The idea is to capture getable gains and to repeat the process the next day. Shooting for homeruns feels great, but at times can be very frustrating and cause drawdown as open profits repeatedly evaporate. The mind will naturally remember the instances the homeruns could have been caught. But considering I am in the business of spotting patterns it is clear that as my entries have improved so have the potential profits. The part I am capturing is right at the beginnings of moves. Once I am out the markets continue on with several pullbacks along the way offering other traders places to get on. Once a move has been well underway the R:R doesn't make sense, at least for me to capture a 2R win.
Don Miller tackles the dilemma between taking high probability trades AND capturing a good portion of the move by trading "sequences". Don enters a buy sequence by starting a position and as the trade proves his trade is correct he adds on along the way. As the move gets "high" (which he calls "retail") he takes profits but keeps part of his long position. Each add is done at "wholesale" areas (retracements to MAs or to price supports). Mathematically a trade would make more if he put on his full size at the beginning and exited it all at the end. But since nobody knows the end in real-time he lets the market tell him whether to get larger or not. Each of his profit exits tend to be small i.e. "getable" (Don trades the emini S&P and tends to go for 1-2 points generally). Eventually a whole buy sequence will be exited in full and Don's activity was in and out for loads of contracts for very large profits. He makes money without concern whether he did it perfectly.
Don's approach isn't for me mainly because I am trading larger timeframes and I cannot be at my computer for all the best entry spots or to exit at the best target. I enter at the best location I can identify and then I try to capture the gain at the most logical spot. However, I could also use scale outs at retail areas looking to add on pullbacks. Another idea is to exit a good chunk of my position, say 70%, and let the remaining portion run. That way I capture profits but also participate in risk-free moves which occassionally will run much farther than I anticipated. Those outlier runaway markets can pay big even on the small remaining position which is all I can hope for considering I find it difficult to re-enter on runaways.
Taking half off and allowing the 2nd half to run could result in many wins being only on half size if the 2nd part keeps getting stopped at break-even. Whereas with the 70/30 idea the 70% exit is a good payout and the remaining position is relatively small enough to not cause much concern.
Range trades can be exited in Full. But trend trades with the larger TF or where the entire group is correlated should be allowed to run. There will never be perfection, but making these adjustments is done to maximize returns of my business and worth the extra effort.
Tuesday, November 25, 2014
AUDUSD - Back With The Trend
The previous buy was a backdoor. It's failure on D means the trend is intact and my job is to get into the trend trade. 4H moved up in 2 legs and left wicks in the cheese. The high entry was missed - happened during Asia. Still the mkt remained in that area so I took the short with a slightly reduced position.Initially I tried an entry at 85, but on 60m it dropped to 75. I lowered my Limit to 80 and was filled on a quick bounce.
The trade took no heat and worked right from the start allowing me to reduce risk quickly. Tgt was the lower trap for +55 or 2R. The entire AUD group was correlated for AUD weakness and I questioned whether I should bag the win and instead shoot for more.
A day later reveals the answer - it's gone about 110 pips (4R). That is the power of group correlation. 4H also shows the previous buy and how my exit for +48 also didn't capture a lot of the move - that went 100 more pips after I exited.
Summary: +2R
The trade took no heat and worked right from the start allowing me to reduce risk quickly. Tgt was the lower trap for +55 or 2R. The entire AUD group was correlated for AUD weakness and I questioned whether I should bag the win and instead shoot for more.
A day later reveals the answer - it's gone about 110 pips (4R). That is the power of group correlation. 4H also shows the previous buy and how my exit for +48 also didn't capture a lot of the move - that went 100 more pips after I exited.
Summary: +2R
Monday, November 24, 2014
AUDUSD - Catching A Falling Knife?
AUDUSD downtrend on D. It was coming down hard to an area of support. 4H shows 2 sets of traps. Considering how hard the decline was I opted to forego buying at the first trap, but still used it to help slow the drop. As the 4H approached the 2nd lower trap I bought on a Limit at 70. The thinking was the fall was a bit overdone seeing that it put together 9 consecutive red bars.
The trap held, but considering the hard downmove I expected another attempt to drop. 4H left a worrisome wick, but it was all about the test of the lows. 15m shows AUDUSD and NZDUSD were both testing the bounce.
Summary: +1.7R
The trap held, but considering the hard downmove I expected another attempt to drop. 4H left a worrisome wick, but it was all about the test of the lows. 15m shows AUDUSD and NZDUSD were both testing the bounce.
15m shows the test held but the subsequent advance was poor - lots of alternation and tapering. I exited for +48.
Monday, November 17, 2014
EURUSD - Revisiting an Old Friend
It's been awhile since I traded EURUSD, but if the pattern is good I don't mind reuniting.
EURUSD peaked in Asia, but I only saw it an hour before LDN Open. I entered based on the retrace to a 4H trap with a confluence of the falling Daily 21 EMA (yellow MA). I required a 41 pips stop due to missing the entry several hours earlier and targeted 2R.
The trade experienced zero heat (5 pips maximum against me) and worked its way down. The 60m shows a seller trap which supported the mkt after it dropped 50 pips in favor. At first I saw that as an inconsequential pause-point, but when it held the mkt for 5 hours it worried me a little.
A glance at the EUR group saw a mixed bag. Mainly EURCAD was wedging instead of providing some leadership. I elected to exit for +44. My timing was flawless (kidding) as the market dropped 20 pips immediately after I jumped off reaching my +80 pips target soon after.
Summary: +1.1R
EURUSD peaked in Asia, but I only saw it an hour before LDN Open. I entered based on the retrace to a 4H trap with a confluence of the falling Daily 21 EMA (yellow MA). I required a 41 pips stop due to missing the entry several hours earlier and targeted 2R.
