Money Management

What i have personally learnt is that price action is King. I have tried hundreds of indicators, standard ones in MT4, ones posted on FF, ones on russian forums, you name it, i have used it.thru all this, i have found that price action is the best.indicators seem to work but they work only for specific periods and for specific types of markets, they dont always work.so one week, they work very well, you make a lot of money and you start trusting it.So next week, cos of your trust, you start to over-leverage when you take trades and what happens ? the indicators dont work and you lose whatever u earnt and more.

Studying price action is not easy.it takes time, it takes experience to understand how the price moves, when and why.Forex is not a get-rich quick scheme.But when we are ready to spend so many years in our respective work areas (manufacturing, automobile, software etc.) to get some money, its amazing how people tend to get impatient when they enter into forex and they tend to over leverage.

Lesson no. 1 is 'dont ever over-leverage'.You should not risk more than 3% of ur account in any trade...ever....if u do, u are bound to lose in the long run.You could win in a week or mnth but u will lose in the long run.thats for sure....

The reason why people over leverage is cos of greed.Lesson no. 2 is to control greed.but its a contradictory thing....lets face it...most of us trade cos we are greedy.We are not happy with the oney that we are earning and we want more.Thats why we move to trading...but, the trade experts say that we should not be greedy.How can you avoid something which was the very reason that you entered into forex in the first place?? its tough.Its really really tough....it took me about 3-4 yrs to control greed.

But just remember this, do you realise that by earning just 50 pips a day using a $1000 account using 3% leverage, you could be making $1000 a mnth after just 5 mnths? and $2000 a mnth after just 7 mnths?? $2000 a mnth is more than enough for a lot of us. And i could go on and on on how we could keep building this amount....

What i have said is not impossible.Anyone can afford $1000. 3% leverage is a decent leverage for small accounts.and 50 pips a day is very much possible if you know what you r doing.So, all that i have said above is possible for all of us....but it needs a lot of self control...

You could make 50 pips a day just by trading for 2 hrs a day during the euro or the US session.But being patient and waiting for the right trade is the key...thats where everyone loses....

Some thoughts on EURGBP

First of all, thanks for your continued support to this blog. It is comments and visits by you guys that acts as a tonic and makes it worth the effort to post all these information.

Anyway, coming back to trading, attached is a 1H chart for EURGBP. I have marked bar A and this is the same control bar which we discussed yesterday. I had pointed out in my article that a break of that low will lead to an upmove to 0.8800 and the low did break and we had a high of aboput 8796. Not bad. I believe that the upmove will still continue but 8795-8805 should prove a crucial hurdle.

I have marked the next control bar B. You can see that the high of A is almost the same as low of B and both of them come in around 8805 and this would mean that 8805 region should prove a strong hurdle. It will take its time but i think the hurdle will be crossed.

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Updated Hourly Chart of EURGBP

Attached is the updated hourly chart of EURGBP. In the morning, i had marked off the control bar. Now you can see that the price has broken thru the low, which was acting as resistance. Now we need to watch and see if there is an hourly close above this level. We need to see whether the resistance has been broken or not before we initiate any trade.

If the hourly bar closes below the low, then we can short it with small SL. If it closes above, wait for retrace and go long with small SL. Considering the fact that EURGBP has bounced off its lows by about 50 pips, i would be looking for longs for a trip to 0.8800..

Control Bar on 15M in GU

Attached is the 15M chart of GU with the control bar marked as A. It is the bar with the highest range and as you can see, ever since it appeared , it has kept the price within itself. You can see how the high and low of this bar has acted as good resistance and support.

So, for this trading, all that you need to do is identify control bars. For now, just have a look at your chart and choose the bar with the highest range. That should be your control bar and then trade off it with small SL and TP.

Control Bar on GU

Attached is the 1H chart of GBPUSD. The control bar has again been marked as A. It is very simple and easy to locate. You can see that the price has kept bouncing off the highs of the control bar. The high of the bar serves as a good support after it has been broken. It has bounced 3-4 times now and each time , you could have easily made 30-40 pips. I had taken a short on EURGBP and long on GBPUSD as per the control bars and have already closed each of them for 40 pips. Had taken them with a SL of 20 pips. Easy !!

What is a Control Bar and how to locate it?

Ok, lets start with the question that is uppermost on everyone's minds. What are control bars? I have a specialised algorithm which calculates the bar to me but as i said, that wouldnt work out when i throw it open to the public forum. Not all people can use this algo and i cannot expect everyone to depend on me for the bars.

So, lets try and come up with a good universal definition for control bars. In my mind, its quite simple to find good control bars. Just open up your chart and choose the bar which has the highest volatility, in other words, the biggest bar. This is a good control bar for everyone to work with.

I can give so many definitions for it but that will only add to the confusion. A simple definition is a bar on your chart which has the biggest size. Simple..I have attached a chart of EURGBP and you can see that i have marked a bar, which is a control bar in my view, as A. It is the biggest bar in my chart and as you can see, it acts as a fantastic control bar as it keeps price within it and once there is a break outside this bar, you can see that there is a good breakout and also the high and low of this bar then starts acting as support/resistance.

I have taken a short using the low of the bar as the resistance. It has less SL and the idea is to take off half of the position at 1:1 and leave the rest for 3:1 or 4:1 trade.

Random Thoughts on Control Bars

I have been working on the control bars for more than 6 months or so. So far, i have been analyzing, re-analyzing etc etc. and have worked on trading strategies aligned with the control bars and other various aspects of it. So far, it has remained purely my work which i have not shared with anyone nor have i felt the need to see if anyone else has worked on it.

It is only for the last 2 weeks or so that i have put it open into the public forum. To be honest, the response has been much bigger than i had anticipated. My blog used to get about 20 visits per article but it has now been getting more than 300 visits per day over the last few days. They say that with great power comes great responsibility as well.

Putting this into the public forum has given me a lot of power to take this, discuss and teach a lot of people. But i also have the responsibility to ensure that i give out the right information only. Till the time when the control bars were analysed only by me, i wasnt answerable to anyone. I could analyse, trade, make mistakes, commit errors etc and still get away with it. But now that i have thrown it open to the public, i need to be more careful in what i say and how i say it.

The first few posts may not have had a great cohesion for a lot of people and i can see that many are yet to grasp the basics. This is my problem as i just put up all the stuff which i had gathered in my mind without trying to either categorize or structure my thoughts.

Now that there are so many people looking into this, i will ensure that i post things in a more structured manner. I am not one of the so-called analyst who comes into twitter/blogging etc. with a specific agenda in mind. I am a trader and what i have posted so far as just what i see/do on a daily basis. This is the reason for the lack of structure so far.

Anyway, from today, i will try and start explaining things in a better manner. Lets start with the 1H charts as the PA in those charts are slow enough for me to explain things. Control bars work on 5M and 15M as well but the PA is sometimes so that i dont have the time to explain things as it happens.

I will post more charts/examples as we move along.