lara-iriarteLara Iriarte, a fellow Kiwi, has been using the Elliott Wave principle to analyse up to five markets a day since 2008. She trades using Elliott Wave to determine direction, in conjunction with trend lines and classic technical analysis indicators. Lara prefers to hold a trade for a longer time frame and only follows the trend. She prefers to trade Forex and has, just recently, started to trade commodities.

In the show Lara reveals:

  • Why her current trade is targeting a take profit of 1541 pips
  • The Elliott Wave documentary that will amaze you
  • The common mistakes she made when she first started trading
  • How she sets her Stop Loss and why she thinks it’s so important
  • The books she used to master Elliott Wave

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19: Lara Iriarte on Trading Forex Using Elliott Wave with Minimal Stress
00:00:00 00:00:00

Recommended book

Technical Analysis of Stock Trends, by Robert D. Edwards
Technical Analysis: The Complete Resource for Financial Market Technicians, by Charles D. Kirkpatrick II

Platform & Broker

MetaTrader 4, EasyForex

Interview links

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Transcript notes

Cam Hawkins:

Lara, tell us a bit about yourself, personally, and what first attracted you to trading?

Lara Iriarte:

I actually learned about technical analysis first before I tried trading and I heard, first, about the Elliott Wave principle back in 2006 and I started using it to analyse markets in 2008. And I started doing that publicly on an old website we had forexinfo.us and I started trading at the same time.

Initially trading looked like a way to make quick, easy money and I learned the hard way that it’s not. So that was how I started trading. Personally I think my biggest passion is surfing, that’s why I live where I do and so I ride waves in the ocean and trade waves in the markets.

Cam Hawkins:

Can you give the listeners some insight into your trading? Your trading style, strategy, time frames, ave. trade duration, % winner’s, typical risk reward ratio… those sorts of things.

Lara Iriarte:

The first thing I do is I only ever trade with the trend and I prefer to hold a position for weeks or even months. My strategy is primarily Elliott Wave and I use that first to determine the direction of the trend. And I’m looking for 3rd waves or if I’m looking at a commodity I’m looking for 5th waves as well.

So when I think I’ve got one of those coming up, the timeframe I’m looking at is pretty much only weekly and daily charts and sometimes monthly as well. When I’m trading, because I’m doing it more long term, I hardly even look at an hourly chart for my trades.

So far this year I’ve only made 7 trades and as we’re in July that’s really not a lot. Of those 7 I’ve had 2 losses, 5 small profits and I’ve got one trade that I’m holding onto at the moment. I’ve got a stop loss on that that would give me a profit of 600 pips if the market goes against me. If the market does what I expect it to do I’ve got a take profit set in there at 1541 pips. I’ve been holding that one for a few weeks now.

But on the way down I might recalculate my targets when I have some more information from the markets, but that might change. Or I could be stopped out earlier and that’s okay because there’s always another opportunity.

So far if the stop loss on my current trade is hit my return on my account this year would be 169%. I’ve really only been trading the Kiwi mostly this year. I’ve started to have a go at Oil, but I haven’t had a winner there yet. That’s a new market to me. I’ve been analysing it for quite a while and now I think I’m finally ready to have a go trading it.

But I really do prefer having one trade at a time and I’m not really anxious to open a position with one going and doing what I expect it to do.

So my maximum number of active trades I’m comfortable with is only 2 but I would prefer 1.

My typical draw down at the moment, I think is too high. It’s about 15% and I know it should be closer to 2%, that’s my goal.

At the moment I’m really choosing to manage my risk by putting funds into my account that I’m really comfortable in losing. So I’m losing no sleep over it at all. So that’s one reason why I’m more comfortable with a bit of a higher drawdown or a losing trade at this time.

The most important thing that I do, that I’m really careful about, is that I always have an exit strategy with every single trade and I set my stop really carefully. And I have to consider, am I comfortable losing that amount of money. If the market goes against me, what does the Elliott Wave structure look like? And that can tell me how far it might go against me.

Cam Hawkins:

Where was your stop loss set initially on the trade you currently have active?

