Hi Guys,
GBP/JPY has not been reacting well to our scalp lines recently. So obviously it’s time to throw my method away and go find another method…..
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Ok, hopefully that got rid of the 95% of trader who will never succeed in Forex! Thank you for being one of the 5% who stayed.
I am going to think this one through a little and discuss some simple concepts that will bring my method back to it’s 80% win rate. Before that though, I just want to inject some logic into this situation.
For all of 2007 and 2008 and up to May of 2009 this method has a 70%-80%. If like me you’ve been trading it since that time these few recent losses would mean very little. There are always going to be bad periods with any trading method. Successful traders ride them out while everybody else abandons ship.
Ok logical stuff done, now onto what we can do to optimize the method.
Adaptability
I have discussed a few times before so I won’t go in to too much detail suffice to say to succeed in this business you need to be able to adapt. Changing market conditions or world economic conditions can have a drastic long-term effect on price action. Recently we have seen drastic changes in the world’s economic stability. These changes are reflected by a change to erratic and jumpy price action.
So what do we do? Should we just quit trading?
NO! Of course not.
We should adapt to the new market conditions. Forget about the silly 95% who left at the start of this blog post. You and me are part of the 5% of successful traders. What we need to do now is analyze the market and figure out how to optimize the method.
This probably won’t be easy as several changes to how the method is traded may be needed. However, some of us have already started optimizing the method so we’re half way there.
Metalhawk who you may know from the site has done some very extensive back testing. He went over his records and compiled a list of all trades take since mid 2008. Using the 5 min chart he then tested how well the trades would have worked with different targets and stops. Surprisingly the results conclusively show that on scalps the best target and stop since mid 2008 until now for scalp trades is:
Target = 85 pips
Stop = 65 pips
Download the spreadsheet document here
Trading completely manually this target and stop combination would give you a 62.5% win rate. You’re right that doesn’t sound great. However, once you throw in some discretion the win rate would be up in the high 70% or even 80% area.
It seems pretty clear by those statistics that I should officially change the target and stop for my method. I am currently testing to see how effective this would be though.
I am also currently reviewing:
1. How I select scalp lines I might be making a few changes to optimize lines.
2. The addition of trend lines to identify stronger lines.
3. Different pairs that can be traded instead of GBP/JPY
Metalhawk is also looking into which sessions statistically have the most losing trades. This would help us know when to steer clear of the market.
The point is that just because the method is no longer working at peak efficiency we shouldn’t just abandon it. Instead we should adapt it to the changing market conditions. Adapting is one of things that separates the winners from the losers.
Ok now here is the most important part. A new e-Book is coming very soon with an updated version of the method.
If you want to discuss this comment below guys:
{ 77 comments… read them below or add one }
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No problem. I’m sticking with you, Nick!
change is not a 4 letter word…
change is ineviteable-to resist is an option (no pun intended)
Nick, For all of 2007, 2008, and up to May of 2009 the markets have been in risk/safety mode. With economic signs of life the shift in currencies will be more toward risk/fundamentals. I have been studying price action lately and find it very compatible with your scalp lines. The difference is the lines are used as reference areas to watch for price action signals and if a signal appears then take a trade.
A) Great post, all too true. It’s encouraging to see someone with a trading strategy that’s had this much success, willing to turn it upside down when it’s no longer performing well (or at least tweak it a bit).
B) I’m a bit surprised that Metalhawks research didn’t suggest smaller TP/SL’s. Have you looked into that at all?
C) I was in Edinburgh a million years ago during June, and I asked “when is the best time to visit here”, and they said “end of August is when we have a big festival, and there’s great music and shows and tons of stuff to do”. So, I’m envious. Have a great time.
I am glad you are not letting this market get to you.
Nick! One cannot become a Martial Arts expert without years of practice, training and getting “hurt” many, many times. To become an “expert” requires hours of dedication and a strong mindset to achieve that success. It’s not for the weak minded.
I look at Forex Trading with the same mental attitude and, I know that I will succeed, eventually. Forex has it’s own way of dealing the killer blows, and for the ones that can’t take it, better to get out now……!
My thanks go out to people like you that are willing to absorb the hits, then get back in the ring and start again. So keep up the good work for all of us who follow you and, wish you success.