The trade experienced zero heat (5 pips maximum against me) and worked its way down. The 60m shows a seller trap which supported the mkt after it dropped 50 pips in favor. At first I saw that as an inconsequential pause-point, but when it held the mkt for 5 hours it worried me a little.
A glance at the EUR group saw a mixed bag. Mainly EURCAD was wedging instead of providing some leadership. I elected to exit for +44. My timing was flawless (kidding) as the market dropped 20 pips immediately after I jumped off reaching my +80 pips target soon after.
Summary: +1.1R
Friday, October 31, 2014
Fri Oct 31 - Whipsawed in the range
AUDUSD has consolidated for 4 weeks on D. Wednesday's FOMC caused the USD to strengthen in its group. AUDUSD crashed, but not as much as EURUSD or GBPUSD making it a better pair to try a range short nearer the top of its range. I kept an eye on its partner but was hesitant to short AUDCAD since its D was in an uptrend.
4H shows a 50% retrace that rolled over. I awaited a move to the trap above but it rolled over on 60m. I entered via a Limit Order on a quick pullback. The trade went 20 pips in favor and then formed a DB on 60m and slammed 25 pips against me. I cut it at 18.
AUDCAD looked more bullish and I no longer saw correlation to head down. It is rare that I flip my position, but it was a play to test the highs of the range on D. I entered AUDUSD long deciding that CAD was risky with the GDP figures release in a few hours.
AUDUSD worked it way to +24 pips but was reversed on the USD strength from its Orange reports.
Not shown is AUDCAD which has continued to rally. This is frustrating since I knew AUDCAD was the better buy, but chose not to take the trade on that pair. In the end USD maintained strength and CAD maintained weakness regardless of the report results, better to stick with their fundamental biases.
Despite both trades going beyond 20 pips in favor I took losses on both - not even break-even on either. Reason being I am trying to hold through reports, but wouldn't be so bad if I occasionally survived them. However, with the stops being closer than targets I am dealt losses as the markets jiggle within the range.
I will have to analyze the report expectations and consider exiting ahead of reports.
Summary: 2L for -1.3R overall.
AUDCAD looked more bullish and I no longer saw correlation to head down. It is rare that I flip my position, but it was a play to test the highs of the range on D. I entered AUDUSD long deciding that CAD was risky with the GDP figures release in a few hours.
AUDUSD worked it way to +24 pips but was reversed on the USD strength from its Orange reports.
Not shown is AUDCAD which has continued to rally. This is frustrating since I knew AUDCAD was the better buy, but chose not to take the trade on that pair. In the end USD maintained strength and CAD maintained weakness regardless of the report results, better to stick with their fundamental biases.
Despite both trades going beyond 20 pips in favor I took losses on both - not even break-even on either. Reason being I am trying to hold through reports, but wouldn't be so bad if I occasionally survived them. However, with the stops being closer than targets I am dealt losses as the markets jiggle within the range.
I will have to analyze the report expectations and consider exiting ahead of reports.
Summary: 2L for -1.3R overall.
Thursday, October 30, 2014
Tue Oct 28 - In Search of a Homerun
Long GBPAUD yesterday. D made a 2LPB which tailed on the trap test. I missed the previous day's entry at 77, but took an alternate entry when it tested the trap again and tailed. Entry was higher than I prefer due to entering on the 4H's close. Plus my broker's spread is 5 pips on this pair so I entered on 50% size.
Overnight the mkt went 33 in favor and rolled over on me. By the time I was at the charts I wasn't able to scratch. It was stopped at -0.9R.
The weakness that followed looks like this pair isn't trying to resume the overall uptrend, but is transitioning to a range or downwards. EURAUD is even weaker suggesting this may be the case.
Summary: -0.9R
Overnight the mkt went 33 in favor and rolled over on me. By the time I was at the charts I wasn't able to scratch. It was stopped at -0.9R.
The weakness that followed looks like this pair isn't trying to resume the overall uptrend, but is transitioning to a range or downwards. EURAUD is even weaker suggesting this may be the case.
Summary: -0.9R
Friday, October 24, 2014
Forex Tester
I recently learned of Forex Tester (FT) http://www.forextester.com . Gonna buy it to solidify my method. Of most interest are trades that have lots of favorable elements, but are missed due to waiting for the test. When 3 legs have occurred it doesn't make sense to wait for a test considering the rarity of 4 legged moves. I am interested to see how an entry on a closed 4H bar will perform.
Waiting for a test has some pros:
But of course there are cons:
GBPNZD was in an overall uptrend on D. It pb in 2L and then based sideways for a week. 4H formed a trap and was tested in 3L (as marked). The reversal occurred with a bullish bar closing at 2.0228 signalling a buy and needing a stop at 2.0074 of 154 pips. Some of the biggest moves begin with large reversal bars. I've often seen those as signal bars but I've opted to not enter and wait for a test of the signal bar. Normally I enter with stops 1/5 that size, but if I waited for the test there would not have been an entry here. So far the pair has rallied 328 pips from the signal.
Position sizing makes each trade of equal risk regardless of the initial stop sizes. I expect the Win % to drop, but since the method makes money thru R:R it shouldn't matter too much. Plus I will participate in more of these runaway moves. What attracts me to entering on closed 4H bars is the simplicity. Knowing I only need to look at the 12pm, 4pm, 8pm and 12am bars helps save time. Pre-mkt Prep will be mainly to update my trap boxes and group views and then my job will be to tune in at bar close time. Using FT should put me a step towards automation. Although I have yet to be convinced everything can be fully automated I am open to anything that frees up my time.
