of 50 trades. 

Now, assume you want 5% max drawdown. This would mean there are quite high chances that your strategy might hit this "trip" wire within each batch of 50 trades.

AIMS Stress Free Trading The Setup 1 method is a strategy that gives you 65%% win rate (33% losers, 33% BE) that means the chances of 5 losing streak is lower than 40%. So that means 5% draw down limit with 1% risk per trade would suit this method.

What happens if I hit my Drawdown Limit? 

After the above you then have to assess, how many trades does your method generate per week. And then decide what would be your chances of blowing your max drawdown fuse? if you take 50 Trades a month, there is a reasonable chances that you might blow the fuse once or twice a month. Is that ok or do you want to avoid it? best be to avoid it.

How many trades do you expect for your method depends on how many markets you watch and trade and what time frame. 8 FX Pairs on an hourly chart can produce half of that per month. so 5% drawdown at 1% per trade is not bad if you trade 20-25 times a month. (assuming there are no DS0 trades). This will keep your equity curve smooth and rising steadily upwards. 

4 Step Process that Leads to More Winning Trades

That is a Fantastic 4 step process 

(Interesting Chat taken from AIMS Trading Room )

it can be applied to any trading strategy.

iMi [16:17]
When you get time can you Write down here. the 4 Questions. :)

Jasmien [03:20]
ALWAYS ASK YOURSELF
1. Directional Indication
2. Where is it coming from, where is it going.
3. Risk Reward
4. Entry setup


No. 2. often can let a trader understand the difference between when an "entry signal" is worth taking.  e.g. Where is it coming from? you see the market printed 7 big strong green candles and then there is this small tight IB. Where is it going from there? well probably breakouts and resumes, but most probably more pause(consolidation) or reversal. in either cases, Risk Reward and entry setup will always come after this assessment. (Risk Reward is a crucial step, often this decides whether trade will be taken or not)

You'd notice that most beginner traders  start at 4 without going through 1,2,3 [Big Mistake]

iMi [19:09]
Question: PB (Pin Bar) is a Direction Bar, OB is a Direction Indicator, but IB is not?  is there a way to decide the most probable direction breakout of an IB? How is it done?

Answer: the IB must have its high/low/open/close near each other. if Yes, the directional breakout probability will depend on the bar to left. If its a strong Bull Bar, higher chances that the IB will breakout UP.

iMi [19:59]
Also something to remind ourselves about is that an IB is not an IB if it has a good Healthy RANGE.

e.g. if its normal for a market to have 50 pips daily range. and you see an IB that has 40 Range it's not really telling us anything, in that case the direction of the IB will have information. a bear or a bull IB.

Is this a Bear candle or an IB?




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Pasted image at 2019-03-23, 8:01 PM


The Trend is a VERY subjective term

as @Snorm mentioned the other day. Not only can it be different per time frame it can differ per your METHOD of establishing the trend.

e..g a trend can be based on AIMS Gator, it can be price above or below the Purple trend, or any other means used, and all could lead to different trend indication.

Some people would define it with moving averages, other using swings on price charts, yet other using elliott wave. Some AIMSters use AIMS Box only.

But the WiPG method of @Jasmien, looks at 1-2 candle patterns. The method is based on our knowledge of trading patterns that we identified using indicators on several different time frames and markets. The patterns that gave us statistical advantage and high confidence. It involved years of studies. It created a fractal geometric pattern has lead to this 2 candle formation. Its highly probable and less time consuming.

The London Open Report 22 March 2019

Right, so today we had some European PMI news lined up. Not that I was actively waiting for it do something but news is one thing that's always on the agenda for a forex trader, specially intraday time frames.

So Dax started with an uptrend already, and there was no entry. I took a long of the overnight range knowing well ahead of time, that it was highly likely that it would turn into risk. But also knowing that possibility of breakout was also there.

Market is pessimistic these days so any bad news will attract more selling, with relatively much ease. 

Both German and French PMI came out negative, far worse than expected.  And that meant, SELL THE EUROS.

 Before the news, I saw a setup 1 on #USD/JPY. Love this setup 1. It was great looking setup to go short. PO was set well before the news.