Bye the way. Based on your methodology, i’m developing my own technique. If it works well, then I will share it, later, with whomever wishes to try it.
Bon chance!
Hey Nick I agree with you about adaptability and adjusting. I have been trading the s/r line method with you for about a year now and it clear works. Even in these mkt conditions. I think if we look at the recent group of failed trades we will see that based on your ebook and video course they were actually NO TRADES. The break of 153.40 was mid ny session in a sideways moving, consolidating mkt. There was no strong downward move and then break. The break of 152.30 was again during NY session with three consecutive sideways candles prior to the break and right before US new home sales data release. Thats a no trade as well based on the information on forex4noobs. I say this to say I dont think the method needs much of an adjustment but we have to take in to account all relevant factors when judging whether to enter or not. Over the past couple of months I have managed to trade with above 90% avg by just sticking to the plan. Yes there have been less valid setups to trade but not neccessarily a lower percentage of winning trades. The economic environment has changed which should make us all scrutinize the trades we take that much more but changing the method, tp/sl or pair during the difficult times will not allow us to stay the course until “normal” trading condition come back (as it says in the ebook as well). just my thoughts…
hey nick, i’ve been following ur method too, this thing happen again and again: the stochastic O (10,3,3) influent the success rate of the breakout, don enter if 5 min or 30 minit stoch value in os and ob, it tent to retrace when the price is to cheap or too expensive. hopefully my information help a bit.
Nick – great honest post, thank you.
Great leaders know when times are changing and adapt, as you say.
The ability to continually adapt, evolve and innovate in any market, whether FX or otherwise is the mark of great leaders and of success.
Look forward to this journey with you and the crew.
Also thanks to Metalhawk for the hard work!
FlashBack
Hi Nick,
Please don;t be frustrated, many GJ Trading system got stopped out during March – August 2009,.
Just my thought :
1. At Nick Scalp-line (4H Inpact Zone), may be we should check :
- It will get a Break or Pull Back, I prefer using 4H bar Straddle Trading system.
- Check, If there is Uptrust or reverse Uptrust at Scalp-line to confirm if the Price pattern will be Break or Pull back.(Volume Spread analysis)
Go ahead, I am with you
Cheers,
I’m with you Nick. Keep it coming. In all the books I’ve read they say exactly what you are talking about. No system is forever and they all need adapting.
Been using the cross of the tenkan on the kijun the last few weeks….ichimoku chart combined with a double lined stoch. Been keeping it to 10-20 pips a shot. It’s kept me out of some nasty stuff and got me some pips. Tonights 152.30 has been a bugger… the big triangle / 2 month channel on the 4 hr chart looks like it may have a pull back coming. I’m being very careful at 152.30..it doesn’t want to break 152.15. We shall see soon
I’ve been burnt by the last couple of G/J scalps (one shouldn’t have entered and one just didn’t work) so didn’t trade that most recent one thankfully.
I guess it’s just a porcess that all new traders go though but I am kind of despondant about my trading at the moment. Your blog post arrived at the right time … it reminded me that even successful traders have times where they need to take a step back and reassess their method for changing market conditions.
I also really appreciate that you are upfront about adapting your method :)
Arrggghh better stop now before peeps start thinking I like Aussies. Hahahaha!!
Nick what a great post…I’m a newbie and have been floundering around like a fish out of water. I have been trying to trade since May this year and just cannot seem to get it right. Your post is heartening in that if professionals like yourself have had a difficult time trading lately then I know that its not all me…I just gotta get a solid method going.
…I’m a expat. Kiwi
So much arrogance for a loser. When do the appologies come?
Nick, all what you said is true and thanks for the honest words. We are waiting for any modification and for any new ebook to read.
Good luck …
Hey Nick,
Warning: long post and some fundamental analysis below :)
In addition to using your method I track the fundamentals pretty closely. In particular, I have always found the SP500 futures to be very useful in confirming your scalp / S-R Line entries.
Now we all know that GBP/JPY is somewhat violent as compared to the other yen pairs, but recently in this week the yen pairs, and also some USD pairs, have NOT been adhering to general fundamental principles. I was extremely confounded, if not annoyed to see GJ gaining 40 pips every 5 minutes while the major equity markets were clearly in the red.