Lara Iriarte:

I usually try and have a stop loss that is within 100 pips. It’s usually a bit too wide for me really. It has to be less than 100 pips. I usually like 60-70 pips but I have a really, really specific entry method. When I think the correction is over and I have some trend channel confirmation, I use a 15 minute chart with Bollinger Bands, MACD and I enter the trade at the best possible point I can and I set my stop definitely within 100 pips, preferably 60 or 70 but it depends on the Elliott Wave structure and then I try and move my stop down within 24 hours to just past my entry point reducing my risk to zero as quickly as possible.

Cam Hawkins: 

What does your typical trading day look like?

Lara Iriarte:

Because I hold my trades and I’ve only got one winning one that I’m holding at the moment where I’ve got that nice profit locked in I’m not really looking to enter any more at the moment. So, when I’ve got a trade like that I’m just going to hold it and I might not even look at it more than once a day.

So my typical trading day isn’t like what most other traders trading days look like because I will never do day trading. I really don’t like that kind of level of stress. It just doesn’t work for me.

So, I’ll look at my account. I might move my stop closer if the market has moved in the direction. At the moment I’m using a trend line for resistance, I’m trailing the Kiwi down. So I might move my stop down, I’ll have a look at my account, I’ll look at the chart. I might update my Elliott Wave structure and that’ll take half an hour.

Cam Hawkins: 

Have you always trades like that or in the past were you more active?

Lara Iriarte:

Yeah, when I started, like every novice trader does I got so excited and thought I was going to make so much money and I didn’t. I had a whopping great loss that wiped out my account. And I was trading very, very short term. And it’s taken me 7 years of reading and learning and practicing to figure out that my personal trading style is not day trading, not short term. I want to hold something for weeks if not months. So, with that kind of style you do necessarily have less work involved.

Cam Hawkins: 

From an emotional perspective how would you rate trading from an emotional perspective?

Lara Iriarte:

Really, really high. I would say maybe 80%. It’s the psychological aspect that’s the biggest thing to overcome and figuring out what kind of strategy works for you psychologically, once you’ve found that like I found my particular strategy now (and I’m more comfortable with it) I think that’s the biggest barrier. That and risk management.

I have to remain unemotional. As soon as you get emotional that’s when greed and fear are going to take over. You just have to be really clinical and unemotional about it I think.

Cam Hawkins:

In the beginning, what differentiated you from the average ‘Man on the street’ trader out there? What traits did you have, what actions did you take?

Lara Iriarte: 

Well, I guess I should start out with what I did wrong because that’s how I learn; the best way to learn is by making mistakes. I think I started out like every other trader. And I had that whopping great loss after a few small wins and I thought I was doing ok but then I wiped out my account and I learned the hard way that I didn’t manage risk at all well. I would risk my whole account on any one trade and I wasn’t using stop losses at all. But the difference I think was Elliott Wave and because I learned of it before I started trading and before I even knew of Forex trading I think it gives me my edge.

So I stepped back from trading and I focused really hard on learning and analysing; and I didn’t place any trades after that initial huge loss for about 3 years and I’m only trading again now, just started at the end of last year. So, I don’t actually have a very long track record yet, of successful trading but I have years of learning and reading behind what I’m now starting to do.

Cam Hawkins:

What steps did you take to learn more about the Elliott Wave strategy?

Lara Iriarte:

Well, I watched Histories Hidden Engine and that’s a really cool little movie. And I started watching markets and looking at 5 and 3 as waves unfolded. I guess I’m a geek because I just found it interesting.

So I got a copy of Frost and Prechter’s Elliott Wave Principle and I read it and I just started practicing and applying it. And I started doing it publically on a website and after I’d been doing that for about 6 months and I was starting to get okay at it people started asking me to do more and more. And after a year I was confident enough to do it regularly for people and started charging for it because I was spending so much time doing it. It just kind of happened by accident. That I ended up being an Elliott Wave analyst. And I just keep doing it because I really love it.

Cam Hawkins: 

If you split your trading up into technical vs fundamental, what would that split look like?

Lara Iriarte:

It would be 100% technical because Elliott Wave is mutually exclusive to fundamental analysis and the two just don’t go together.

Cam Hawkins: 

Diving a little deeper, thinking about any price chart, what 3 things would you recommend a novice trader educate themselves on when reading a chart?