Waiting for a test has some pros:
- If L4 happens I avoid a stopout
- It reduces time in a trade
- I can often gain a better entry which reduces the required stop and allows for a higher R:R trade
- I can spot a leader pair take off to precisely time my entry in a follower
But of course there are cons:
- I can miss large moves that blast away once L3 completes which.....
- wastes the time I planned/stalked
GBPNZD was in an overall uptrend on D. It pb in 2L and then based sideways for a week. 4H formed a trap and was tested in 3L (as marked). The reversal occurred with a bullish bar closing at 2.0228 signalling a buy and needing a stop at 2.0074 of 154 pips. Some of the biggest moves begin with large reversal bars. I've often seen those as signal bars but I've opted to not enter and wait for a test of the signal bar. Normally I enter with stops 1/5 that size, but if I waited for the test there would not have been an entry here. So far the pair has rallied 328 pips from the signal.
Position sizing makes each trade of equal risk regardless of the initial stop sizes. I expect the Win % to drop, but since the method makes money thru R:R it shouldn't matter too much. Plus I will participate in more of these runaway moves. What attracts me to entering on closed 4H bars is the simplicity. Knowing I only need to look at the 12pm, 4pm, 8pm and 12am bars helps save time. Pre-mkt Prep will be mainly to update my trap boxes and group views and then my job will be to tune in at bar close time. Using FT should put me a step towards automation. Although I have yet to be convinced everything can be fully automated I am open to anything that frees up my time.
Thursday, October 23, 2014
Wed Oct 22 - In Before the Rocket Launch
AUDNZD D in overall uptrend - seems to have become a range. Playing long expecting buyers to step in. 4H retraced in 2 hard legs and basing above trap lows for a week. I entered on a 2nd tail bar for the current swing. First tail bar was a bear mid range bar, but I entered 5 bars later on a more bullish tail bar.
4H shows the test of the tail bar took 7hrs until it started to move higher. 3 bars later it closed the day strongly above the DTL. Tgt was to the trap above. 60m exit blasted into trap without flinching. Exit at 109 pips for 3.6R.
USDJPY D had a steep downmove. I planned on catching a retracement to ride down whatever else was left of it. 4H shows I entered on a test of the 107.38 high. 60m entry was taken after 2 attempts up failed.
About 2hrs later there was no attempt to work. I exited when 15m returned to entry and put in a HL with a pin bar. Out at -4 pips or -0.09R
Summary: 1W, 1L for +3.5R
4H shows the test of the tail bar took 7hrs until it started to move higher. 3 bars later it closed the day strongly above the DTL. Tgt was to the trap above. 60m exit blasted into trap without flinching. Exit at 109 pips for 3.6R.
USDJPY D had a steep downmove. I planned on catching a retracement to ride down whatever else was left of it. 4H shows I entered on a test of the 107.38 high. 60m entry was taken after 2 attempts up failed.
About 2hrs later there was no attempt to work. I exited when 15m returned to entry and put in a HL with a pin bar. Out at -4 pips or -0.09R
Summary: 1W, 1L for +3.5R
Thursday, August 28, 2014
Fri Aug 22 - Back in the Trenches
EURGBP. 4H retraced up to trapped trader highs. I boxed an area of focus which confluenced nicely with a DTL - either should bring in sellers. To the left there was also a gap trapping buy-side traders from the previous session. The 4H looks like a doji but a look at the 15m shows it had already topped and was working its way down. I entered on 15m with a LO at the MAs at about a 40% retracement. Tgt was +20, SL-10.
15m shows the 2hrs chop before it finally cratered and reached tgt at the obvious zone I chose from the lower left.
Summary: 1W for 2R
15m shows the 2hrs chop before it finally cratered and reached tgt at the obvious zone I chose from the lower left.
Switch to Bigger Timeframes
The lack of volatility this year has forced me to scrap the scalping and revert back to trading large timeframes. Ideally there would be sufficient movement and range to capture smaller moves several times a day and to amplify the gains with bigger size. However, conditions are not optimal for scalping. Markets mostly sit around waiting for news or report catalysts. When that happens the moves are often instant and reach their destination without pullbacks for me to enter with a favorable R:R.
My focus will now be on 4H for view and 15m charts for entries. I will be locating areas of trapped traders at support/resistance areas and target the most logical next support/resistance. Trades will be all in/all out with a minimum of 2:1 Reward:Risk.
My results will be in terms of risking "R" rather than pips. A 2:1 Reward:Risk trade could have a 40 pips stop and 80 pips target or a 10 pips stop with a 20 pips target. Either way they target twice what is risked so the actual pips amount is not meaningful. Selecting 2R (or higher) setups also takes away any emphasis on win/loss percentage. The 2:1 risk parameters means I only need to maintain a win rate of 34% to break-even. My "R" maximum risk per trade will represent 0.3% of my acct balance, a loss will be -1R while a win of 2R will be a gain of 0.6%.
My focus will now be on 4H for view and 15m charts for entries. I will be locating areas of trapped traders at support/resistance areas and target the most logical next support/resistance. Trades will be all in/all out with a minimum of 2:1 Reward:Risk.
My results will be in terms of risking "R" rather than pips. A 2:1 Reward:Risk trade could have a 40 pips stop and 80 pips target or a 10 pips stop with a 20 pips target. Either way they target twice what is risked so the actual pips amount is not meaningful. Selecting 2R (or higher) setups also takes away any emphasis on win/loss percentage. The 2:1 risk parameters means I only need to maintain a win rate of 34% to break-even. My "R" maximum risk per trade will represent 0.3% of my acct balance, a loss will be -1R while a win of 2R will be a gain of 0.6%.
