Trade Selection Lessons from Inside a Hedge Fund and the World’s Leading Traders
Successful traders are outstandingly good at trade selection. When I wanted to be a trader, I met for my Financial Times book some of the world’s leading traders (The Mind of a Trader) — that was 20 years ago! I set up the hedge fund a few years later.
We now put our strategy in a algorithm indicator of buy and sell points, called the Pips Predator.
These are some insights from them (and me!) taken from our training materials for our staff. For retail clients we use 24option.com to provide the charts below, so ordinary traders can get the charts and data free.
(See also www.trading-champions.com for more free education)
I want to train you up to see how traders think. When we start at the 1 hour timeframe and see if the 30m and 4h timeframes are picking up good smooth trends under the indicator we find this:
As you know I like to look at 1h bars and see if we are picking up trends. A good example is this. (Green arrows in the charts are buy signals from our indicator)
The diary below will show you how often a professional can expect to be wrong too and when to stay clear and wait as well.
Well, you don’t need to tell you more about this one:
Some great trends around this week:
Update 27th June
After a lot of sideways moves, we’ve started getting money-making trends on the 1h and 30m
We got messed up on NZDUSD 1h. Too volatile. And so we moved to both the 15m — bit easier when the markets very volatile.
EURCHF — not the easiest but we love some of the strong trends.
Because of the sharp moves in Gold, we’ve slipped it down to 15m. Ie more volatility means you go to 15m or 1d charts to either ride closely, or stay out of the fray.
Update 22nd June
I want to show more trades and our thinking around why we entered and exited, whether at profit or loss. It is this walk-through which should help you understand trade selection.
For some time now we have found ‘staying out of the EURUSD fray by going to 1D charts is providing some benefit. Of course we far prefer the 1h timeframe as explained in the trading manual.
On the 1h time frame you can see that the trends are being picked up and that is why that preferred time frame works well presently.
When we start at the 1 hour timeframe and see if the 30m and 4h timeframes are picking up good smooth trends under the indicator we find this:
GBPUSD 1h is a classic example where we got stopped out, but it was worth doing a re-entry. We talk about this in www.pipspredator.com website (the 12 week bitesize course). It’s a very important technique. There are a few techniques/skills which make all the difference.
FTSE has been very smooth:
Update 12 June
For the election period, I did my updates and webinars on www.pipspredator.com and all apprentices would have got emails about all that.
Now, this morning Morgan Stanley told its wealthy clients to buy GBP. They may be correct, but PipsPredator tells another story. So although eventually because of a soft Brexit we think there will be a rising GBP — for the moment as proven by the chart below — money is to be made by what the banks are actually doing NOT what they are saying — ie follow the money with PipsPredator.com
(To see Morgan Stanley’s view in the attachments)
Other good trends — and also don’t forget to look at previous updates below to learn how to think for trade selection.
Update 2nd June:
The above correlates to different analysis sent to me:
Again, the above correlates to alternative research sent to me:
Update June 1st
An update on what we are finding the best time-frames and currencies for our personal focus:
EURUSD — because of the election turmoil, we are staying out of voltility and looking for the best trends by shortening our preferred time frame under 1h or above 1h.
The 1hour time frame is always our starting point. Where we see smooth trends being caputured by PipsPredator is where we head to.
For AUDCAD — again volatile, but ample room to engineer profits on the 1h
GBPCAD30m is giving us good trends, but again, some reversals.
USDCHF — 30m for the best trend pickups
After some sideways moves, we are getting at last some smooth moves well picked up indeed in EURNZD 30m
GBPJPY 1h had been the absolute best pair for so long and has made us the most money this year. But we’ve had a couple of sideways moves after a great short trade on 25 May
Below are the other pairs and time frames we find are showing the best moves
Update May 27th
See MindMap Attached
Update for May 15
I have increased the number of currency pairs to show you, so you have more choices.
I like to stick the ones from the previous week, but will equally start on the 1h timeframe and go to 4h or 30m to find the best quality trends being picked up by the indicator. Of the ones below, I have circled ones I like the most presently by quality of trend and quality of pick up by our indicator of those trends.
For some, if the price is far from the signal, wait for the next one. Remember I am looking for apprentices to do one quality trade a day, where they feel so confident that their teeth itch.
From last week: (Remember we are only looking to do 1 good trade a day as beginners — more as you get more confident). (See also this article: https://pipspredator.zendesk.com/hc/en-us/articles/115002999685-Walk-Through-To-Cut-Losses-Trade-Selection )
As mentioned before my starting point is 1h, Major v Minor or Minor v Minor currencies (eg AUDCAD) but the key and most important is to find the easiest ie most easily clearly trending pairs which we can capture. If I do not obviously see smooth trends, I will go down to 30m and up to 4h. Rarely I will look outside those time-frames, but it can be worth it to diversify and hedge by having longer time frames too.
This week — they are these which are my favourites for getting a ‘kill’!
We also explain more on www.trading-champions.com