Forex Patterns and Probabilities: Trading Strategies for Trending and Range-Bound Markets (Wiley Trading)
While most books on trading deal with general concepts and shy away from specifics, Forex Patterns and Probabilities provides you with real-world strategies and a rare sense of clarity about the specific mechanics of currency trading. Leading trading educator Ed Ponsi will explain the driving forces in the currency markets and will provide strategies to enter, exit, and manage successful trades. Dozens of chart examples and explanations will guide you each step of the way and allow the reader to
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Good but limited number of strategies which are not really new,
This is mostly for beginners. There are only good advices, so it is a good choice for beginners or those who need to be put back on tracks.
The number of strategies is in fact quite limited and not really new. I was expecting much more from the description. Ed just uses levels for entry and stops that could be slightly different than in some other books.
2 strategies about trending markets (FX-Ed and classic 2 time frame system), 1 for pennant/flags, a volatility breakout strategy, which is in fact a triangle strategy (for the entry). playing the round numbers, a range trading in the low volume opening, and a word about the carry trade.
The so-called FX-Ed trending strategy is based on moving averages. I have backtested it (it is easy, no place for interpretation for the version without partial exits and reload)and of course it works on strongly trending markets such EURUSD recently, but wait, any trending strategy worked!! The same strategy with pairs such as USDJPY generates a loss or a small gain between 1997 and 2005 and it was in fact quite good at buying tops and shorting bottoms, resulting in huge volatility of the equity curve.
Update: Backtest of the “round trip” (playing the round numbers). Only difference with the text is that the second target is a multiple of the first one instead of based on a previous R/S level. From Sept 2003 to Sept 2006, it does not work and looses for most pairs (including those preferred by the author). Even if we take only the first bounce, it looses.
Update2: Backtest of the “Boomerang”, a range trading in the low volume opening. EURUSD only as suggested by Ed. Tested from Sept 2001 to Nov 2006. There is a profit growing steadily (though there are drawdowns) from Sept 2001 to May 2004. After that, it is flat. There are still trades, but they do not produce any profit, just breakeven. Has it stopped working after too much advertisement for it?
Page 217 is quite interesting. The author explains why it is not recommended to systematically take small profits such as 10 pips. I am wondering if the “strategy 10” advertised by one of the praisers of this book is compatible with this view. Anyway, Ed also says that those who recommend such thing may just want to profit from people by the “introducing broker” system, and so we must be careful.
The book progresses slowly, explaining every single detail. There are a few repeats in the first half of the book. For most charts, the horizontal labels are not displayed.
The book is 245 pages but the content is quite small because there are so many charts! The number of useless charts is amazing. He uses charts to illustrate any single information in the book. For example, a pair trending up (a chart), a pair trending down (a chart), a congestion (a chart), breakout from congestion (a chart), a strong trend (a chart), a moving average (a chart), a second moving average (a chart), a RSI (a chart), a fib retracement level (a chart). For a “strategy”, an entry point (a chart), placement of the stop to be put after the entry (a chart), placing first target (a chart), second target (a chart), third target (a chart), tweaking the exit levels (1 chart per exit level!), Entry triggered (a chart), first target reached (a chart), the pair continues (a chart), it pulls back (a chart), it reaches the second target (a chart), and the third (a chart), etc… Well, don’t you think that a few charts with gathering a few things on each of them would have been enough? It looks as if the book was the written version of a seminar. In fact, it probably is!
Page 204: Two times the same chart! The first chart was supposed to show only the entry (as usual), and the second the exit later on, but the first one already shows the exit! Good Ed, you are improving by putting both entry and exit on the same chart (you could save some trees by concentrating more information!!), but only one chart is necessary in this case!
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|Clear and detailed strategies for the forex market,
Ed provides the basics of trading strategies that handle most of the forex market conditions. While many of these strategies have appeared eleswhere the explanations of why they work and why they should be followed is something that comes from years of trading experience. For example: why does forex often fail to breakout of support and resistance areas on the first or second attempt? How do the institutions maneuver the price during slow volume hours and how you can use this to advantage. Also the section on his trend following system is clearly thought out and easy to follow.
This is a book that I could really could have used 6 months ago and skipped most of the other stuff about trading. About the only thing missing is backtested results to show how well the systems work in real trading. But there are clear examples of each strategy.
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|A Solid work but too conservative,
A very good from-scratch discussion of the market and trading mechanics, nice overview of the fundemental reports, some actionable strategies laid out and well explained and a few genuine veteran insights thrown in to boot. Worth owning, especially if you’re beginner to intermediate.
However, he’s just too conservative. His setups are very good but you’ll grow old waiting to see them. Example: calling for 4 (5, 20, 50, and 200 if I remember right) moving averages to fan out in proper order, on a daily chart, in order to qualify a trend. Yeah, it’s definitely a trend, but by the time you get there, the trend’s almost over. And you’ll never get in on a retracement or a resumption that way. You’ll control losses by never placing any trades. Nix at least one moving average, maybe even 2.
His focus is daily charts in general. Nothing wrong with that, but nowhere’s near the money to made or lost as in the intraday charts. But he doesn’t tell you that. He offers a flawed argument why his way is best, goes something like this: Using one of his ideal trendfollowing setups, he pulls of a trade that earns him something like 3000 in 4 months. Then he goes on to compare it to a 10 pip per trade goal and says even if you made your 10 pips per day, everyday, in that same period, with the same pair, you’d only score about 1700 pips instead of his 3000. Fair logic, but who says you’d only get 10 pips and quit? His 3000 pip rise is punctuated with enough ups and downs to score twice or 3 times that trading intraday. With less risk, given that his stops on a daily were as high as 155 pips, still pretty tight for a daily chart, yet that same 155 pips is an enormous stop on an hourly. Not to mention all the days that you won’t be trading while you wait for 4 MA’s to line up.
I’m not bashing the guy – he wrote a good book, better than alot of them out there, but know that his way is safe at the expense of returns. The one advantage is that his trades are not labor intensive, you can visit your broker site once a day to manage them. But only once. Not for active traders unless you adapt them somehow.
On the other hand, if you have a job and a family and a house to take care of and are happy just to beat the return on a T-bill then Ponsi’s your man. You just can’t make a living with his methods.
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