Also Took a setup 0 on the EUR/GBP M15 chart

EUR/GBP a Setup 2 Pink Dot but a breakout entry overall. Working pretty nicely thanks to negative news for the euros

this is #gbpjpy it had a classic breakout setup, entered market order below box when it started to move after news

EUR/GBP M15 Out with 46 pips Profit 



USD/JPY H1 Setup 1 - SL to BreakEven. Going towards Target Zone 1 


The London AM Report 21 March 2019

Well I did not see anything setting up on the DAX M1 chart since it was already moving before LO. But then the open behaved quite ok and we got our first Cherry signal.

Took the cherry promptly and it hit 2R target. That's it. There was nothing after that.


So I switched my attention to FX Market. Specially because FOMC helped it move last night. We always look at the market on the M15 chart the following day to catch some #FamousSetup. Famous setup is a very unique AIMS Setup 1. Sam is the Master of Famous Setups.

But I did not catch any apart from EU long which was a RENT.

And then I found a nice cherry on GBP/USD. So a nice and easy 2R trade. Below, I share with you how a Cherry trade is taken from entry to exit with 2% profit.

Here you see the Yellow little square, Cherry signal. 

Stop Loss moved to BE (entry level) after 1R profit

A bit of anxiety for some people seeing it nearly missed the Take Profit level

Finally It HIts 2R. There was no drawdown on this trade. Very Easy. 

The DOW Report 20 March 2019

so, today was a blessed day. First day of Spring in the UK. The also sprung well during the late afternoon session in the UK.

Below you'd see a Class 1 Setup 1 and a combination of AIMS The Hunt Sell Signal which was also "fractal geometrically" correct and  in line with Setup 1 on the M1 chart.



Here we see a perfect Setup 1 Signal followed by a Cherry Signal within the Wave 5 

This chart has a perfect example of Setup 1 which was also a Cherry Signal on M5

THE DAX Report - 20 March 2019

The morning started with no real momentum.

There was no breakout, not that I'm a big fan of LO breakouts , not anymore. I wait for it to breakout. then I see if its time to trade

While chatting and making fun of @Tomi and @sam market finally started to move. I was aware of it, so was tomi right at the first 1 minute candle. that happened .. rest of the story on the chart below.



The Afternoon Session (NEO)

There was a lovely lovely Hunt Signal followed by a Setup 1 just before NEO

Below step by step picture sof Setup 1 Start to completion #LiveTrade

The arrow without a caption points to AIMS The HUNT Seed Sell Signal. So powerful 

DAX Setup 1 short SL moved to #BE and Trailing AIMS Boxes


DAX was not showing momentum. I was watching DOW and it was dropping but DAX was not. Meaning there was less interest. Exit after the bounce off the levels to the left. Turns out it was a good decision. 

THE DAX m5/M1 charts side by side. This is the AIMS method 



Why is The FX MARKET DEAD?

The Forex Market is definitely going through some low volume/volatility period. 

What we see on the Daily charts, or the hourly chart these days is not what is normal. 

The markets used to trend like this EUR/USD Chart below 



And the answer is, we don't know. 

Meanwhile what should we be doing? 

The simple answer is , to trade cautiously and trade the same setups over and over but taking profits at levels to the left at 1R or so. 

When the markets change, and they start to trend. we will then let some trades run. 

More focus will be given to Daily Charts overall in my trading. And I will discuss it here more and more. But still I'll continue to look for possible setups on the H1 time frame for major pairs. 

cheers

ps: meanwhile the indices still offer plenty of movement, as well as OIL and Gold. 

Was I lucky on this trade

Look at this Setup 1 short on The DAX30 M1 chart.

I had a 7 pips stop loss and grabbed 3x profit of 21 points?

Price hits my Target Point and immediately turns around?

Do You think I was lucky?


The fact of the matter is that I was not lucky. Not at all.
My Target or Take profit level was set on the pure AIMS concept of TZ1. (target zone 1)

So I set my take profit level a couple of points above the TZ1 indication.

To learn more about The Setup 1  Strategy, download FREE Ebook AIMS Stress Free Trading - The Setup using buttons above. 