Now, I’m sure everyone is aware that this week, and the 2 next are crucial for the state of the global economy. Firstly, September traditionally is the slowest month of the year, if not the most bearish. Secondly, a huge number of traders believe that we have a correction due. Surprisingly the major markets are techinically still on a rally, having just ended their 7th day in a row in the green. The problem is, the economical data simply does not support this. Unemployment is still increasing, and the US budget deficit is stil burning the economy. In my humble opinion, it seems that traders are being overoptimistic, buying on high oil prices and whatever positive economic data coming out at the moment. However, many other traders are not so sure.
This is reflected in the daily chart of G/J itself. The ADR for the past week is only approximately 200, as compared to 300 we are so used to. We are seeing more reversals in the 4H chart, where it is no longer unusual to see candles changing colours by the candle. I take this to mean that traders are very undecided, and are profit taking early. No one really dares to follow up on a trend anymore.
The bottomline is, I would stay out of this market. There is simply too much uncertainty. The scalp line which failed, I couldn’t resist. Everything was perfect, I watched it break, retrace and used the line as resistance, checked fundamentals, everything. However, almost immediately after entering, it went in the opposite direction and never looked back.
This isn’t a problem with Nick’s method. Its simply a market where indecision, and very very daring scalpers, thrive. Trend and swing traders are having a tough time. Its impossible to predict the market anymore, regardless of how many experts say they can.
Just my 2 cents :)
Twitter: forex4noobs
August 26, 2009 at 10:19 pm
@ Hung Lo:
Arrogant? With a name like Hung Lo(w) you shouldn’t be calling anybody else arrogant. Don’t they say that men who brag about their ahmmm ‘size’ are just compensating?
As for apologising……. not on your life. I have a method and I share it. If you decide to trade it and you lose pips it’s your fault. I am not here to coddle or babysit losers who cannot take responsibility for their own trades.
The signals on this blog are a guide posted weekly for people who trade my method. This way they can compare their analysis to mine and make sure they got it right.
For two years this blog has been making very consistent profits. Now, after two months of breaking even or being slightly down idiots like you come out of the woodwork. Instead of asking me to apologize you should thank me for the two years of consistent profits I brought the Forex world. Furthermore, you should thank me for the endless amount of my free time that I give away to help new traders make it in this tough business. Look around, there is no other site that offers advanced Forex education for free like I do.
The only thing about you that makes me want to apologize is your apparent lack of intelligence. I am sorry to the world that some members of the human race can be so blatantly idiotic…. I truly am.
You don’t like me or this site? Do me a favour hold down the ‘Ctrl’ key and press ‘F4’!
Twitter: forex4noobs
August 26, 2009 at 10:24 pm
@ Trade451:
I haven’t spoken to you in a while. August has been busy so I haven’t had much time for the chatroom.
I agree with what you said. Price action is the key to success with any trading method. Identifying when a line break is actually a line break can turn a mechanically traded 60% accurate method to a 80% accurate method. The reality though is many traders cannot watch price action and until now my method has worked well mechanically.
At the end of the day if you know price action my method still works well. However, I want to have a better balance between mechanical and discretion.
NICK….WELL SAID
Hung Lo ? WTF ? You need to get a life – no apologies are owed – of course you made some bad trades and now want to place blame on someone else.
Kean – what fundamentals ? For the last 2 years this market has ignored fundamentals and embraced Risk/Safety. As the economies level out it will shift to Risk/Fundamentals. I believe G/J is operating under those parameters now and will do so until the true natures of the market reveals itself. TBG, Muggers, and I have been doing price action trades based with good success. We look for price action signals at the s&r or scalp lines rather than just trading the lines. Equity markets are not fundamentals but correlations that do not always work – watch the China CSI 300. If there is a correction then it will be negative for yen cross pairs and good for dollar yen.
@Nick – I must add this comment. In learning the methods of price action I have in fact without trying VALIDATED your scalp lines therfore I must conclude the scalp lines and method ARE still very much valid.
Keep up the great work, Nick.
Twitter: forex4noobs
August 26, 2009 at 10:44 pm
@ graham:
You soudn like my Krav Maga teacher.
