Hi guys. This one was a tough cookie as it was initially a really big fat post with a lot of confusing numbers in it. Re-thinking it I decided to cut it as much as possible and put in as many visual examples as possible. The reality is that not all confirming trades are perfect and you need to prioritize some environmental factors over the others. I will try to show my decision making process from the kitchen utilizing Tim’s recent evolution. The FX260 plan is evolving too and it’s a good thing but it has a very solid starting base. I’m experimenting with an increased number of entries and better risk reward to optimize my strategy and I want to make this process public so you can witness a good trader’s path onto higher levels. I named this second strategy “5k” or “TimK”. For the moment I will keep it SEPARATE from my solid FX260 plan but when I am able to prove its longer term profitability I will incorporate it into my main strategy.

I decided to divide this post into 2 parts. First I will describe a perfect entry that I took on my FX260 account so u guys can see exactly what I am looking for and what a “perfect alignment of planets” (Tim’s quote) looks like.

In the second part I am going to cover the basics of my “5k” strategy – a few things I have learned literally within the last 2 weeks from the new Tim Chandler :) as I have noticed that he has increased his level of market consciousness and is able to take many more trades with an incredible success rate.

Again if you disagree or have a different view on what I write about feel free to comment or email me (checkmatt@yahoo.com) and all solid points will be taken into consideration and might even end up being incorporated into some trading strategy. We are real traders here, making and risking real money therefore we have to have an open mind, accept changes and evolve to always stay ahead of the market.

Now this post itself is a really tough one. There are a lot of factors that affect a trades probabilities both fundamental and technical. In justifying the accuracy of a trade I try to focus mostly on technical (price action) situations but stay aware of fundamentals as this is what we have to do to succeed.

Of course no one can calculate the exact probabilities of a trade and these are my approximate numbers. I will often say that something seems like 83% but the important bit is that it is slightly below 85% :) . A coin flip would obviously be 50% and perfect a confirming setup is anything between 85% up to the maximum on my scale which is 95%. There are other types of setups that range anything in between those two and most good CDL situations oscillate in the 75%-95% range IMO. I will pass on analyzing trades that are under 50% e.g. the one going against strong short term momentum and those that are simply wrong as there is just no point in discussing them. If you trade price action from the middle of moves or try to guess where the market is going you might as well buy a monkey or flip a coin and if you have good risk reward you could still make money.

The system itself is simple but trading it is not easy. There are a lot of traps and monsters hidden in the bushes/closets (you name them) so I will try to make you aware of them and it is always up to you to decide which ones are scary enough to make you stay out of a trade.

So let’s start with the main dish which is my favourite type of trade- A perfect confirming setup. Now there are some important boxes that need to be checked for a trade to fall under this category. The setup itself is fairly simple and doesn’t require a super trained eye to spot this Big Kahuna, Golden Egg Laying Duck of high probability trades. What I’m looking for is exactly what Tim Chandler told us to look for in a trade that we want to properly load up on:

Synchronicity – SINGLE MOST IMPORTANT FACTOR for a trade to be considered of higher probability. When things are moving in sync (most preferably all or most currency pairs- 4+) the probability of a confirming trade paying increases dramatically (If a move is being held – all at *targets(*starts of moves or break outs) we are talking 70%+). The probability of moves being held increases IMO simply due to compounding of supports/resistances. When things are not in sync I’m simply not interested in taking any positions and I walk the dog I don’t have/ post weird youtube videos to my fellow #fx260 room traders/ work out/ make fun of @piptee etc. On the other hand when things are moving beautifully together I stay vigilant, looking for possible trades scenarios with my shark sense/ laser vision fully ON.