Monday, June 2, 2014
Mon Jun 2nd - Where are all the Traders?
GBPUSD 30m view was that the move up for the last 4 hours was a test of yesterday's highs. The last 4 bars were showing a struggle at around a 50% retracement at 1.6760. 5m shows the steep drop at LDN Open indicating an entry was approaching. From 3:20-3:40pm it struggled at the 50% retracement of 1.6760. I shorted in the consolidation looking for a move to the 12pm low. 1m shows the bar I entered on immediately reversed and stopped me out at -4. After some chop the mkt reached up to test 1.6760.
Despite the loss, my short was valid because GBPUSD indicated it was unable to reach the key highs. However, the following chart shows what happened right after they probed the 1.6760 highs. Refer back to the 30m how my view was correct - it was all a test of the previous day's high. However, turning that view into profitable trades can sometimes be difficult. In hindsight it appears I should've given it another shot for the collapse that occurred. To do so I need to know there is an effort to go somewhere, some kind of volatility - a sign of "life". Instead the pace feels as though it meanders around with little purpose.
My job is to find good trades. It is not to trade a lot hoping to catch something. In the past few months I've gone from 5 trades a day to barely 1. It requires tremendous patience to wait on 9 pairs for something displaying the rights match of correlation, pace, Reward:Risk, etc. In the chart above if I had seen a test of the 1.6760 DT I would've tried it again. But the way it rolled over slowly and then picked up speed isn't any indication to me there was volatility worthy of a 2nd shot. It appears it was just a Big Boy rig to probe a few stops right before they slammed it down.
Summary: 1L for -4.
Summary: 1L for -4.
Friday, May 30, 2014
Fri May 30th
GBPUSD 30m grinded upwards all day. I jumped on a pb for any further push up to frustrate short sellers. 5m entry was a cpbt on upwards MAs. P1 exited easily for +4 and I was going to let P2 run, but decided to take it as a +8 tgt. It turned out to be right at the day's high, a lucky exit, but then again was taken ahead of 56 because of the presence of sellers there prior to LDN Open.
Summary: 2W for +10.5.
EURJPY 30m was also a 30m pb buy as was the reasoning for 5m entry. Again P1 exited easily and I tried to trail P2 or sell it at the DT highs, but all it did was wedge forcing me to trail out P2 at +5. 1m shows how it chopped for an hour before breaking to the upside. That was expected, but the chop didn't enable me to stay with the trade.
Thursday, May 29, 2014
Wed May 28th - Pitiful Trends
AUDUSD collapsed an hour before LDN Open (no report release). 30m shows a large red bar. The past 3 days looks in a range, but if this was a decent effort to breakout of the box I wanted to give it a shot.
5m shows from LDN Open it retraced to test previous support. The move up formed in 2 legs and the 3rd leg up conveniently failed at downward MAs triggering my short. Entry @ 43 with a P1 tgt of 4 pips taken at the 2:50pm low. Miniscule for a trend trade, but that is what the mkt showed (it seems unbelievable that there were environments where I would enter and the nearest tgt was 20-30 pips away). 1m shows it went in favor but took 30 minutes to reach a 4 pips tgt!!!! It didn't break the 2:50pm low consolidating there for another 30 minutes and then stopped out P2 for +4. My initial stop was 8 pips so I ended up taking a profit half of my risk, but there was no way to earn a 1:1 payout with such terrible momentum - and this was a trend trade!!!
I quit after that because I only consider re-entries if the movement is healthy - that trade felt agonizing.
The next chart shows how the re-entry fared (without me).
It could've paid about the same amount, but it isn't worth the effort trading ranges that can't pay a minimum of 10 pips. The setup was slightly different and confirmed it was a 1-push trend that died into a range.
AUDCAD showed similar setups confirming correlation, but even worse ability to move. From LDN Open it took 3 hours to move from 45 to 25. 5m shows the constant back n forth making it impossible to capture a good share of that range, any of the deep pullbacks would stop you out before grinding downwards.
It is disheartening that trend setups are performing so poorly. That tells me there is no point trading in a range. Perhaps the reports are the only source of momentum?
Result: 1W for +4.
5m shows from LDN Open it retraced to test previous support. The move up formed in 2 legs and the 3rd leg up conveniently failed at downward MAs triggering my short. Entry @ 43 with a P1 tgt of 4 pips taken at the 2:50pm low. Miniscule for a trend trade, but that is what the mkt showed (it seems unbelievable that there were environments where I would enter and the nearest tgt was 20-30 pips away). 1m shows it went in favor but took 30 minutes to reach a 4 pips tgt!!!! It didn't break the 2:50pm low consolidating there for another 30 minutes and then stopped out P2 for +4. My initial stop was 8 pips so I ended up taking a profit half of my risk, but there was no way to earn a 1:1 payout with such terrible momentum - and this was a trend trade!!!
I quit after that because I only consider re-entries if the movement is healthy - that trade felt agonizing.
The next chart shows how the re-entry fared (without me).
AUDCAD showed similar setups confirming correlation, but even worse ability to move. From LDN Open it took 3 hours to move from 45 to 25. 5m shows the constant back n forth making it impossible to capture a good share of that range, any of the deep pullbacks would stop you out before grinding downwards.
Result: 1W for +4.
Thursday, May 22, 2014
Thu May 22nd - It Feels Random Out There
The report schedule looked promising - plenty of Red Reports involving several currencies. Maybe they could stir things up nicely?
