Archives for July 2014

If you are new to trading or a seasoned veteran, it’s a good idea to be aware of the trading range made in the previous session and the previous day.  I find the UK session to be the most productive for trading.

When price tests the previous session’s high or low (sometimes it tests both) … the Asian session high/low and yesterday’s high/low, be aware that it may pause, move above/below and retest it again. This is typical market behavior and occurs most days.  I mark these levels in the trade examples that I include each day.

I was taught (years ago) never to be a breakout trader… by one of the largest traders in the world.  Wait for price to price to break the range and pull back,  Wait one more time for price to push above/below the Asian session and then wait to be convinced of the direction that price will then move.  This breakout pull back, break out pull back is known as a “wash and rinse” and essentially is a way to stop out weak hands and accumulate volume before a larger move.  About once a week or so, going long/short as price breaks through the previous session’s high/low works, and price runs and the breakout traders are rewarded.  This will entice them to do it again and again, but about 80% of the time, it won’t work and stop losses will be triggered and weak hands will be taken out for a loss.

There are a lot of tricks for interpreting market behavior and I won’t be sharing all the tricks here, but the point has hopefully been made that trading 80% of breakouts is not a prudent trading strategy.  If price runs away…NEVER chase it…let it go and find another trade or come back tomorrow.

The GBP quickly pushed through its Asian range lows and yesterday’s low as the UK trading got underway today.  It then pulled back before pushing down once again.  At this stage we wait for a second pull back… and it pulls back within the Asian session range.  The next candle it reverses lower… closing below the Asian session low.  As price has already pulled back twice – testing the previously mentioned levels, a short is taken with a modest stop loss – giving us a 4:1 Reward for our Risk to our Target 2.  The wild card in this trade will be the US economic news releases, so we will have to tighten our stop loss or profit stop in advance.

This trade is with the current trend of the USD, at a sweet spot of the session – with time to run before the US session gets underway, the wash and rinse pattern appears to be complete and 4:1 R/R trades are somewhat irresistible when a pair is trending predictably.

I hope this helps!  Good luck with your trading!

I like summer trading although this summer’s ranges have been quite contracted.  As long as you follow your trading rules consistently, the strategies remain the same and profitable trades await your analysis and execution.

I had one of my former students – a professional trader with many years of trading experience tell me yesterday that he has just had the best 6 weeks of trading since he began trading.  I have every confidence that his trading success and consistency will continue!

Back tomorrow if we find a trade to wrap up the week as we don’t trade NFP Fridays.

If you have any questions, please send me an email and if you are interested in my course, I will be happy to answer any questions you may have over Skype.  Check the Contact Me section of my website for details.

We continue to look for any short setups on the EUR for intraday trading.  The 1.3500 level gave way last week and today we approached the 1.3400 during the UK session.

Sellers stepped in as the pair attempted to climb above the Asian session highs.  As the pair tried one more futile attempt to rise, it met further selling and a short setup was found.  After the 3rd lower high for the session, we enter short and try to get below the Asian lows allowing for a retest of this level.  We have a greater than 3:1 Reward to Risk ratio to our Target 2.  ( Target 2 is lower Blue line – the first Blue line is our Target 1 – forgot to mark it clearly on the chart today.)

Once we place our profit stop just above the Asian lows, we are stress-free and if the stop is hit we still make a bit of money.  Price does not come high enough to retest the Asian lows but moves down toward our Target 2…where we  exit with the touch downward at the Frankfurt close.

Good luck with your trading!

Back tomorrow if we find a trade.

The GBP continues moving downward after failing last week to take out  the 1.72 figure.  In advance of the retail sales number the GBP pokes above the Asian high but closes back within the Asian session range.  The reaction to the number creates an intial sell off…driving price to close well below the Asian session low.

After the news reaction we anticipate a retest of the Asian session and or yesterday’s lows.  We get exactly that. After the Asian low is rejected we await a clear reversal and find an entry at the US Open.  With a stop just above structure, we have a better than 2:1 R/R to our Target 2.