[Pic.1 Myself and @patrickfxm took that trade on EJ. Look how beautifully in sync those currencies were cruising. Well done Pat :) ]

Targets/Moves– As you probably all know (if you don’t then you are WELL behind and better sign up for Tim’s room http://bit.ly/chdtWM ) price action moves from target 2 target (can also be described as move to move). When a currency hits a particular target it decides where to go next. Sometimes it will blow right through it and break a key level, in other cases it will stop and turn back into the channel. It is not up to us to guess what is going to happen. We have to “wait and let the price action tell us” (another classic Tim Chandler’s quote). If you want to guess you might as well get that monkey :) . Now I personally like channel trading especially with confirmations from multiple currency pairs pointing back into the wide channel as it’s easier to determine possible profit targets. Trading breakouts would be more of a HOBO (breakout) GAME and for more info u are better off speaking to @piptee, @patrickfxm or @barrylouks as they know a lot more about them than myself. Just to touch on it I can see several different types of HOBO trades (it’s like a whole weird family :) ) and that’s why IMO it is harder to justify high probability setup on them but they also pay better RR most of the time so it’s just a different game. (I keep track of some specific HOBO setups for longer term statistics and hopefully will be able to incorporate some of them into a solid portfolio of high probability trades). To summarize when currencies are in sync and at targets, confirming and holding we hit the jackpot, top of probability range 85-95% happy days but now what? How are we going to make money on it? Now that is what makes the difference between traders and analysts. Let’s get trading then :)


[Pic.2 Prices at targets and in sync. We like that :) @patrickfxm took that screenshot. Not sure if any of us traded this particular move. I am pretty sure Tim did :) ]

Entries :) - This is my favourite part. As I wrote in my last post one of my fellow traders Patrick (not @patrickfxm) told me that it is impossible to have perfect entries all the time. Sounded like a challenge to me d^__^p. Impossible is very often possible from the inside and we are at the heart of all the action. My friend has a point and at some level he is probably right as nothing in the universe is perfect so it doesn’t matter what you do there is always space for slight imbalance. Nonetheless that is one of the reasons why I always aim my Trading Sniper Riffle on that perfect entry point that is going to be accurate to the pip( won’t go against me at all). I have this affirmation going on in my head all the time that with all my entries “I’m in profit within seconds and my profit Limits get hit straight after or within minutes” :) As Tim(@candlesdontlie) says all the time “Guys it is ALL ABOUT ENTRIES ” and he is so right. I mean soooooooooooo Right!!! With a good entry even a bad trade can make u money :) . This also works the other way around with a bad entry even a good trade can produce a loss. On top of that it will produce some frustration and disappointment that make it even worse :) . (Anybody ever got stopped out by a pip? :D )
When all planets are aligned and I’m just about to shoot I am watching ALL the correlating currencies for this critical point when they pull back to the limit and take the ones that gives the best entry (easier said than done for sure- only way to perfect it is practice, practice, practice!!! :) ). The way I try to do it is by having my favourite currency of choice that has proven to be paying best- guppy (gbpjpy) after that EJ and EU then the rest of them. If I get an entry from the EJ before the guppy I will take EJ and if the EU or Cable pulls perfectly to the back of the channel/start of the move first I will take it. *** Recently I have been taking 2 pairs per move due to high probability and the fact that perfect setup doesn’t happen that often so if EU gives the perfect entry I take it and when Guppy does it straight after I take it too :) . (@fxzoran seems to be pretty good in it)(**note that It increases risk)

**Additional Point- Wicks are Entries (Another classic Tim’s line).

[Pic.3 This picture seems to be showing an exception. Wick 4 is an entry as they rarely pull back to those longer wicks. ]

Stops and Limits- With perfect entries come tight stops. I have pre-set stops for 20 pips and if entry is to the pip I will move them to 12-15 pips to improve my risk reward :) by quickly dragging my stop line on GFT charts. I also have 20 pip pre set limits and most of the time especially when it’s my first trade of the day I will take profit at 20 unless the market produces a decent enough situation for a possible fat profit.