This is Setup One by iTradeAIMS

Today I'd like to Share just one picture.

This is Our AIMS Setup One.

Truly a picture , specially this one, is worth a thousand words.

DJI One Minute Chart 30 SL Profit 80 Points

What Does FOCUS Mean

Focus mean different things for intraday traders trading the M1 or m5 charts compared to the Swing traders of H1 or H4.



What does it mean for Intraday Traders on Faster Time Frames

Most intraday traders will trade the M1 or M5 time frames. Whether its Forex, Indices or Individual Stocks. It depends on your style and strategy but generally M1 is most intense time frame. For trading the M1 chart, it literally means watching every bar.

No matter, you're in a trade or out of it. You WATCH. Which means you will , naturally experience breaks of concentration that might result in missed trades. Often it's a matter of seconds between missing or getting-in, on the best trade of the day. So better come up with good techniques and solutions to stay on top of this. STAY FOCUSED AT ALL TIMES

You have to work on your ability to "Hold your Concentration". ADHD Issues? Well, you gotta fix it.

To remedy that, enforce deliberate breaks every 30 min. 2-5 min. Look away from screen, possibly out of the window if you are near one. Focus on distant things. Empty your mind.

When to take breaks?
You can take breaks when you know exactly what is happening and look away for a bit. It could be time based or situation based. As long as the GAME is on, you stick to your chart.

What does Focus Mean for Swing and HTF Traders?

For the Swing traders its a bit different. It's about keeping an overall trading focus for the week and the day. Reminding yourself of your months and weekly targets, (for beginners remind again and again what is your trading plan and strategy rules). And then getting out of the minute focus.

You start your day by reviewing your last nights notes and analysis. You pursue that, build on it or scratch some parts of it and you move into the open and set your orders etc. Then you take your focus away from the chart to other things but promptly come back to it when it's time, such as top of the hour top of the sessions.

If you are "in trades" you obviously want to check every bar/period. If not in trade, and you are waiting /expecting something is setting up then you want to keep a soft focus and set alerts. If Nothing seems to be happening for that day, you focus on journals, longer term analysis and update your stats etc.

So FOCUS means different things for different type of trading methodologies and personalities. The most intense obviously is M1. But it also has the MOST potential for Fastest Growth and Instant Results.

Not everyone is cut out for either type of trading. Most traders do well on higher time frames. Which type of trader are you? 

Take Profits on Friday - Swing Trading

I trade the EU GU UJ and Gold on the Hourly Time Frame.

That is my bit of Swing trading.

DAX was supposedly going into a Wave 5 but ...
[Click to Enlarge]
I'm busy trading the DAX on the M1 chart but from time to time, I check these H1 charts. H1 chart does not really need checking every hour. You check them the night before and in the morning pre London Open. Usually if it's going to set-up for something, You will see it before London Open.

I usually only go for trend breakouts (THE SETUP1 and APPLE Method) for FX charts. I like the Hourly Time Frame for FX (currencies.)

Below is an Example of an #AIMS Apple Initial Entry following by BOX Breakout Add on. on #EURUSD



Clearly a Downtrend. A lovely Apple within a Sideways Wave 4. 

Took first Apple and added below box.

Mistake: should have exited on fruit high before end of the week since it was Friday. It was my intention but literally forgot. I remember going "oops" while sitting with wife in the bedroom past 10 pm uk on Friday.


I said, "I might have left the EU trades running". But I had the SL set at the Entry level of the box breakout add on which was hit on Monday.

Mistakes like these could some times cost some money.

On this occasion I lost profit but luckily no huge gaps over the weekend


How Do You Trade Reversals? [Fruit Method]

I will continue to trade the DAX on M1 time frame using The Fruit Method 

I will also trade DOW M1 during the NEO Session 

1. Play The Market Open Drive (Catch the open breakouts etc)
2. Play the rest of the period post Open (after the first 20min) using Fruit method rules etc


However, I'd like to remind ourselves this. 

What is the Fruit Reversal Entry For?
The Fruit Reversal Mechanism is for, like the name suggests, Possible Reversals.

The message is plain and simple. 

