Archives for May 2013

A beautiful short set up for the AUD after a very active Asian session.  This is one of my favourite setups to catch and for those with quick fingers – the retracement move long, set up after the US session got underway.

There are 3 distinct groups of traders, usually with different itineraries in the course of a 24 hour trading day.  The trading day begins with the Asian traders, followed by the UK traders who control the largest amount of volume, followed by the US traders who come on 5 hours later and overlap for 4 hours with the UK traders.

If you are aware of these periods and what the important levels are to these traders, you will find trading more profitable and enjoyable, but never think that it is easy!

After a very large range during the Asian session, the wicky candle forming a lower high followed by a bearish engulfing candle enabled us to find an entry meeting our minimum Reward to Risk ratio of 3:1 to our Target 2… for the UK session.  We move our profit stop down successively as the trade moves in our favour.  We would like price to reach the Asian session low before the US session news.  We are not prepared to give back our profits if price moves back above Target 1 so the trade is closed.

 
It’s been a great week for trading, which makes up for the lacklustre week we had last week.

Good luck with your trading!

Back tomorrow if we can find a trade.

EURGBP moved up through our Targets 1 & 2 then showed signs of stalling and reversing evidenced by very wicky candles.  Vertical moves are not sustainable for long and frequently are followed by vertical moves in the opposite direction.  We enter short for a retracement and closely watch prices’ reaction, firstly to yesterday’s high and secondly, to the Asian session high.  Price penetrates both and we allow a little bit of wiggle room just above the Asian session high.  Price comes back above this level and closes the trade.

Not bad for a retracement trade and 20 pips on the EURGBP is equivalent to approximately 30 pips on a EUR trade.  With a very light economic news calendar for the session, it was nice to find a trade.

Good luck with your trading!

Back tomorrow.

GBP sets up nicely as the US traders begin their day.  After a holiday in the UK and US yesterday, the GBP made a familiar move to the downside – rewarding us with a good size move.

This trade set up meeting our minimum Reward to Risk ratio of 2:1 (for the US session) with a risk of 24 pips for a potential 80 pips to our Target 2.  As US news approached we tightened the stop to 10 pips as the volatility could easily take out our initial stop placement which was too much risk for us around news today.  No one likes to start the week getting stopped out, and we were willing to stay in the trade risking no more than 10 pips.

We move our stop down to protect our profits and are closed out protecting Target 1 after 2 wicky candles.

It’s a fairly light news week.

Good luck with your trading!

Back tomorrow… if we find a trade.

GBP moves up once the US economic news is out of the way.  A nice wicky candle after the news caught my eye.  We waited for further signs of strength before our entry.  We then watch very closely to price’s reaction as it moves toward the Asian session high, yesterday’s high and the session high.

By protecting our profits and moving our stop up progressively – giving price a little wiggle room at each level, we are able to lock in modest profits before being taken out by the market.

It was a slow week for us, as we were not able to find any trade setups on either Wednesday or Thursday.

Back on Tuesday if we find a trade.

Enjoy your weekend!

Michael 

Both the AUD and NZD set up nicely.  We chose the NZD because it enabled a smaller stop loss, but both pairs met our 3:1 Reward to Risk ratio criterion.

The UK session didn’t take long to show an overall USD theme of strength.  News other than for the UK was relatively light, with the German PPI number already out.

When I see a large move during the Asian session, I like to look for a reversal setup.  The NZD showed signs of weakening and an entry short is taken with a modest stop loss.   The 2 concerns were how price would react at yesterday’s high and what effect would a series of UK economic releases have on the pair – if any?  The risk is quickly removed from the trade and if it backs up against us, we will net a pip.  As price moved down, we lock in more profit, but as it stalls and fails to push lower to the Asian session low, we exit the trade.

Let’s hope for a great week ahead.

Good luck with your trading!

Back tomorrow if we find a trade.

An awesome week for trading the CHF.  For some reason the CHF has been much easier to find entries this week than the EUR.  I always confirm EUR trades by looking at the CHF for an inverse correlation.  In other words, if an entry has set up long on the EUR, then a similar entry short is typically seen on the CHF and vice versa.

Although the EUR is more widely traded and has the better spread, the CHF has had better entries all week.  I teach my students to scan the major pairs and take the easiest entry that conforms with our trading rules.

Some traders will trade both the EUR and CHF simultaneously in opposite directions.  I prefer to choose the better setup and trade only one.  Firstly, it’s easier to watch and manage one pair than two.  Secondly, I would be doubling my market risk exposure by trading 2 pairs.  I prefer to put my eggs in one basket at a time and watch that basket very closely.

Trading is not just about finding the market’s direction and trading accordingly.  It is about managing risk, protecting profits and keeping losses very small as well.  My mentor who trades in the billions of dollars, always says that you can get everything right in trading, but if you don’t manage your risk, you can lose everything.  He’s been trading for over 40 years, and has seen this occur many times.

The CHF meandered down after the UK open and found Buyers at the Asian session low.  With no news to stir things up, and entry is taken long with a relatively modest stop loss.  Price moved higher through our levels with a little hesitation around yesterday’s high before moving up to our Target 2.  As price approached Target 2, it looked like it would go right through it.  Instead it touched it and began to reverse.  After giving it a few pips of wiggle room to get through it and continue moving up, we instead close the trade giving back a few pips…but that’s trading.

Our trading Targets 1 & 2 are a cornerstone to the methodology.  They enable us to determine our Reward to Risk ratio and protect our profits.  They are statistically significant with very high probability, as many institutions will be taking their profits near the zone between Target 1 and Target 2.

Back Tuesday if we find a trade.

Good luck with your trading!

Enjoy your weekend!