[Pic.4 Check this out. @Piptee- Titus rode that trade hard some Monday I think. Entry at that marked point and decent momentum with higher lows indicating increased probability for a higher high and that clean big move target being hit. We analyzed that trade BEFORE IT HAPPENED LIVE IN THE ROOM with entry point @1,4410 and profit target @1,4500 as marked :) . GO ON #FX260. Well done guys!! ]

I will take the risk of loosing my gains and let it run ALWAYS watching correlating currencies. TIP: I think Tim likes to take profit and Reload on a pullback therefore make 30-40 pips on a 20 pip move :) . Good idea IMO but requires experience and great execution :) - watch other correlating pairs for that so u can see signs of stopping etc!!!

Now I’m not writing this post to explain what a confirming trade is as I assume that everybody knows it (if not>>>Tim’s room again http://bit.ly/chdtWM ). When we get that long awaited confirmation from currencies holding their moves at sweet targets we just got to pull the trigger.

Probability Reducing Events- Now it all sounds pretty simple and it is but it’s not easy :) . The Devil is always in the details and if you fail to spot those tiny flaws Mr. Market will be happy to bite your head off in no time. There are some probability reducing events that can mess it all up and if you learn to spot them then you are pretty much guaranteed your pay check at the end of the 260 trades (or whatever the plan) cycle :) . I will mention as many as I can but if you spot any more feel free to discuss it in comments and if it turns out there are more than we think there is I will ask @Barrylouks to create a discussion topic and we will make sure we’re on top of them all.

- Currencies close below/above their moves- dangerous. If it’s just a slight(1-2 pips) close u have to watch other pairs and see if that move is really holding. A Body close like this in itself increases a chance of a trade failing so that’s when you need to stay vigilant and conscious of the overall situation across the board. Depending on the size of the close the probability reduction is approx – 5-40% from the perfect 95%.

- Currency pair falling suddenly out of sync- often everything looks sweet and colourful but you get a sudden fall out (euro tends to do it most of the times) for some reason. Now in my eyes it automatically dismisses a trade but in some instances probability can stay at +-70%. Nevertheless situation suddenly becomes dangerous so probability reduction is 30%+++

- High Momentum- That’s the most recent one we have spotted in #fx260 room.

[Pic.5 I decided to pass on that one for that exact reason but guys loaded up on it and got stopped out by just a few pips. Titus had a stop based on perfect entry and made some money but this trade happened with London closed and at NY lunch I think so my call is that in fast market it wouldn’t have pulled back to pay anything ].

One of my FX260 plan losing trades was caused by this exact event so I always stay aware of phantom confirmations on very STEEP moves in the middle of a session in fast moving markets. Perfect entries and tight stops are your only friends in this environment. Probability reduction- +- 25-40%( only 3 examples seen so statistical count in progress :p)

- Sudden, Major Fundamental News- unannounced news can swing the market violently so importance of having a good data feed (twitter, FT subscriptions etc.) on top of your broker’s news feed is a good idea. Not much we can do about it but if we are in a trade and we witness a major event like this the safe play is either to tighten the stop/reduce position or just get out of a trade if news seems not in our favour. Sometimes this type of an event can swing the market our way and you are going to get PAID :) so we can call it a market wild card. My friend Ronan was short EJ on that bloody Thursday beginning of may 2010 when markets dropped like crazy in space of minutes and made 30% on his account risking 3% in less than 15 minutes so I wish you all this kind of luck as it is better to be lucky than smart- every day of the week :) . Hmmm maybe not better :) let’s say it’s definitely easier :D .

- Speakers/ Scheduled announcements- I’m just going to touch on this one. When I joined Tim’s room one of the things he warned us about was trading on the news. So far I have seen 7+ perfect confirming setups that happened on the news and they all paid. They paid BIG so it looks like math and statistics are telling us to go ahead and take a perfect trade when it happens :) . (If you witnessed an event when a scheduled announcement messed up a perfect confirming trade please email me :) )

