Archives for March 2013

An awesome week for trading continued today.  It has been a little unusual that the big moves have been in the US session this week, but that is has been when most of the major news releases have occurred.  The UK traders have moved the market much less than their usual range.  The key has been to read the direction of the market, and not get stopped out for a loss, when the US news releases occur, or to enter the market after the releases, reading the direction the market will move for the balance of the session.

I had a conversation with a student yesterday about our Targets 1 & 2.  These are critical to our style of trading.  When I see an entry, I measure the distance to Target 2 and the distance to where I would put the initial stop loss.  If the distance allows me 3 pips of gain or more  for 1 pip of risk,  I’m willing to further consider the trade.  Most of our stop losses are set between 15 and 25 pips initially.  In other words, if the stop loss is 15 pips, than I am aiming to get 45 pips or more out of the trade – to our Target 2.  During the US session, for a reversal trade, if found, I’m willing to take fewer pips because there is less trading time until the London Close.

The targets that I use have very high probability!  Some weeks the market may not cooperate as well as other weeks, but statistically the targets are significant and I have used them for years.  They work!!! These targets are very powerful because many institutional traders are taking profits in the same areas…enough said.

Enjoy your weekend!

Good luck with your trading!

Back Tuesday.

A similar trade to yesterday with the EURGBP showing lower highs and fading to the downside. This pair is a slow mover making it easier to trade than many pairs.  It is crossed with the GBP, so the pip value is approximately 1.5 times that of a USD cross.

This trade set up with lower highs, and once we entered, our first hurdle was to get through the Asian session low.  Once price did, we removed the risk from the trade by placing our stop a little above the Asian session low to allow for a re-test.  Price moved down from there and we were closed out on the hammer-like candle protecting 20 pips.  Had we not protected the 20 pips, we would have been stopped out on the retracement caused by the US News.  It’s always better to lock in some pips, remove risk from a trade when prudent to do so, than to give your pips back to the market.

We subsequently saw a beautiful setup on the CHF after the US News.  ( Not shown here)   The entry was on the open of the third red candle after the long wicky candle which formed the high of the day.  Our Target 2 was .9480 and price plummeted right through it allowing for some additional bonus pips.  The EUR & GBP also had big moves, but the CHF to my eyes had the best setup.

If you can find a nice trade setup in the UK session and another setup or a reversal trade in the US session, it makes trading a lot easier.  Typically the US session trades will not provide as many pips, but this certainly wasn’t the case today.

This has been a great week to trade!  What a difference a week makes – on the heels of last week’s tricky and dismal trading.  It all averages out and we are only mid way into March.

Good luck with your trading!

Back tomorrow.

With little news until the US session, the majors started moving as soon as the UK traders began their day.  The EUR and GBP required larger stop losses than my comfort zone, but the EURGBP allowed for a stop loss that just met our criterion of 3:1 Reward to Risk to our Target 2.

The first hurdle for this trade was to make it through the Asian session low, once it did, the risk was taken out of the trade by moving the stop loss down, while allowing for a re-test of the Asian session low.  The stop loss, now “take profit” was incrementally moved down to lock in profits in the event of a reversal.  As price re-tested our Target 1, the trade is closed.  Price then continued down to our Target 2 and beyond. When price is not moving down with momentum at our Target 1 level, it is better to close the trade or put the “take profit” at Target 1, than to get greedy.

Good luck with your trading!

Back tomorrow.

A beautiful session to trade!  In North America we have moved to Daylight Savings Time which means the UK session starts one hour later for us, until the end of the month, when the UK and Europe switch over too.

Last week, all the news releases throughout the trading sessions, made for a very difficult and volatile trading week.  This was capped off with NFP on Friday – a day we do not trade.

There were many nice setups during the UK session today however, but the EUR had a favourite setup of mine.  This trade set up with breakout traders being lured in short twice, allowed for a 3:1 Reward to Risk ratio setup to our Target 2.  When price began to fade just below Target 1, we closed to protect our profits.  A familiar 1,2,3 rollover setup gave us a short entry as the US traders reversed the overnight up trend.  Price came down completing a familiar formation that I teach.

I love intraday trading!  One typically gets a move in the UK session which is very often reversed  when the US traders come to work.  For those that successfully trade the UK move, why would you want to give it back and not lock in your profits?  We use small stop losses and have defined targets.  We read price, trade familiar high probability setups, and exit when price indicates to us that a move may be reversing.  I learned trading from the largest currency trader in the world, a man with over 42 years of trading experience, whose peers consider to be the best trader out there, and he taught us how being able to read price is paramount to trading success!  Regardless of your preferred trading intervals, or preference for price bars or candles, you must learn how to interpret from price what the market is telling you.

Let’s hope for a continued awesome week.

Good luck with your trades!

With so much news all session long, the volatility made for a near impossible scenario to make a profit.  The best approach would have been to take the day off.  I saw a nice entry which required a small initial stop loss.  The trade went positive, but retraced to a slightly negative position just after an hour, before going positive one more time.  After moving the stop loss to plus one pip in advance of the major US news, the position is subsequently closed out.  Price then goes vertically down to our Targets 1 and 2 without us.

Due to our habit of not trading NFP Fridays, I was looking for a final trade for the week and it wasn’t there.

My mentor who trades in the tens of billions of dollars per trade, when I asked him about trading NFP and other major economic news events said to me, “you wouldn’t stand if front of an oncoming locomotive, would you?”  He went on to say that  he takes his traders out for something to eat and comes back when the market has settled down.  If he sees something he likes then, he trades it, if not, he doesn’t trade.  Very wise words…what was I thinking?

The UK session last night seemed to be one of those sessions when locomotives were coming full steam ahead every hour.

Back Tuesday.

Be very careful if you trade tomorrow.

There were several nice trade setups during the UK session to choose from.  I liked the EUR best because it had a greater than 5:1 Reward to Risk.  The stop loss on this trade was about 11 pips for a potential 62 pips to our Target 2.  We closed the trade just above our Target 1 to lock in 45 pips.

I always move my “take profit” level down as a trade progresses.  Once the risk is out of the trade and you have locked in some profit – there is no stress.  When you have an acceptable number of pips and price retraces, it’s best to lock in your profits, as opposed to giving them back and hoping price will come back in your direction, without retracing too much.  The old expression…”you will never go broke taking a profit” comes to mind.  Any day that you can get 40 pips is a great day.  Some days, you will get 50, 60, 70+ pips in a trade.  When those day’s happen – rejoice!

Good luck with your trading!

Back tomorrow.