Nope, not a lot of action - no range expansion and no deliberate movement.
Traders face several problems when dealing with reports. The spreads widen, brokers trigger stops, markets move large amounts in either direction (or not much at all), and when the dust settles you can never be sure whether the new chart structures can be trusted. For example, if a resistance level is smashed is it really a higher high? Or is it a probe that failed? Inability to properly define it can lead to incorrect decisions. There tends to be a cooling off period after awhile, but then it needs to be determined if they're bracing to spring into life once again or if they have died straight back to the listless chop that preceded the report.
We have to figure it out ourselves. Nobody can teach you because there is no exploitable pattern. Reports are random to us, but are big money makers for brokers and those with advance knowledge of what the report will be. I choose to stand aside. Afterwards I look for signs of life, some kind of logic telling me there's something to trade.
Today all I saw were pairs moving within their ranges. Below is EURJPY. The circled portion is the period I trade. I marked the bars which red reports occurred on.
It is clear there was some expansion on those bars, but much of the bar is explosive as spreads widen that you cannot cleanly execute at good levels. Many times you are left with where they have taken it to causing you to buy high or sell low. A trader can play for continuation (as I do) or mean reversion, but whichever style is employed you need good execution in order to achieve your strategy's goals. To my eye the moves were random. If I marked other bars as the report bars it wouldn't look any different because the reports didn't actually change anything - they had no significance because it remained in the range.
My stance on reports is that they are fine if they change the picture. Surprises cause trades to have to do something, and the flood of orders coming in usually brings in volatility and continuation. When the reports don't do what I like I have no business getting involved.
AUDCAD. I tried a buy after a report blast held and retained a bullish look. 30m shows the report blast held above previous support. The 3m held above upward MAs forming a HL. I bought @ 88 and it went up immediately, but then it stalled without filling me P1 at +6....and then rolled over.
I scratched the whole position. Looking at the move that followed it appears that maybe I should've stalked a short instead. I can see all kinds of reasons now: the move up stalled at a Fibonacci 50% level, the 30m MAs were downward, etc. But at the time I took my buy the 30m structure was not violated. There was no reason to skip a buy and instead wait for a short because the structure of higher support lows was intact.
After my buy it collapsed at 10pm forming a first LH. Looking at the 3m it went sideways from 10-11pm while still holding the support level. If I felt a short was on the cards I needed a move to the top of the box rather than selling into support (not a smart thing to do). With sufficient volatility I can figure out which way to go, but when the markets are sideways all day it is hard to feel which way they are trying to go. Lately, reports slam things around, but they hold at levels in tiny ranges forcing you to have to violate your rules if you really have to get in. My buy was fine. From the resulting move down I saw I should get short, but it has to be where there's a decent R:R and from a spot I can protect myself. No need to violate or change rules - let this period pass and wait for days with patterns that agree with my method.
Result: 1 scratch
Traders face several problems when dealing with reports. The spreads widen, brokers trigger stops, markets move large amounts in either direction (or not much at all), and when the dust settles you can never be sure whether the new chart structures can be trusted. For example, if a resistance level is smashed is it really a higher high? Or is it a probe that failed? Inability to properly define it can lead to incorrect decisions. There tends to be a cooling off period after awhile, but then it needs to be determined if they're bracing to spring into life once again or if they have died straight back to the listless chop that preceded the report.
We have to figure it out ourselves. Nobody can teach you because there is no exploitable pattern. Reports are random to us, but are big money makers for brokers and those with advance knowledge of what the report will be. I choose to stand aside. Afterwards I look for signs of life, some kind of logic telling me there's something to trade.
Today all I saw were pairs moving within their ranges. Below is EURJPY. The circled portion is the period I trade. I marked the bars which red reports occurred on.
My stance on reports is that they are fine if they change the picture. Surprises cause trades to have to do something, and the flood of orders coming in usually brings in volatility and continuation. When the reports don't do what I like I have no business getting involved.
AUDCAD. I tried a buy after a report blast held and retained a bullish look. 30m shows the report blast held above previous support. The 3m held above upward MAs forming a HL. I bought @ 88 and it went up immediately, but then it stalled without filling me P1 at +6....and then rolled over.
After my buy it collapsed at 10pm forming a first LH. Looking at the 3m it went sideways from 10-11pm while still holding the support level. If I felt a short was on the cards I needed a move to the top of the box rather than selling into support (not a smart thing to do). With sufficient volatility I can figure out which way to go, but when the markets are sideways all day it is hard to feel which way they are trying to go. Lately, reports slam things around, but they hold at levels in tiny ranges forcing you to have to violate your rules if you really have to get in. My buy was fine. From the resulting move down I saw I should get short, but it has to be where there's a decent R:R and from a spot I can protect myself. No need to violate or change rules - let this period pass and wait for days with patterns that agree with my method.
Result: 1 scratch
A Tale of Two Trends
The Grindy Trend
AUDUSD is a trend spanning several days. Grindy trends don't feel strong because they take so long, but after 3 days you look at the move and wonder why you didn't just enter at market and hold on. Ah, the benefit of hindsight! In real-time you'd await pullbacks that didn't seem to come. They emerged as narrow range pauses before the sellers hit it again. Shorting means you do so right into support lows. Normally you don't want to get in that habit since any deeper retracement can stop you out. Every method has it's day and in this case it favored the Breakout Players which is not a tactic for me.
