Archives for November 2016

When a pair is making higher lows like the USDJPY did today, the idea is to find a pullback and when a candle reversal pattern occurs, to go long with a stop loss below the pullback low –  providing the reward to risk ratio makes sense.

As the London session got underway, price made a higher low, then moved above its Asian high.  I avoid breakout trades and always wait for a pullback.  The pullback followed and we saw a second higher low for the session.  An entry long is taken risking 16 pips for a potential 47 pips to our Target.  This was a nice trade because it ran quickly up to the Target where we exited as price came back off the high of the candle.

Curiously, the USD was weaker after a very strong Preliminary GDP q/q print today.  I know one institutional trader who went long the EUR when he saw the market’s reaction – but he’s not planning on staying in the trade long.  He is just taking advantage of the countertrend  move.  This is the natural flow of a market…there are always those who are willing to sell and others willing to buy.

Music to my ears today when one of my students sent me his trade and he had done better than me while trading the USDJPY today.

Good luck with your trading!

 

As the new week began the EURUSD moved up early in the Asian session before going sideways into the UK Open.  A brief move up was followed by a strong bearish reversal in the first hour of London trading.  A short is taken with a 16 pips stop loss for a potential 61 pips to our Target.  This a familiar pattern and with the Asian low coupled with our Target price, we exited once price touched it.

Political event risk overhangs Europe this coming weekend with Italy and Austria.  Italian 10 year bond spreads over German 10 year bunds will likely widen throughout the week.  The market will be focused on the potential for Italian bank failures.

NFP awaits us on Friday in the U.S., so it will be shortened trading week for me.

Trading Tip:  Many traders think of themselves as risk takers and what they really want is a guaranteed outcome.  This doesn’t happen in trading. There are no guaranteed outcomes when you trade.  As a result, many traders hesitate to put on a trade, even when it  meets their trading plan criteria. Every trade will have risk associated with it!  To be a successful trader requires that you learn to get comfortable with taking risks and take responsibility for your trades.  Follow your trading rules consistently (if they work) and practice, practice, practice.  When a trade doesn’t work out, see if can determine why it didn’t…learn from it, and move on the next trade.

Good luck with your trading!

My bias currently is to short the EUR.  On Tuesday what appeared to be really nice setup early in the UK part of the session quickly fizzled out. After hitting my stop the pair ran down to test the Asian low without me.  After a retracement to start the U.S. session, a second short entry is found and price moved down further for modest gains before our profit stop was hit.

Wednesday the EUR set up nicely again for a short.  A stop loss of 16 pips for a potential 73 pips to our Target was an attractive R/R ratio.  Price made a lower high and began to move down (with trend) as the U.S. session overlap got closer.  It continued to sell off in advance of the economic news releases.  We tightened the profit stop in advance of the news to lock in some profit if the pairs gets volatile or the USD comes under pressure.  The news was USD positive and with traders having priced in a December rate hike, price continued lower.  We locked in our Target price and the market took us out.

Thursday is U.S. Thanksgiving holiday so many traders will be off until next week.

Good luck with your trading!

 

Trading has been good this week with setups on multiple pairs.

There wasn’t much economic news today of significance after ECB’s Draghi spoke.   Aside from Canada’s core CPI and numerous FED speakers talking the session was light on news.

The EUR and AUD continue to move down and the USDJPY continues to move up.

The GBP caught my eye today with the old familiar “M pattern”.  The GBP currently is trading in a range between 1.2550 and 1.2150  The “M pattern” is an old favourite, but it hasn’t been as common this past year.  It essentially is a move higher above the Asian high – which lures in breakout traders followed by a pullback to stop them out, followed by another false move higher and pullback.  An entry short was taken after the second pullback with a stop above the session high requiring a 25 pip stop loss for a potential 97 pips to our Target*.

It didn’t take long for price to move with the trend downward.  As it did, we needed to take out yesterday’s low, the Asian low and hope that the momentum would be strong enough to hit our Target.  Once price moves in our direction, we eliminate the risk by moving our stop loss to a profit stop and keep adjusting it as price moves lower.  Vertical moves are not sustainable, so it’s prudent to keep moving the profit stop to lock in more profit as price continues.  When price hit our Target, we lock it that level, and allow price to take us out when it retraces.  If price continues lower without a retracement, then we keep locking in more profit until the market takes us out.

*The Target we use is a statistical value calculated daily and it works extremely well.  I used to show a Target 1 and a Target 2, but my indicator which draws it, is not working reliably after some recent MT4 updates.  As a result, we are using the original indicator which I have used for years.  The Target 1 is now calculated manually at 15% less than Target 2.  For example if Target  2 is based on a 100 pip move today then Target 1 would be 85 pips.  This calculation lets us determine our Risk/Reward Ratio.

The USD remains strong and trading accordingly in trending pairs is working very well.

Good luck with your trading and enjoy your weekend!

This could have been a subdued session while traders awaited Janet Yellen’s testimony for hints of a December rate hike.

The USDJPY has been moving nicely upward since the election as it heads for a test of 110.00.  As it made higher lows today, an entry is taken risking 23 pips for a potential 70 pips to our daily target at 109.82  We moved the stop loss up as the U.S. session gets underway with the pending unemployment release to be followed by Yellen’s testimony on the economic outlook.  Price jumped up after the favorable unemployment number and not wanting to give back too many pips we tightened the profit stop and get taken out.

I’m including a nice AUD trade from yesterday that one of my former students sent me.  I missed this setup, but he didn’t.  He executed and closed exactly at the Target price.

Trading Tip:  T O P an acronym for  Target Price, Obstacles, Plan

1. Before you enter a trade,you must know what your Target Price is, so you can determine what your Risk is for the amount of Reward.  Intraday trading will be much different than position trading.
2. Determine what Obstacles are in the way of you getting to your Target.  There can be a number of factors, for example, yesterday’s high/low, Asian session high/low, pending news, 100 levels known as the figures, previous support and resistance levels etc.
3. Plan or Trading Plan which of course are your trading rules which are the foundation of every successful trader’s arsenal.  All successful traders have a compilation of trading rules that work for them.  The extremely successful Chicago billionaire trader Richard Dennis is quoted as saying: ” I always say that you could publish my trading rules in the newspaper and no one would follow them.  The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught our people.  What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.”

Good luck with your trading!

 

 

With the U.S. election finally out of the way, the market has new areas to focus on.  Europe is not looking very promising as we move forward into the next few months.  The charts are telling the same story and any opportunities to short the EUR with an appropriate reward to risk ratio will be an obvious choice.

As the U.K. session got underway today, price moved higher before forming a nice reversal pattern.  Risking 23 pips for a potential 101 pips to our target, we went short.  It wasn’t all smooth sailing though as it took awhile before price closed below its Asian high and moved lower. Protecting ourselves as the trade moved down, we kept locking in profit until price looked like it was reversing and we closed the position for a nice gain as price rose up to retest its Asian low.

Trading Tip:  No matter how strongly you feel about the direction of a trade, be flexible to the possibility that you may be wrong.  Remember the market doesn’t even know that you exist or for that matter even care.  I can list a number of fundamental reasons why my current preference is to short the Euro, but if the market technicals don’t tell the same story, then there is no point in shorting it.  At the moment, fundamentals and technicals agree.  In trading you must be flexible and be willing to admit at what price you may be wrong.  I had a mentor say to me years ago, ” do your analysis, take the trade and if the market doesn’t do what it’s suppose to do…get out!”  Remember that with the proper “reward to risk ratio” setups, we don’t have to be right all the time…we just have to be right more often than being wrong.

Good luck with your trading!