Lara Iriarte:

Trendlines I think; the strongest piece of technical analysis and the simplest. So learn how to draw them, how to use them and for that I would recommend that classic book on technical analysis of Stock Trends by Edwards and Magee.

Second thing; how to determine if the market is trending or consolidating and the fact that there is a difference. I’ll always avoid a consolidating or correcting market. I don’t ever want to be on the wrong side of the trend. But then figuring out if the market is trending isn’t always easy. You can use ADX but it does tend to lag. So, I’ll use that in conjunction with Elliott Wave and volume and trend lines.

And the third thing is how to use volume to determine if a trend is supported or not.

Cam Hawkins:

And how do you use Volume?

Lara Iriarte:

Really simply, I’ve just been following the text books. But I also have to know the market.

Basically I’d look for a declining volume during a consolidation. Towards the end it should decline. So if you see volume continually declining in the market sideways, then you’re going to expect a breakout. And then you look, where is the volume the highest, on what day do you have volume spikes. If it’s down the breakout’s more likely to be down and vice versa.

If I think the markets trending I’d look for volume to support that, particularly in an uptrend volume should be rising as price is rising. It should also be rising if pricing is falling, at least that does strengthen the idea that you’ve got a down trend but it doesn’t have to, because the market can fall of its own weight.

Cam Hawkins: 

How long did it take you to go from trading newbie to consistently profitable trader?

Lara Iriarte:

About 7 years.

Cam Hawkins: 

What’s your mental approach to trading and what special techniques do you use to keep your emotions in check?

Lara Iriarte:

I keep my risk low. I’m only ever going to use money I’m comfortable with losing and that helps keep my emotions in check. I always turn my computer off right after I place a trade and I don’t look at it until the next morning. I’ve done my analysis, I’ve set my stop and if the market goes against me, that’s okay, I know how much I stand to lose. I’ve got a specific entry point technique and so I usually have a profit within 24 hours. When that happens I move my stop down to just beyond my entry point reducing my risk to zero and keeping unemotional about it then. And that’s why I’ve had quite a few small profits this year and just that one big one.

I wait for the trade to stick and if it doesn’t I just try again and stay calm.

Cam Hawkins: 

What’s your favorite entry setup?

Lara Iriarte:

So, I wait for a 2nd wave to complete at a minor or intermediate degree. Then I wait for a trendline or a channel containing it to be breached. Then I’ll probably wait for a throwback to that line and that’s when I’m ready to enter.

And then to time my entry very precisely this is what I do. I use a 15 minute chart with Bollinger Bands set at 2 and 5 standard deviations. I wait until price is between the two bands on the opposite side of the direction I think the market’s going to go (and I get the direction from Elliott Wave) and then I wait for a bar on the histogram of the MACD to be smaller than the one before it and that’s when I enter my position.

Cam Hawkins:

What strategies do you use to exit and manage active trades?

Lara Iriarte:

I move my stop to just beyond my entry point to limit risk to zero and then I use Elliott Wave validation points or trendlines (depending on money management) showing support or resistance, to move my stop progressively to lock in some profit. It’s a rule for me that’s absolutely vital. And again this goes to managing emotion. If a correction unfolds where I didn’t expect it, I’m not allowed to move my stop further away, I have to stick by the analysis that made me put it there in the first place. If I’m stopped out before my take profit is hit, I just let it go because there’s always another opportunity.

Cam Hawkins: 

What’s your recommended “must read” trading book?

Lara Iriarte:

I can’t decide between Magee and Edwards Technical Analysis of Stock Trends, it’s a classic for a reason. Or Kirkpatrick and Dahlquist Technical Analysis. They’re both excellent and I refer to them a few times a week.

I’m going to add actually, I would recommend newbies to NOT start with Elliott Wave. It’s way to difficult, it takes far too long to do it right.

On my website I have an education page that shows how I learned it and I’ve made some little education videos. So, you could start with Histories Hidden Engine. I think that’s a good introduction to the “Why” of Elliott Wave and if you don’t understand the “Why” you may as well forget learning it.

Then you need to get a copy of Frost and Prechter 10th Edition, and they’ve got a list of rules and guidelines in there. I would read those over once a day, every single day until they are absolutely committed to heart because most of them, bar one, are absolutely blank and white. And that’s the difference between Elliott Wave and other technical analysis.