When a trend is present I'll initially hold off to see what the buyers can muster. Waiting for more development also provides information about the nature of the trend - it's volatility, the likeliness if the whole move has completed or if I should expect continuation. The pullback also tells me the potential Reward:Risk in place. After awhile it becomes clear buyers are unable to lift the market. Visually the retracements are shallow. Grindy moves don't necessarily mean the sellers are ruthlessly overwhelming the buyers, they might just be slightly more aggressive. The lack of volatility makes trading these trends difficult as the market doesn't seem to move much in favor and keeps coming back at you. Over time it works its way lower, but there is any ever-present risk that any piece of news could reverse the market. I've yet to see anyone enter these trends and comfortably ride them to their destination. Yes there is a trend, but these are not my preferred type.
I will give these trends a shot, but only if it has left a lengthy consolidation. Otherwise they aren't worth the effort. At the point of entry I must regard it as Grindy trend. The distinction prepares me for their frustrating elements - the slow drift and the repeated tests back to my entry price. There is no point entering if I don't allow for a substantial payout. That will only be on my 2nd part, trailed conservatively. Part 1 will be taken as usual and is a necessary step in handling this type of trend. Once my partial profit is taken my stop stays at the original spot (grindy trends have a knack for hitting stops moved to breakeven). I do my best to stay with the trend, but once I have trailed out I won't re-enter due to the worse R:R. In my experience I tend to exit for logical reasons based on clues on the chart, but a day later it shows me there was a lot more left and I had gotten shaken out. It doesn't matter, all that matters is that each effort pays a multiple of what was risked
The Volatile Trend
GBPUSD shows a schizo market - alternating narrow and wide ranges, pullbacks are sometimes shallow and sometimes deep. The structure is clearly HH and HL, but good luck trading this trend. Even if you manage to get onboard and see the blast blow through all resistances it isn't easy to know how to take profits. In real-time the trade seems to be working well so why sell it so soon? But any greedy plans to stay with it sees the deep retracements slam back at you often trailing you out where you give back a chunk of the open profits. Volatile trends are often sparked by reports, but delude you into thinking they are strong. Many times they will be reversed straight back to test pre-report areas. I'm usually not on these types of trends because I tend to be flat prior to reports. However, occasionally if I have entered a trade and gotten a P1 profit I will be able to decide whether to risk P2 profits in case a report pushes further in favor. But whether P2 is stopped out or if I can trail for good profits is just luck. Like I said I can only afford to go for it because I have already taken a P1 gain. Once again, yes there is a trend, but these are not my preferred type. Trading whatever is present gets me involved in these trends, but the entire time I am cognizant I really don't like it. The recognition of the type of trend I am dealing with is what protects me and also dictates my actions - how I trail, how I pick a target, etc.
I don't have trouble with what I consider "normal" trends - the kinds that push in one direction, pull back towards a 50% retracement in a relatively orderly manner and also in a reasonable amount of time before signalling the trend may want to resume. When I see those trends I tend to hit them twice in succession and with little stress. I don't try to milk them for all they're worth - I just trail along as well as possible and am satisfied with my take. Defining what is normal is a tremendous help because it's clear when IT ISN'T WHAT I'M DEALING WITH. Usually what arrives are one of the two ugly sisters mentioned above. When faced with the Grindy or Volatile type I switch to a different mode based on my experience with them. There are probably several more kinds, but I don't need to elaborate on anything else. Highlighting these two other types tends to cover me most times.
Wednesday, May 21, 2014
Wed May 21st - Scalping in a Miniscule Range
EURJPY 30m was downtrending and had the best look of the Yen pairs so I focused entirely on it. 3m shows 3 trades were taken in about an hour. Trade 1 was an attempt to short as high in the box as possible. The wick bars to the left told me it could turn from there. The entry was taken while the 30m 5pm bar still had 15 mins left (circled). It drifted against me indicating it was testing the top of the box so I cut it at -3.
Trade 2 was for the same tst setup, a slightly better entry and after it showed sellers were taking control. It was on the 2nd 30m white bar and the 3m structure shows 2 legs up to the top of the box. I was concerned by the 12 minute stall so I scratched.
Trade 3. The 25 tick showed 3 legs up testing the last 3m LH so I was confident a re-entry could work. It was the last attempt if the 30m downtrend really wanted to continue. It became a runner, but a small one. P1 took +4 and I would've let P2 run, but I could already see 2 legs down on 3m. I exited P2 at a +7 tgt. The read was correct as that proved to be the 3rd push failing just shy of the bottom of the box.
Summary: 2W, 1L for +3.5 pips overall.
Trade 3. The 25 tick showed 3 legs up testing the last 3m LH so I was confident a re-entry could work. It was the last attempt if the 30m downtrend really wanted to continue. It became a runner, but a small one. P1 took +4 and I would've let P2 run, but I could already see 2 legs down on 3m. I exited P2 at a +7 tgt. The read was correct as that proved to be the 3rd push failing just shy of the bottom of the box.
Summary: 2W, 1L for +3.5 pips overall.
Tuesday, May 20, 2014
Tue May 22nd - A Day of ERRORS
EURUSD broke down an hour before LDN Open. I looked for a pb from 3pm, it chopped sideways barely able to pb. Wicks on 30m bars told me I'd have to sell it low. I took a 92 short which started well, got P1 off at +6. Then it came back at me a little too strong. I scratched it with much difficulty. Plus I wanted to be out before the 4:30pm report.
It's always frustrating to get out and see the report take it my way (without me), but the point of exiting is to avoid the wackiness that often occurs. I tried a re-entry much lower and sold into what became a bullish 30m pin. It was never in favor and I cut it at -4.
USDJPY had a nice 30m downtrend. My over-eagerness to get in had me short @ 29 into the 30m bull pin - the same mistake I made on the EURUSD losing trade. I was not noting the 30m bar times! Took a -5 for my recklessness.
