Michael Bridgman

An hour before the U.S. session began the GBP made a second lower high in the session, accompanied by a 3 candle reversal.  A short is taken risking 20 pips for a potential 92 pips to our Target 2.  Price started to plummet just in advance of the U.S. Core Durable Good Orders and Unemployment Claims release…so who knew?

Price continued down and briefly bounced above the Asian session low before quickly dropping right through the 1.2200 figure.  Not wanting to give back any pips on the probable retest of the 1.2200 level – we chose to close the trade.

Trading Tip:

Following up on yesterday’s tip of ALWAYS using a stop loss at the time of trade execution…is moving your stop loss to a profit stop.  When the market moves in your direction, get the risk out of the trade as soon as is reasonable… especially when economic news is pending as the market tends to get volatile.  If you’re up 15 pips, it’s a good idea to get the risk out of the trade by putting your stop loss to plus one or two.  This strategy has two beneficial effects.  The first being  the trader can be stress-free having eliminated the possibility of losing any money.  The second being that the worst case scenario is still a positive trade and your account grew.  This is very different psychologically from having a winning trade move against you and hit your stop loss which is never fun and happens to all traders.  Remember a plus one or two pip trade is a positive trade and as the adage goes…no one goes broke taking a profit.

As a trade moves further in your direction, lock in more profit by moving your profit stop closer to current price – also known as trailing the stop.  Let the market take you out, hit your targets or click out for your own reasons as was done today.  The most important thing is to not let a nice profit turn into a loss.  Over time you will get better and better with your profit stop placements.  Personally, I like to move it above structure , a strategic level or halfway up a large candle.

Good luck with your trading!

 

 

Australia’s CPI q/q yesterday came in at .7% up from the previous .4% and above the estimated .5% the market was expecting.  This resulted in the AUDUSD jumping up to the formidable .7700 area where it has a difficult time closing above.

When this type of news reaction move happens with the AUD, I like to look for a short setup as opposed to a continuation.  With the Aussie moving back down in the UK session, a short is taken risking 17 pips – above structure for 62 pips to our Target – which is the Daily and Asian session low.

The key here is to lock in profits and let the market take us out if our target price is not attained.  A candle with a long lower wick is a warning sign of buyers entering, and we don’t want to give back too much of our profit.  We can always enter again…and did today.  A second short entry is taken in the U.S. overlap risking 16 pips for a potential 42 pips to the Asian low.  This second trade backed up on us 11 pips before moving downward where once again a long lower wick had us tighten our profit stop to lock in 20 additional pips.

Trading Tip:  Stop Losses

Always always always use a stop loss.  This should be entered at the same time as you enter the market.  Although it may sound like common sense, I still come across traders who don’t use them and think they will click out if the market goes against them or even worse…think the market will reverse back and go in the desired direction to profit.  The market can and does make sudden huge moves – in a blink and if this is against you… it may cost you your account.  I have some strict rules around stop losses and how to move them to profit stops as a trade moves along in the desired direction. This comes from years of experience and also from traders who have been around a lot longer than I have.  The bottom line is to always use a stop loss with every trade at the time of execution.  Adjust it as needed but always use one.

Good luck with your trading!

CB consumer confidence  in the U.S. today followed by both UK Governor Carney and ECB President Draghi speaking .

As the U.S. session got underway, the GBP moved through the Asian lows and consistent with the charts, a short is taken risking 15 pips for a potential 78 pips to our Target 2.  The idea was to take minimal risk and keep locking in profit… as this pair is particularly volatile and headline sensitive of late with the “hard Brexit” chatter.  With Governor Carney speaking during the session, the pair tends to be volatile.

The GBP sold off hard and we exited at our Target 2.  Although our next zone level was where the pair bounced…the October 11 low, we were happy to reach our Target 2 and know statistically that this is where the pair most days should run out of gas.  With Carney speaking today…it could have dropped another 100+ pips but were happy to leave that trade for someone else.

Trading Tip:  If you can find a trading partner and look for setups together as long as you use the same trading style, it can be a rewarding experience. Choose your trading partner as carefully as you would any business partner.  When I was trained by a sovereign wealth trader (trades on behalf of countries not corporations) two of his traders worked together.  When either saw a trade setup they liked, they immediately had the other one check it. If they both liked the trade, they both entered and if one didn’t like the setup…neither entered.   I watched these two traders who reminded me of a married couple, each make $200,000 in 20 minutes on a single trade on a slow day.  They both were former Chicago Mercantile Exchange floor traders who had done very well for themselves and were continuing to do very well indeed.

Good luck with your trading!

