“Hello, erik here and thanks for your chart!
I have few questions regarding setup to enter new trade.
I am struggling making profit so I wonder:
ME: Firstly, profit and loss is a bi-product of trading chaos. You have to trade at least a month to 3 months and then conclude whether you’re making money or not. However, I can assure you following this strategy you wont lose your account provided you follow the “Exit” signals correctly. Note that I stressed on Exit not Entry. You can make entry where ever you want but exit appropriately and you will create profits. Before putting a pending we should know exactly where we would exit otherwise once in a trade taking that decision could mean the difference between a consistently successful trader or otherwise.
1) When the alligator is sleeping and you break a fractal, would not be this fractal, often, inside the alligator so not a valid one?
ME: When the alligator is sleeping and AO is close to Zero line and AIMS Levels are not too far away from each other or entry not too far from red line, you will always have two options.
1. bracket the market above and below the AIMS Levels outside alligators mouth each side. however
2. if you see that a time frame 1 step up e.g. M5 for M1, shows a trend direction then you have an option not to bracket rather put a pending in the direction of the trend on m5. Choose to exit if price close on red line.
2) When aligator is sleeping, trend can easily go either ways, so would you not get your SL reached often before getting a trade following the market? Specially has wave 4 can last longer than the other waves
ME: targeting a saddle point requires a mind set, that is that we dont care which way the market moves once we have achieved a saddle point at a given time frame we get great advantage, since no one knows which way the market might go this helps us get rid of the anxiety that most “speculators” have. We dont care. We just follow the break out. You might at times end up, what we call “paying rent” a few times but eventually you will make so much more when the trend starts that it will cover all the rent paid. Remember trading from a saddle point is like living in low rent district. We dont want to trade saddle point off the 4th wave. off a 4th wave we normally try to get into a 5th wave and for that we use m1. We prefer trading saddle point after a complete wave sequence but I know its not always easy but it certainly is simple.
3) Would you not have a safer entry (but later one) like a new break of aims outside the alligator?
ME: Every entry is safe and unsafe. It all depends on how you define “SAFE”. If you consider closing a trade for a negative balance as “un-safe” that shows you are protective of your money. Now this might sound a bit nonsense since every one’s focus is on “protecting” your money, but the fact of the matter is that as long as your focus remains on “protecting” your money all you’d achieve is just that. “Protection of what you have”. We want to trade so that we can “CREATE PROFITS”. Having said that, I certainly am not saying to lose as much as you can , we just need to think “Positive” and remain focused on “Creating Profits” rather then “being safe”. My friend Robert said once, “We create risk in order to create profits”. Think about it.
And having said that, of course we have an “alternative” entry technique. if you dont want to trade off the saddle point, wait for 2nd fractal. e.g. when you see a saddle point, instead of bracketing you wait for price to break out, let the alligator open its mouth and then wait for a fractal. as soon as you have an AIMS Level measure your risk from red/green line and put a pending. the only problem with this is that during high volatility (which is second name of forex markets) you might miss a few trends but one can live with that. My stats show that without adding on you’d be getting around 40% success rate which is why keeping your losers small i.e. entry off saddle point, and letting your winners run i.e. follow the red line is what makes us profitable.
My friend G shares with us, (i hope you dont mind me sharing this in public) his stats. His losers were over 50% during the past 4 months. yet he managed to keep his average lower to 7pips (or so) and average winner to 16pips or so. That resulted in a massive Over 15% during Jan/Feb Each and around 10% during March/April. He achieved this while working. So he trades whenever he gets time. Full Timers have a great advantage.
There is one VERY IMPORTANT POINT here to remember. During the time when you are trying to learn how to trade off a saddle point your aim is to remain consistent and not lose money. Once you learn how to enter and exit appropriately you will become profitable. but the REAL target is not just that. the REAL target is to get to the stage when you will be adding on each AIMS Level and balance line trade. once you achieve that you will be called “Competent Trader”. Then you’d make so much during a trend that paying “rent” wont be a problem for you.Once you are consistently winning the bread and butter it will be time to “maximise” your profits by trading the shit out of a trending market. Add on as much as you can, be aggressive as much as you can, create risk as much as you can, invest as much as you can when in a trend. and play very very safe when market going sideways.
I hope it all makes sense to you and all of us include on top priority myself.
ME:Thank you for your questions. Keep em coming.
GreenRiver: About Money Management: If we want to trade off the saddle point and add on the way we should be, e.g. All Fractals and Balance Line Trades (Only when close to Lip/Teeth/Jaw) this would make us so profitable that rent paid wont matter. So I suggest depending on the size of your account, one can go with a fixed percentage. e.g. for account over 10K I’d suggest .25% each trade. e.g. for m5 I’d position size on 25pips for EU. Once can find the same relevant number of pips for other time frames. Then take a dimension only when your exit point is within the range of that number of pips. e.g. we have new AIMS level but if we put a pending exit would be more then 25 pips that would mean risking more then what your normal position size would be so we could ignore that entry.
Trade crazy when its trending and trade only one trade when its sleeping. Once alligator open take each and every valid entry signal. Even trading only aims levels would be sufficient. more over, if you were to trade H4 on H1 but trade only off H4 saddle point, and add on each and ever fractal on H1 you would eventually end up trading almost all 5 dimensions. This is my research our group knows about it. You can do your research and I’m sure you’d find 90% of trades would be either one of the dimension. e.g. we trade M5 trends with entry on each m1 aims level and found that it covered nearly all dimension. Bill Williams is so clever that by making you trade all 5 dimensions on your chosen time frame he makes you trade nearly all relevant time frames. this might sound a bit bazzare but I’m sure you’d find the sense in it. I hope you agree. cheers.