Again I didn't see it in favor at all. I tried a re-entry @31, but it found support and I scratched.
GBPUSD compounded my poor performance. Similar to the 1st EURUSD short it dropped immediately from entry. I was so convinced I was on a 30m 1st LH that I failed to notice I was shorting into the 30m upward MAs. I had a +6 tgt for P1 which was missed by a pip. Rather than hold at the lows and allow me to exit with something less it instead V-turned at me. It went through me and missed my stop, but wouldn't pb to let me scratch. I had to cut it at -4.
Summary: 1W, 3L, 2S for -10 overall. The final trade could've been a win had I not gotten greedy for a larger P1 tgt. The missed runner would've made it a scratch day. The losses all on fof setups selling into 30m BULLISH bars were my downfall. Fortunately it happened 3 times which tells me it is consistently a poor thing to do. I can't recall the last time I made this many mistakes.
EURAUD buy triggered as I was exiting the EURUSD trade. This one was missed, a shame coz it was a runner.
Summary: 1W, 3L, 2S for -10 overall. The final trade could've been a win had I not gotten greedy for a larger P1 tgt. The missed runner would've made it a scratch day. The losses all on fof setups selling into 30m BULLISH bars were my downfall. Fortunately it happened 3 times which tells me it is consistently a poor thing to do. I can't recall the last time I made this many mistakes.
Friday, May 16, 2014
Using Discretion Over Specific Rules
Each morning I go through the usual preparation rituals.
I'll glance at the charts, but I won't actually get in the market unless I see enough range or pace. It doesn't matter if I see patterns. Otherwise, I risk getting in and getting chopped up. I Prioritize volatility over structure accepting a setup or two might be missed - whatever it takes till I am convinced to risk my money.
I never agreed with the saying: "Trade each instance of your method". It sounds like the thing to do in the pursuit of behaving casino-like. Unfortunately, the markets do not steadily pay what we think are setups with an edge. Let's say you trade pullback setups when the structure is HH and HL. When there are HH and HL does buying always work?
The markets make HH and HL all over the charts, but you would argue it's not always in a trending state. Ever notice ranges also have HH and HL? The books don't point that out. This is why the general definition of what constitutes an uptrend is too vague, actually quite useless - all it is good for is to teach beginners the basics of identifying a trend.
If this was the World Series of Poker you wouldn't hear anybody explain which hand beats which - everyone competing should already know the basics! Yet with Trading we often see people cling on to such rudimentary concepts as though they matter, as though they retain an edge.
Yes, it is good to be a buyer in an uptrend, but you have to be aware of the time of day, the range and whether it makes sense to be trading in it. Then there's also the method you employ to enter. Some traders buy as new highs are created, while some buy on retracements. There are all kinds of variables which can affect how your trades will do compared to someone else even though you're both trading the same uptrend.
Asian session often dies ahead of the London Open. This makes London appear like a sudden burst of activity. If they try to break to new highs I won't buy a breakout pullback (bpb) or short a breakout failure (bof). I don't care about patterns, but the reaction. If it just sits there it means all they did was try to trigger stops with no intention of taking it anywhere after that. So why should I get in? To make money I need to know it will MOVE AWAY. I don't know which way, but I need to see clues there was a purpose to the initial push.
I wish I could begin my day at 3pm, trade for 3 hours and count my winnings. The problem is they don't always start at the same time, nor is the volatility predictable. It is empowering to know trading has a lot of uncertainty and I have the ability to figure it out. Otherwise it would all seem so random. It kinda is, but there are moments of logic out there.
Letting them show their hand first means I will often miss the initial explosive move. But from there I trust I can read the reaction and which way to trade. Does it collapse right back into the range? Or does it pull back orderly and hold? The former tells me to play reversal style and the latter is for trend continuation. Throw in a partner pair and the puzzle becomes clearer. All I can do is piece in the clues until I have a picture in my mind. It will never be perfect. The charts will always look slightly different, but the key is to use all of my experience to know where the edge is. There is freedom in not needing to be accountable to anyone for my choices. In the end what I have deduced will be reflected in my results.
I never agreed with the saying: "Trade each instance of your method". It sounds like the thing to do in the pursuit of behaving casino-like. Unfortunately, the markets do not steadily pay what we think are setups with an edge. Let's say you trade pullback setups when the structure is HH and HL. When there are HH and HL does buying always work?
I don't think so!
The markets make HH and HL all over the charts, but you would argue it's not always in a trending state. Ever notice ranges also have HH and HL? The books don't point that out. This is why the general definition of what constitutes an uptrend is too vague, actually quite useless - all it is good for is to teach beginners the basics of identifying a trend.
If this was the World Series of Poker you wouldn't hear anybody explain which hand beats which - everyone competing should already know the basics! Yet with Trading we often see people cling on to such rudimentary concepts as though they matter, as though they retain an edge.
Yes, it is good to be a buyer in an uptrend, but you have to be aware of the time of day, the range and whether it makes sense to be trading in it. Then there's also the method you employ to enter. Some traders buy as new highs are created, while some buy on retracements. There are all kinds of variables which can affect how your trades will do compared to someone else even though you're both trading the same uptrend.
Asian session often dies ahead of the London Open. This makes London appear like a sudden burst of activity. If they try to break to new highs I won't buy a breakout pullback (bpb) or short a breakout failure (bof). I don't care about patterns, but the reaction. If it just sits there it means all they did was try to trigger stops with no intention of taking it anywhere after that. So why should I get in? To make money I need to know it will MOVE AWAY. I don't know which way, but I need to see clues there was a purpose to the initial push.
