Archives for February 2013

The AUD set up nicely during the Asian session for a short in the UK session.  There was very little news to be concerned about until the US economic news releases.  This is one of my favourite setups.  Had price moved down all the way to the Asian session low, than it would have been one of my favourite results too.

My students often comment that I give too many tips away in the blog.  Having said that…here I go again.  Currency pairs have a tendency to move a certain amount in a given day.  Once they have moved this amount, the probability of them exceeding it further, dwindles rapidly.  Can a pair move 20 or 30 pips above what it normally does on a given day…yes absolutely.  Is it likely to…no.  Currency trading is not an exact science, but probability and statistics are very applicable.  On very exceptional days, a pair may double its usual range and we see this now and then.  It’s not the norm though.

The AUD exceeded its range during the Asian session by approximately 20 pips.  Think about it…how are the UK traders going to make money on the AUD, if it has already exceeded its range?  The answer is… they will likely reverse it and push it the other direction.

We see a quick rejection of a break above the Asian session high which affords us a very reasonable stop.  My intention is to aim for 3 pips for every pip that I’m willing to risk.  In this case, it’s a risk of 17 pips to get 79 pips.  As the trade progresses, I expect yesterday’s high to be tested and retested before a further descent toward the Asian session low.  Instead of a complete reversal to the Asian session low, we end up in the middle of the range in this case…which is not usual, but it often will go the full distance.

Keep your eyes open for this kind of trade setup.

Good luck with your trades!

Back tomorrow.

A volatile week of trading and very messy charts.  To my eyes the EURGBP looked best.  This pair has been very active the past couple of weeks and tends to move in a more orderly manner than most pairs.  It set up very nicely during the UK session, rejecting a close above the Asian session high, followed by a very bearish candle.  A short trade with an affordable stop meeting our minimum 3:1 Reward to Risk ratio to our Target 2 followed.

The market has been very volatile this week and with Dr. Bernanke testifying yesterday and today, there is room for considerably more volatility.  After a bounce off the Asian session low, the trade is closed before round one of the major US Economic news releases.   Better to play it safe today or not play at all.

Be very careful trading volatile looking charts.  It is always better to avoid the difficult looking trades and choose the easier looking setups or not to trade at all.  Be very selective and keep your stops tight.

Good luck with your trading!

Back tomorrow.

The AUD made a larger Asian session range than usual yesterday and continues to weaken against the USD.  After putting in a series of lower highs it chopped its way down during the UK session attempting to close below yesterday’s low and the Asian session low, but lacked any real momentum until the US session news.

When you can, eliminate your risk by placing your stop better than breakeven, it removes the stress from trading.  If the worst case scenario is you make a couple of pips, but are bored silly…at least you’re getting paid.  With major news around the corner, always protect yourself.  If you are in profit, protect some of it and be prepared for volatility.  Some traders choose to take any profits, close their trades and avoid the chop.  There is nothing wrong with that.   When the US economic news releases began, price almost stopped us out for plus 2 pips, but pushed down in our favour and hit both our targets, where we closed the trade.

We don’t trade on Mondays, so we are happy with the first day back of our trading week.

Back tomorrow.

Good luck with your trades!

The NZD looked like it had good potential to go down during the UK session, and allowed for a small stop.  The Reward to Risk was a bit better than 4.5:1 to our Target 2 – easily meeting our minimum risk criteria of 3:1.

The AUD shot up while Governor Stephens was speaking, and I was really hoping for it to roll over and set up for one of my favourite trading patterns, but it wasn’t to be.  The EUR had potential, but the stop loss was too expensive…so the Kiwi turned out to be the preferred setup.

We didn’t make it to our Targets, but we’ll take 30 pips any day.

The market was very generous to begin our trading week and the past 2 days have been tricky.

A wonderful thing about trading, is every day is a new day and every week we search for new opportunities using the same tools – like a prospector searching for gold. 

Our particular style enables us to take very low risk and high probability trade setups.  We bank the pips each session.  We never let large gains back up on us and we never leave positions open at the end of the trading session.  We have clearly defined targets before we enter and we read price as it moves through the levels toward our targets.  If price indicates to us that it may be reversing, we have protected our profits and happily accept what the market gives us.  We remove risk (the initial stop loss) as soon as it is prudent to do so, thereby making our trades “stress free” as they progress.

A little tip:  Never move a stop loss to break even.   Always move it ahead to at least, Plus 1 pip.  It is psychologically much better to have a positive trade than a scratch trade.  After all, the dealer has made money the moment you open the trade and again when you close it.  This naturally refers to moving the stop loss once it is prudent to do so.

Enjoy your weekend!

Back Tuesday.

The EUR broke through the Asian session low very quickly once the UK session got underway – without retesting the level.  I learned a long time ago from my mentor, it’s never a good idea to chase a trade.

The CHF moves inversely to the EUR because the Franc is the cross not the US dollar.  I typically use the CHF to confirm (inversely) the EUR setups.  In this case, when the CHF made a lower high, just as the EUR  made a higher low, I opted for the CHF short.  The CHF offered a tighter stop loss and with some major US news releases around the corner, it seemed like the better trade at the time.  The Reward to Risk was 4:1 to our Target 2.  It turns out that there was more money to be made by taking the EUR long.  Oh well…that’s trading.

Let’s see what Friday brings us in the way of opportunity to close the week.

Good luck with your trades.

The EUR and AUD set up very nicely during the UK session.  This is turning into a great week for trading and as traders know, some weeks are much better than others.  The USD continues to strengthen. We are intraday traders not macro economists…so we are happy to find trade setups that meet our criteria, require low risk entries and bank our profits each session.  We trade what we see each session and wish “position traders” all the best.  We look for signs of  where the BIG institutional money is entering and exiting their positions each session.

With the reaction to the UK news behind us, we saw a short opportunity in both the EUR and AUD.  The EUR trade was a 4:1 plus Reward to Risk ratio setup.  Although it didn’t make it as far as our Targets 1 and 2 before the US Economic news releases, we are very happy with the trade.  Our targets enable us to determine whether our Reward to Risk ratio minimum of 3:1 to our Target 2 is available, and once we enter a trade, we protect our profits and read price for signs that the market may be turning or continuing.   If price is slowing down, showing signs of reversing or event risk is entering the market, we tighten our “take profit levels” or close the trade.  Where price goes after that is inconsequential.

It has taken me years of trading experience to develop the methodology.  I was taught by the best and the rest comes from experience.

So far, it’s been a great week.

Good luck with your trading!

Back tomorrow.