Cam Hawkins:

Do you automate parts of your trading? If so, what have you automated, why and how does it help you?

Lara Iriarte:

I don’t automate anything, my system and personal style is entirely discretionary.

Cam Hawkins: 

If there was one thing you would recommend any retail trader spend the next month mastering, what would it be, why and how could they go about mastering it?

Lara Iriarte:

I think risk management is essential, both Magee and Dahlquist cover that really well. You must have an exit strategy for every single trade. You must manage the money in your trading account well. Risk management will make the difference in your trading. It’ll turn an even bad or average trading system into profit long term if you have good risk management.

Cam Hawkins:

What trading related internet resource, like bloomberg.com, do you always use?

Lara Iriarte:

I actually don’t use any. I try not to be influenced by the news and I’m not following fundamentals anyway. I actually try and avoid internet resources, the news reading I do follow focuses mostly on local news. I don’t want to be influenced by social mood. I just want to watch the chart.

Cam Hawkins: 

What’s the biggest mistake most retail traders make?

Lara Iriarte:

I think they get emotional and they think they’re going to get rich quick.

Cam Hawkins: 

What’s your preferred broker and trading platform?

Lara Iriarte:

I have used FXCM in the past but I heard a little while ago that they were possibly close to bankruptcy so I don’t want to be depositing a lot of money with them again. I found EasyForex and I like them because they’re New Zealand based, but I found their rollover fees are hideous, so they don’t work for someone who holds a trade for weeks or months. So, that’s actually putting quite a big dampener on my trading and I really need to spend the time to find a new broker.

Cam Hawkins: 

If there was one mantra or saying our listeners should reminded themselves of each day, to help improve their trading, what would it be?

Lara Iriarte:

Keep calm and carry on learning.

Cam Hawkins: 

If you could leave our listeners with one piece of advice what would it be?

Lara Iriarte:

Never ever trade without a clear exit strategy and a stop in place. All the time.

Cam Hawkins: 

Perfect! For those not in the know, my mastermind community are working towards creating a profitable trading system. If you’re not in the mastermind yet, just jump on 52traders.com and join today while it’s free.

So, Lara, today your task is this:

We’d like you to help us find a high probability exit point for our trading system. We already have a market to focus on (namely the S&P500), and we’re looking for specific standard indicators, candlestick formations, market events, those sorts of things…

So Lara, to help us pinpoint high probability exit points for our trading system what “3 golden nuggets” can you share with us today?

Lara Iriarte:

So, the S&P, that’s a market I know really, really well. I’ve been analysing that in depth, right down to the 5 minute chart level, every single day since 2008. So I’m going to assume that the trade is following my trading style because that’s how I do it.

So in other words, I’m going to make an assumption it’s not a short term trade and it’s been held for some weeks.

So first it really depends if the trade is long or short. For long, for the S&P, it’s harder to pick a top than it is to pick a bottom. So I wouldn’t even try. The S&P can remain extreme in overbought for long periods of time when it’s trending and overall it does have an upward bias. And when it’s in a bear market, look out, because it can move really fast.

So, for a long trade I’d use the bull market trendline to mark a stop loss about 4-5% below or I’d choose a money management stop loss. If that line is breached by a close of 3% or more of market value I’d exit. That should work for weekly and daily charts. My take profit would probably be an Elliott Wave target for a long. So I’d set those two up, the stop loss and the take profit, and I’d just let it run. I’d adjust the stop loss, probably a couple of times a week depending on what the markets doing. Then I’d keep an eye on the ADX and if the market starts drifting sideways and consolidating, I’d probably exit, because the S&P can do that for reasonably long periods of time. I’d try and exit at resistance.

If it was a short, that’s a little bit different. I’d look for a complete 5 down and then I’d look for a divergence between price and RSI at a low for the S&P. That’s usually quite reliable for the S&P. Once I saw those two things I’d exit. And I’d keep my stop loss on the way down just above a downward sloping trendline showing resistance.

Cam Hawkins: 

Before we wrap up what’s the best way for traders to get hold of you?

Lara Iriarte:

There’s a contact form on my website, ElliottWaveGold.com or ElliottWaveStockMarket.com.

Tell me what you thought!

Please feel free to leave a comment or question about the show in the comments section below.


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