We enter short and but in advance of the US unemployment number, we move our stop loss to plus one pip. Price subsequently accommodates us closing below our Targets 1 & 2 enabling us to lock in those profits as we continue to move our profit stop down.  Price ultimately takes us out in advance of the second round of US news.

Patience pays off in trading as this set up was straightforward.  Yesterday the charts didn’t allow me any entries.  As traders we only get paid for being right.  We don’t get paid for showing up and being enthusiastic.

Good luck with your trading!

Back tomorrow if we find a trade.

After the US Core CPI number was released the NZD jumped significantly higher.  We prefer to trade the retracement after the initial reaction to the news and take the counter-trade.

We go short with a stop loss just over structure and a better than 3:1 Reward to Risk to our Target 2.

Price moved swiftly down and completely retraces the up move.  We exit the trade as price comes back up to our Target 1.

Lots of important economic news this week to keep abreast of while trading.

Good luck this week!

Back tomorrow if we find a trade.

The GBP began to rise early in the UK session above the Asian session highs.  This is usually a trap which lures in retail breakout traders and is followed by a pullback to stop them out.  I was taught by a huge Chicago trader years ago to NEVER be a breakout trader! (Hint)

When I see the breakout traders lured in and the market pull back, I wait for a second round of the breakout and pullback to occur.  There is an art to this and it didn’t set up that way this session.  On Thursday it set up nicely and unfortunately the market didn’t move much… but the setup was clear.  The Big Boys call this a wash and rinse.

Today as price began to descend with lower highs, there is one candle low that concerns me, so I wait another 15 minutes before entering.  The session low is clearly taken out and the Reward to Risk is 3:1 to my Target 2 -which is acceptable… a 2:1 RR once the US traders have begun is acceptable to me also, because I have 4 or less hours left in the UK session from that point.

Our Target 1 coincidentally coincides with the June 19 2014 high and the July 15 2014 low.  This area will be ripe to be retested by price and it is today.

Price continues to drop and we protect our profits while in the move and especially when price breaks below our Target 2.  We know US economic news is pending and as buyers begin to enter, the move down concludes for the session.  Price comes right back to our Target 2 – retests the level – moves up to our Target 1 and rises above the previously mentioned levels of June 19 and July 15.

A currency pair will typically move so far in a given day and then reverses to trap traders into holding their positions longer or overnight.  Institutions can well afford to take longer term position trades and do, but retails traders are often frustrated giving back their profits to retracement traps off highs and lows of a day. It’s better to know statistically how far a pair may move given its current market behavior.  This is how we set our Targets 1 & 2.  Trading is not an exact science – it’s an art and the more you know about what matters to the BIGGEST traders and how to see the charts the way they see them, the easier it is to identify high probability trade setups.  Despite what many marketers would tell you, a Stochastic, RSI, MACD, Bollinger band etc. are not used by most large institutional traders and at best they are simply lagging indicators.  If you want to learn what the largest traders use… and are willing to put in many hours of practice learning how to trade, contact me.

Good luck with your trading.  Enjoy your weekend!

I like this setup whenever I see it.  The UK traders pushed price below the Asian session lows… luring in breakout sellers.  They  immediately bring price back up, reverse it and lure breakout shorts a second time followed by another pullback.  In this case, it looks like an “M” formation with the second pullback making a lower high.  As price moves lower, we enter short with a stop loss above the lower high of the session and hope price will fall to our Target 2.

It sure looked good at the time!  Price fell but not nearly as low as we had anticipated.  As the US traders begin their session, price climbs a bit hitting our profit stop and we are taken out for a modest gain.  As there was US news pending, we remained out and hope for a larger gain tomorrow to conclude the week.

The US Federal Reserve continues to be dovish despite the improving economy and employment numbers. The market continues to await a more hawkish tone and has not heard it yet.

Geopolitical events are a wildcard and could effect the market abruptly.  Keep stops tight and be patient.

Good luck with your trading!

Back tomorrow if we find a trade.