Michael Bridgman

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!

On the day of the U.S. election the AUD managed to close at its highest level since April.  It sold off sharply yesterday and today again it could not climb higher.

A reversal setup is found and an entry short is taken.  Price moved down predictably testing the Asian high, before descending through the Asian low tagging our target – where we exited on the retest at .7629 in advance of the U.S. unemployment release.

The market can finally move its focus away from the U.S. election.  A December rate hike expectation is now back on traders’ minds.  The elections next year in Europe continue to make the Euro vulnerable to the downside, but before any elections we have the Italian referendum.

It’s Remembrance Day tomorrow in North America.

Good luck with your trading!

 

 

 

A similar trade to yesterday but with a more desirable result.  Today had almost a classic “3 Drives” pattern.  As the U.K. traders came on… price moved down for one candle, then pulled up for an hour setting up a reversal pattern.  A short is taken …price moved down to test its previous. then moved down to our Target 2 as the U.S. session got underway.

I wasn’t expecting the charts to be as clear as they were today.  With the market positioning for a Clinton win last week and now re-balancing for a possible Trump victory the USD is selling off and positioning is moving toward safety.  It certainly keeps things interesting with a week to go.

I’m including a chart from a former student of mine who took a similar trade today taking advantage of the “risk off” environment by shorting the CADJPY.

He took the course 3 or 4 years ago and says,”Trading is going great, still knocking the pips out. The system/your teaching has certainly stood the test of time.”

Keep trading simple and you will impress yourself with how well you can do!

Good luck with your trading!

 

 

 

As the U.S. session got underway today the EUR had taken out 1.1000 and was looking quite strong.  The AUD was strong too.  The JPY hadn’t moved nearly as much as the other majors and was making lower highs consistent with the overall USD weakness.  A short was taken but I got stopped out for plus 1 pip just before the U.S. news.  It is far better in my experience to tighten stops before news and eliminate the risk of a profitable trade potentially going negative.  You can always get back in.  This market is too volatile these days to risk much profit on a trade.

I know an excellent trader who had a very nice profitable EUR short recently and took off some of his position and left a profit stop about 50 pips lower than his entry.  As the EUR sank and he was up well over 250 pips, he chose to leave his profit stop in place… and he ended up giving back over 200 pips of profit.  He is an excellent professional trader with many years of experience and his style is different from mine.  I don’t like giving back profit but he is a position trader and his style is different from mine.

 

I quickly got back in short after the news with a very cheap stop just above the pre-news high and the fourth lower high.  Price moved down nicely but there was a very important level on the one hour chart that price was going to have to test, which was also close to Friday’s low and the options at the 104.50 area.  With the confluence of the 3 factors, one would expect that the level would be quite sticky …difficult to get through and potentially an area for a reversal.  I decided to play it safe and place a profit stop just below the 104.50 area and as I watched price come down to it… I wondered why the trade didn’t close.  I also had a profit stop above, so one of the them was going to get hit and it would be a profitable trade one way or another. Unfortunately it was the upper profit stop that triggered and not the lower one!  I was watching price come right down to it and it just didn’t trigger for some reason.  This happens and if it hasn’t happened to you yet…be aware that it does happen.  It’s not worth getting out of sorts over as the outcome will remain the same.  Trading is not an exact science and brokerages don’t always fill your order the way you would expect them to, but that’s trading.  Any trade that puts money in your account is a good trade.

My chart boxes are off by an hour this week due to the U.K. and European time change which we will follow this coming weekend.  This week has lots of economic news  and of course we have all the U.S. election related news…so be very cautious, selective and keep your stops tight.  It could be quite a roller coaster ride as we approach the election outcome.

Good luck with your trading!

I don’t normally share small trades, because it takes time to mark up a chart and write up the trade.  Today’s example is to illustrate the psychology of the GBP short today in line with the tips this week on the use of stop losses and moving them to profit stops.

The GBP is a favourite short of mine.  Currently it trades in a range between 1.2080 and 1.2330 – most likely until we get clarity on the High Court ruling.

As price shot up early in the U.S. part of the session it ran into sellers – just as it had in the Asian and early part of the UK session.(see chart)  The larger charts are bearish, so we have confluence on the downward trending direction.  The long upper wicks indicate sellers pushing price lower. An entry short was taken at 1.2161 with a stop loss just above today’s highs – risking 29 pips for a potential 93 pips to our Target Price of 1.2068.  If I can get to the earlier U.S. session low – I will be very happy with the trade and of course the more pips the merrier.  Statistically it shouldn’t run much past 1.2068 though without some jarring news coming into the market.  However…it could get down to 1.2080 to close the week.

The entry candle got off to a bad start and price began rising against me.  This can and does happen…to everyone.  That is why we have a stop loss entered at the time we execute the trade.  If the stop loss gets hit…it closes the trade and could spare us from catastrophic loss should the market go violently or progressively further against us.  Put another way…a trader does his thorough analysis, accepts his risk and enters the market on a high probability trade setup.  If the market goes against you after you have done your analysis correctly and entered according to your trading plan – then get out.  Don’t take it personally…it’s the market not doing what it normally does…so get out.  Your stop loss will take you out or you can click out, but you need to follow your trading plan.

The thing I didn’t like was the USD was weakening to the EUR and AUD and then the EUR started to weaken to the GBP briefly, in the EURGBP. cross.  As price climbed a bit against me, it began forming a long upper wick as price entered the sell zone.  The candle closed with a lower high.(sigh of relief)  The following candle dropped as the European session ended – closing below both the Asian low and yesterday’s low.  This is usually followed by a retest… much like a retest of a 1.2100 or 1.2200 level.

After this move down, it was time to take the risk out of the trade by moving the stop loss to just into profit or if you prefer to lock in half the move of the large red candle or all of it…that’s fine too. Each way, you’re guaranteed a profitable trade.  Price then retraced just above halfway of the large red candle (very common) and then pushed down to close near its low (very bearish).  The next candle found some buyers as evidenced by the longish lower wick.  This coupled with the U.K close approaching and positions being squared for the weekend makes for a good reason to tighten the profit stop just above this candle’s high.  As the close approaches, the trade is closed for a few pips, but executed in accordance to the trading plan.

Not every trade will make you a lot of pips.  Following your trading plan, taking an acceptable calculated reward to risk ratio trade setup and being disciplined following your rules is what is important to trading survival.

The question a trader asks himself after a trade is whether he would take the same setup again in the future…all things being equal?  Did did he trade in a disciplined manner true to his trading plan?  What did he learn from the trade and would he do anything differently in the future?

I hope that helps at least one trader.

Clocks go back in the U.K. and Europe this weekend.  North America follows next weekend.

Enjoy your weekend!

****Note to my students – I have removed the Channels Final indicator as it seems to be off since the last MT4 Update.  Continue to use the Mod. 1 indicator and draw Target 1 in manually – 15% before Target 2.