That is my shortened description of a Perfect Confirming Setup :D . We ideally want our correlating currencies holding the same move, all stopping at this particular price point and giving us confirmation in the same direction. Closes above targets or any other type of suspicious behaviour simply reduce probabilities of a trade so the cleaner the better. For this to be right an automatic requirement is for a move to be clean (without choppiness). Once the target/ move is holding and we got a confirmation with currencies in sync our shark sense/laser vision (call it whatever u want just watch what’s happening on all pairs) should be automatically on with your trigger finger ready as this is when we prepare to load up at the perfect entry and make money. Tim will often tip you off with “Looks like currencies are holding these moves” or “We just confirmed” and you hear him clicking something vigorously :D which in our world of mortals means “Watch for an entry” or “Load up!” :) and there you go. With a perfect entry you are in profit within seconds and your profit limits get hits straight after. +20 pips for +3% cha ching, money in the bank and already looking for next perfect setup with 1 less trade to go.

Part 2

I don’t want you guys to fall asleep reading all this but there is section 2 of this post which is shorter and to be able to fully understand it you have to IMHO pay Tim for access to his room and educational recordings (again here is the link http://bit.ly/chdtWM ) and be with him every day asking questions and trying to match his level of market consciousness. I am doing it every day and can honestly say that I am seeing things clearer than I have ever seen before. I am developing a trading sense and strategy that combines high probability trades with high trading volume and great risk reward which sounds crazy but is 100% true. I can see it, I can touch it and I can feel it! It is real and once one masters it one can perform on another level. Unimaginable to most outsiders so watch Tim and us in #FX260 room applying his techniques and putting on an incredible trading show :) . It’s neither a simple nor easy art to master although there are a few points that are helpful and can speed up your learning process. Important points for this strategy (I call it 5k or TimK) that I have written down are:

- We always trade of Starts of Moves and Breakouts- meaning we watch correlating currencies at all times and if we get signs of them holding a particular move (mix between some holding starts of moves-some breakouts) we look for entries

- Sometimes we will take a trade prematurely at the start of the move to get best entry once we have indication that currencies are holding a particular area. This is when synchronicity and perfect entries justify such a move

- We accept “Slight Deviations” from perfect confirming setups if we have strong indication of pairs holding a particular move- closes slightly above or below but holding on that breakout. Single currency pairs falling slightly out of sync etc. Those cannot be ignored but perfect entries on other pairs justified by a move being held and with enough macro indication (macro- in this example overall 6 pairs picture)

- Perfect entries- entries determine your Risk Reward Ratio, Perfect Entries allow you to get out of a bad trade if other pairs indicate it is bad, Perfect entries are EVEN MORE IMPORTANT in this strategy so what is a perfect/good entry? It is simply start of the move :) For this you watch other correlating pairs for indication, for crucial turning points which allow your entries to be spot on all the time or most of the time Patrick(not @patrickfxm the other Patrick) :)

- We watch ALL CORRELATING CURRENCIES ALL THE TIME!!!
Now what I wrote above are loose enough notes from Tim’s sessions that help me on a higher level of analysis. It is not as simple as perfect confirming trades and it is harder to master too. Has huge potential though and therefore is worth learning. Comes with experience and it is harder to put finger on exact paper rules. It is simply a higher level of trading that requires time, practice, hard work and a good mentor. If you are willing to put your time and effort rewards will come. I am currently running a secondary experimental trading strategy based on part 2 (5k or TimK). I am devoted to both and I am planning to incorporate part 2 into my #FX260 plan once my statement will confirm what I already know which is that we have access to priceless knowledge and skills set that can take traders to a super high level and make them achieve any goal quicker once they are willing to put the time and effort into it. Oh I am willing, eager and ready. Always have been ready as when you are ready you don’ have to get ready :) . Ain’t that right T?

Watch us putting our money where our mouth is in Tim’s room, in #FX260 room and on twitter.
I would like to mention twitter nicknames of all FX260 room members that I trade with every day and that all contribute to analysis in the room. Thanks guys and main reason why our trading is on such high level and so much fun is you guys
Patrick- @patrickfxm
Ross- @totorotrader
Titus- @piptee
Paul- @paulfxm
Barry- @barrylouks
Zoran- @fxzoran
Scott- @tradercisco
And our latest addition
Cindy- @ttmoon