You’re absolutely right though. Let us know how your method goes!
Trader451 – I apologise if I may have come across a bit straightforward. I think I may have misrepresented myself. I may have used the word “fundamentals” too broadly.
The gist of the matter is I agree with everything you said in your reply to me. Yes I understand that people flee risky assets and anchor their money in the yen and USD (although the USD may be losing its seat as a safe asset) when uncertain. What i’m trying to say is that even if there is a correction, my mind tells me that yes, yen pairs will suffer, but i’m not so sure anymore.
Just to clarify to everyone, yes equity markets are merely correlations, that do not always work. What is certain is that I have a lot of learning to do and thank you for your comment.
Twitter: forex4noobs
August 26, 2009 at 10:45 pm
@ I.A.
You’re right some of them should probably have been no trades. To be honest with the changing market conditions the rules of the method got blurred. It is time to set them out again and update some of them. It has been two years after all!
Twitter: forex4noobs
August 26, 2009 at 10:47 pm
@ Flashback:
Thanks man.
And everybody should be thanking Metalhawk. Going over 1 years worth of trades is quite tedious but he did it and he chose to help everyone by making the info public. He is very cool and deserves a lot of thanks!
Twitter: forex4noobs
August 26, 2009 at 10:49 pm
@Andi:
Yeh the pull-backs are the biggest issue. This is why expanding the stops seems to work. Generally pull-backs are under 65 pips (they use to be under 50 pips) so changing the stops helps protect from pull-backs.
Thanks Andi!
Twitter: forex4noobs
August 26, 2009 at 10:51 pm
@ Muskrat:
In 2006 I changed my method from trading GBP/USD to GBP/JPY. I use to target 40 pips on G/U with a stop of about 30 pips. All of a sudden market conditions changed and the effectiveness went down. While the method essentially remained the same I made some changes. It looks like its time to change again!
Twitter: forex4noobs
August 26, 2009 at 10:55 pm
@ Twinky:
You don’t like Aussies? I thought all New Zealanders loved us…… actually I thought they even envied us. We have all that wide open grazing land perfect for huge flocks of sheep. And we all know how you NZ’s love sheep!
Twinky don’t give up it’s a hard time for most of us. If we see this through we will reach the good times again and then you can line your pockets with pips.
Twitter: forex4noobs
August 26, 2009 at 10:58 pm
@Kean
I find EUR/JPY and GBP/USD are predictable at the moment and they follow scalp lines well. I agree with a lot of what your saying about G/Y though it is getting tough to trade and it is becoming very erratic. As for it being impossible to trade at the moment? Thats another story.
As for fundamentals. Does the market ever listen to them? As far back as 1 year ago you would see data come out positive for the U.S. but the USD takes a dive or it coming out negative and the USD shooting up. Putting aside the fact that most of the fundamental figures are bullshit figures anyway the market hasn’t really paid much attention for some time. I heard somebody rave about a positive turn in the global economy because house sales are up in the U.S. Well generally that would be good news but when you consider you can now buy a house in the U.S. for $50k I don’t think home sales really means that much. Fundamentals are subjective!
Yeah Aussies suck. They come over here pretending to like us kiwis but really they are just here hankering after our lovely soft, fuffy sheep …
@Kean – oh no – no apologies needed. We all learn together – it has not been easy on any of us that is for sure. Keep your comments coming as we all learn from the discussions.
Hey Nick,
As i’ve said to Trader 451 – I apologise for having used the term “fundamentals” too broadly.
Why I regard fundamentals as pertinent to us – because one half of our pair, the JPY, is a safe asset. As I’ve said until very recently I noticed that G/J mirrors SP500, only because as it falls people abandon their risky assets and buys yen.
Don’t get me wrong, I am not a fundamentalist. I merely look to market conditions to reconfirm my entries using your method.
Nick, as for your example with USD, it makes perfect sense. Its because as the market goes down, people prefer the safer US bonds, giving the USD a boost, and vice versa.
As for your example with the new home sales, you are completely right! I didn’t think of it haha!