I wish I could begin my day at 3pm, trade for 3 hours and count my winnings. The problem is they don't always start at the same time, nor is the volatility predictable. It is empowering to know trading has a lot of uncertainty and I have the ability to figure it out. Otherwise it would all seem so random. It kinda is, but there are moments of logic out there.
Letting them show their hand first means I will often miss the initial explosive move. But from there I trust I can read the reaction and which way to trade. Does it collapse right back into the range? Or does it pull back orderly and hold? The former tells me to play reversal style and the latter is for trend continuation. Throw in a partner pair and the puzzle becomes clearer. All I can do is piece in the clues until I have a picture in my mind. It will never be perfect. The charts will always look slightly different, but the key is to use all of my experience to know where the edge is. There is freedom in not needing to be accountable to anyone for my choices. In the end what I have deduced will be reflected in my results.
Thursday, May 15, 2014
Thur May 15th - Patterns to trade, but miniscule ranges with poor pace
AUDUSD. Leading in to LDN Open AUDUSD broke to new highs. That ended up being a probe and collapsed an hour into the session. I stalked a short on a failure to reach the 0.9392 high. I tried a 76 entry at 4:16pm when it stalled. That refused to drop. I felt I could've cut it when I didn't feel any downside pace, but I stuck with it and got taken out at -5.
Another failure occurred at 4:45pm and just to be sure I waited for another stall, got in at 5pm @ 77. The trade started well, but no volatility - it felt like getting P1 at +4 was a miracle. I considered whether to move the stop for P2, but assumed this was my best shot at a runner if it actually wanted to go somewhere so I risked the +4 to keep the stop out of the way.
It barely tested my entry and then trended for the next 40 mins. Exit was a tgt of the previous 30m DB lows rather than trying to trail it for a homerun.
EURJPY set up a 30m bpb short while I was managing the AUDUSD trade so I didn't catch it - as long as I catch one or the other.
GBPUSD set up a similar 30 bpb 30 mins later. I was in based on a 3m DT + tst, but missed the actual entry 10 mins earlier, but because the mkt was still there I took the entry anyway. The trade started well and was +4 in favor after 12 mins, but I wasn't filled so I took +3 instead.
EURJPY set up a 30m bpb short while I was managing the AUDUSD trade so I didn't catch it - as long as I catch one or the other.
GBPUSD set up a similar 30 bpb 30 mins later. I was in based on a 3m DT + tst, but missed the actual entry 10 mins earlier, but because the mkt was still there I took the entry anyway. The trade started well and was +4 in favor after 12 mins, but I wasn't filled so I took +3 instead.
The next four 3m bars tested my entry and could only get 2 pips through me so I looked for decent continuation. By 6:39 it was starting to head back in favor. However, the 6:42 3m bar closed as a hammer and a HL. A quick look at the 30m and the whole move down looked more like a breakout failure - the clue was the strong way the retracement came back erasing the 2 hard 30m red bars that tried to breakout. I scratched P2 and quit.
Summary: 2W for +7 overall.
Wednesday, May 14, 2014
Wed May 14th - Too many to monitor!
Trades triggering at various times regardless of Report times makes it difficult to catch 'em all. Obviously if London session had this kind of opportunity more often I'd use 3 monitors and be all over them. Lately LDN has been dead - there can be moves, but I need to see logic or I won't enter. Often they grind in one direction for hours without adequate pullbacks to get in at proper Reward:Risk locations. Then again that's what 9 pairs are for - catching some kind of win somewhere and being done with the day.
EURAUD had a nice short an hour after LDN Open. I missed it mainly because I saw it inside a 40 pips range between 4580 and 4621 (see 30m lines). The MAs were angled nicely to expect they'd hold for a good short, but I need convincing that the look of the chart agrees with the day's mood.
GBPUSD was a short view only. There was a pb short in between them, but seeing 2 red reports an hour apart (blue lines on 3m) made me want to wait out the wackiness. Unfortunately that meant they moved so much already.
The plan was still to go short, but I needed an upside fakeout to try it......
The 6pm collapse on 3m said sellers were still controlling so I stalked a fof short. In at 80 and out Part1 at +6 and trailed P2 for +10. Part2 missed my tgt by a few pips. It sucks to miss out on +20 and instead to take half that amount but that's typical.
NZDUSD was a pb buy in very choppy conditions. 30m lead the way, but it took lots of belief it'd work seeing how choppy the 3m was. It looks like an easy buy, but it felt like it couldn't even move 5 pips. In at 55 and exited for +4 which is just as well coz it hit resistance and got smacked down.
Summary: 1W for +8 overall. 3 missed trades mostly due to reports.
EURAUD had a nice short an hour after LDN Open. I missed it mainly because I saw it inside a 40 pips range between 4580 and 4621 (see 30m lines). The MAs were angled nicely to expect they'd hold for a good short, but I need convincing that the look of the chart agrees with the day's mood.
GBPUSD was a short view only. There was a pb short in between them, but seeing 2 red reports an hour apart (blue lines on 3m) made me want to wait out the wackiness. Unfortunately that meant they moved so much already.
The 6pm collapse on 3m said sellers were still controlling so I stalked a fof short. In at 80 and out Part1 at +6 and trailed P2 for +10. Part2 missed my tgt by a few pips. It sucks to miss out on +20 and instead to take half that amount but that's typical.
NZDUSD was a pb buy in very choppy conditions. 30m lead the way, but it took lots of belief it'd work seeing how choppy the 3m was. It looks like an easy buy, but it felt like it couldn't even move 5 pips. In at 55 and exited for +4 which is just as well coz it hit resistance and got smacked down.
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