 

Both the EURUSD and EURJPY have trending easy-to-read charts.  With some JPY strength today and a flat USDX, a  EURJPY  short worked out well.  This pair can be very erratic at times but lately it has been less so.  There is a lot of concerns regarding the Euro with Brexit, European banks and an Italian referendum.  Looking at the charts tells us that the institutions prefer to be short.

A nice setup occurred today in the EURJPY after it convincingly closed below its Asian lows , at the same time as the EURUSD closed with a bearish engulfing candle.  With the USDJPY moving lower this week, EURJPY weakness looked to be a better option than the EURUSD.  With a stop loss just above the Asian low, we had at risk 14 pips for a potential 43 pips to our Target 2.  As price moved down, we locked in increments of profit and before the U.S. Open we had locked in a plus one trade.  We continued locking in profits, moving the profit stop just above the lower highs and the trade was closed at our Target 2.

Lots of news tomorrow with the ECB Press Conference being the major event risk.

Following up on the GBP…it appears that although everyone was short a week ago…not everyone is this week.  A break above 1.2350 may bring in further longs.

Tip:

For those that are interested, I’m going to restart a series of “Tips” for traders.  As trading has been slower with my style of late, I have been tempted through boredom to take trades for the sake of trading.  Thank goodness…I know better.  A few weeks back a student of mine brought an interesting concept to my attention.  I wasn’t aware of it before and it seemed interesting… so I spent some time practicing it and making sense of it.  When a trade set up that I wouldn’t otherwise take, but looked good combined this new concept…I tried it out.  The result was a losing trade and I rethought the strategy.   I have completely abandoned this “new concept” and I am grateful that I lost the money by deviating from my trading plan.

Successful traders have very well defined trading rules.  If you take trades that go against your defined rules…you will not last as a trader.  If at first you deviate and get rewarded for breaking your rules…think about it…you will do it again.  Your trading rules are paramount to your trading success and help to decide which trades to take and just as importantly, which trades not to take.  Following your trading plan consistently is the only way to be a successful trader.  All successful traders are extremely disciplined with their method of trading.

When I learned trading from one of largest traders in the world, he insisted that we fill out a Trade Entry sheet for each trade or he wouldn’t discuss a trade with us.  I have refined this sheet over the years for both myself and my students.  If you would like a basic one to reference, please email me and I will gladly send you one in Excel format.

Good luck with your trading!

 

 

 

It was a holiday in North America yesterday and the U.S. traders came back today looking to make some money.  With a strong USD and the GBP continuing to look weak, a short was taken after a reversal set up early in the U.S. overlap.  The stop loss was larger than I initially like, but the R/R was greater than 3:1 and trades can be closed before a stop loss is hit.

The pair moved down quickly, briefly bounced for a candle at T1 before moving down to test the figure and closed our position at T2 …for a great start to the week.

Mark the low of the flash crash last week and look for the GBP to test this level in the near term.  I have a lower target still based on the MSML from the Daily chart.  My concern is that everyone else is short the GBP, so protect your profits along the way and I will be looking for opportunities to fade any waves to the upside.

The EUR is looking very precarious as traders are focused on the condition of the European banking system, the effectiveness of the ECB and politics in general.

It could be a fun week.

Good luck with your trading!

 

 

 

The GBPUSD continues to drops further making new lows, most days.  On days that it moves up, keep your eyes on the candles for the roll over and if you find an acceptable R/R entry, a short can be rewarding.  Today as it rolled over, we found an entry risking 20 pips for a potential 74 pips to our Target 2 giving us a greater than 3 to 1 R/R.  Price came back at is once giving us no more than 5 pips of heat before tumbling much lower – taking out the Asian low and yesterday’s low without looking back.  As price pierced through out Target 2, we protected the level and chose to close the trade after the next candle moved up… with our daily target realized.

 

Looking at a MSML on a daily chart, we can see that price could drop further in days to come.  Keep in mind that although the market is preoccupied with the cost of Brexit, it will shift its attention away from Britain to Europe, Japan and the U.S. in any given week and on any given day.  The GBP shorts will be squeezed eventually.

It’s best to focus on the technicals, but be aware of the markets’ sentiment toward the fundamentals.  Trade what you see, not what you think makes fundamental long term sense.

Keep your stops tight and protect your profits by moving your profit stop to lock in profits as the market moves in your favour.

Friday will be NFP in the U.S. so traders will use the number to determine how soon an interest rate hike is likely.  To avoid the volatility associated with NFP we will keep out of the market until next week.

Monday is a holiday in North America.

Good luck with your trading and enjoy your weekend!