@Kean – I also watch correlations and fundamentals but I have grown to believe they really are insignificant in the grand scheme of things. Fundamentals are like a ship’s sextant on a cloudy night while price action is like a gps with 6 sattelites. In truth I am growing to believe fundmentals are much like noise because the market is going to go where it wants to go regardless – take a look at the most recent NFP on a higher time and chop off the wicks. It was ir relevant. Just watched UK housing data – it was very good – g/y went down (wtf?). We have to remember the “market makers” whoever they may be are moody and pick and chose what is relevant. In another example my mum wanted to invest in a stock with her church group. They gathered companies 10K’s etc etc. She chose Ford but I used S/R to get her in and got her out with a double. If the company is solid non of that stuff matters.
Can’t wait!
Thank you for all your hepl and advice. Forex4Noobs rocks!
I think the whole idea of demanding an apology from Nick is just disgraceful! After all of the work he’s put (and continues to put) into this project… Trading decisions are our own responsibility – don’t go blaming someone else – it’s childish.
Thanks for you spirit of moving forward. things will surely become better it only requires a little hand work further.
quiters never win, success
@ Nick:
Do you think that maybe your method is not 100% working now because it is the Summer break?
Maybe after the Summer break, in September, when everybody is back from vacation and the volume will shot up, your method will come back to the 70% to 80% of success rate.
I am just sharing my view, I don’t know if you agree.
MiG
hi nick,
these are uncertain times since financial crash. I dont think anyone knows where values of currencies should be because of all the bs coming from various central banks.
stick to your system but perhaps shoot for 30 pips. it seems as if scalping has become order of day as traders grab profits soonest due to uncertainty
trading is a business where you can easily lose 6 out of 10 trades. if your risk/reward is right you should still come out on top with wins on the other 4 trades.
changing systems is no answer – the 95% will find this out soon
Hi nick, and the rest of the friends here.can i ask something nick, if your method not working now and you going to think of a new trading method, then does it mean i should not buy the trading video you posted here?since the method not working, then should i wait for your new method out?
Hi Nick as you know I have been floating around your site for a couple of years or so now. Before I came I used to trade reversals only, you then opened my thinking on breakout trading. About 10 months ago I took a decision to put breakout trading on the back burner and refocus only reversal set ups, these have continued to work well for me. As you know I trade off s/r levels mainly but interestingly do not set pip value stop losses or targets but rather aim for next logical minor/major s/r level. its my opinion that setting stops and targets off s/r levels as well entries copes well with the volatile market recently. Anyway sorry just a ramble. I look forward to the new book with interest.
cheers rich
Nick, thanks heaps for all the hard work you and MH do and are willing to share.
Ignore those who try and rattle you… don’t let them see they have succeeded!!
It’s been a rollercoaster ride ,the thing is it could be called good painful training experience.
Lesson one is ,the market is not personally doing this to me by going the opposite way when ever I enter a trade.
It is true the market is in chaos ,all the economies are propt up by toy money, Nick I was wondering ,would it be an idea to move to a longer still trading time frame with the NickB method , to reduce the erraticism and smooth trades , ?
Anyway you do have my respect,
Damien
Nicky, i am sticking with you.your system works well.as long as u trade then i trade too…….im with you
Hey Nick,
Thanks for all of the support you provide. I wouldn’t be in the Forex market at all if I hadn’t learned of your methods and approach to trading.
I agree that trendlines are a very nice potential addition to your method. When you see a bounce off of not only a scalp line but a corresponding trend line, it adds some good validation to a reversal (or the strength of a break, if the price punches through).
Cody
NICK, the strategy is working find for me. The issue is the entry. What I do for the entry is go down to the 10minute chart and look for an engulfing candle and wait for directional confirmation before I decide to enter. When I do, my goal is only 20-25 pips. In and Out. I also trade GBP/USD and EUR/JPY. So between them I collect my pips. No Goals – I take what the market gives me.
Thanks for all your post and knowledge
@ OT In other words you use Price Action to get in the trade !!
Hi Nick,
BIg time lurkernoob (is there such a word?) here but like Cody here, I’d still be looking at a screen full of indicators and still not know what to do, if not for this site.
I am not sure if this helps in anyway but I’ve been DEMOing with your method (trying to get it right) and i could get away with 15-20 pips on many occasions because of the erratic movements around the scalp and trend lines. Again, taht’s only DEMO – not sure if it’ll work on the real thing though.
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