But when we start to trade, we start trading every time we see the Fruit Bar Entry Signal. 

*That ain't it Chief*


Always 


The Fruit Entry Signal is ONLY valid when the RUBBER BAND principle Apply. 

You always have to ask, yes, lets do reversal but *Reversal of WHAT* 
> has the market "Pulled away from the gator too far too fast?" 
> has price broken all the levels and gone so far up so quick that it cannot sustain it?

For me I trade the OPEN Drive, as the name suggests, at the Open. 

and I may utilise Box, momentum, fruit or box entry to catch the first move. 

add on as much as possible keeping risk under control. 

then soon after when price consolidates. Now I'll only trade the Setup breakouts, may use apple to get into next wave up. (I won't call it wave 5.)

so there it is. And I will post here one or two times, how the session went.

How do I Trade in AIMS Live Trading Room

#raklian asked a question. He wanted me to further clarify a concept.

I thought to myself, well that's the reason I presented you with AIMS The Fruit 180 Pages eBook with explanation of that concept and plenty of pictures.

I was waiting for that ideal pattern to happen just after the Fed's Powell was about to speak. Meanwhile Fed Bullard was also chirping.

The Dow, such a mighty beast it is, very volatile these days, was sideways on the M1 chart. It created a Box, It needed that breakout. And finally it happened.

So the following Screenshots shows how the ANSWER to The Question was presented in THE FORM OF LIVE TRADES. It was fun.


Story of the Campaign on DOW

At News Price broke. up, met with resistance and created an angle after dashing up nearly a 100 points.

Creates angle and Fruit signal becomes the last piece of the puzzle. I get to test the waters with .1% entry at fruit. FE

Immediately it drops 2 bars, and starts to pull up. i'm thinking, is it just a pullback, will it go up instead I'm waiting. (trying not to get out, telling myself, you will be proven wrong when and only when it goes above the high of the fruit bar)

That helps. I'm saying to myself, its Stage 2 now. hold on.
Look for FAO. (Add on signal)
at the bar 20.00 I realise, oh shoot, i have missed FAO, but had my FB entry. so FB (box add on) kicked in below box.

Price pulled back up, to where my FAO would have been, i took market order.

FAO was 0.5% and FB was 0.4%. now fully loaded.

Price still in stage 2. I could now lose 0.5% of account if it goes up since Box high created above the bar of 19.59.

at 20.06 price breaks, immediately I say to myself, shoot, I could have added one more below the box, it would have been .3%.

in two bars 20.06-.07 it dropped by 72 points. now x 3 = running profit shot up by 216 points. NICE
then it pulled up a little I hiteh exit for the add ons banking the profits.
and started trailing the last entry FE .. which I exited now as  Iwrite.

Trailed the last (position) one until it lost angle. then decided to close on green line close.

There is pleasure when you are able to follow your trade plan correctly.

Screenshot of AIMS Live Trading Room

He asked what do you mean by Looking at the Overall Pattern. Because I said, don't look for an entry signal alone. We don't do that. We look for the overall pattern. Which means, "Look at the full 100-140 bars analysis". Which means, look for the Question 1. Where was price before?
 Question 2. Where is Price Now?
 Question 3: Where is it going? 

The Signal was there , so I pointed to the 19.51 Bar. Look at it RIGHT NOW










How to Catch Early Entry into a Crash 1600 Pips

Well if you were trading the daily time frame you'd have seen a nice setup during december.

We discussed it a few times in our chatroom.

The spike happened in 2019 but the entries were 2 weeks ahead of it in 2018. You did not have to panic, because you were correctly positioned.

When I work with new traders they often try to cover their mistakes when showing me their trades. As if they are trying to impress me or something. For some reason everything thinks they should know how to trade from Day 1. This is what I said to one of our AIMS new friend.

"Hey, we don't learn to walk straight out of mothers womb. Life is a continual process of Growth. We attempt to do something fist time. to find out how much we need to learn. Now you know how much you need to learn. Will you take the challenge and become the BEST OF YOU? The TRADER that you aspire to be is at the end of the journey that you have started. The way to get there is tough but the rewards are highly lucrative and fun.!!! "