Why you should trade retracements...

[FiatFap]

Lets say a swing trader (1-5 day position), goes long @ 100.00. The trade goes well and it ends up @ 100.50 at the end of the week and you close the position with a healthy 50 pip profit

Here's my hypothesis....

That 5 day trade consisted of many back & forth Elliot waves; it's the nature of wave patterns 'ya know

So if you trade the retracements, you're also catching the downs within the long uptrend and hypothetically, you can capture 100% more pips, so if you get your peaks and troughs just right, you can double up your pip value over the swing trader with a healthy 101.00.

Intraday trading can be statistically more profitable, but your analysis has to be bang on.

What are your thoughts?

[wrtm_19]

Cool,

That's some sort of what I do, once I identify the larger trend and have a position for the 'long term' , I try to trade the fractals, but only the ones in the direction of the trend, I have no ability for retracements yet.

It certainly allows you to add more positions and get big extra chunk of profits.

Once in a trade I find it easier to trade waves 3.

I'd like to know how you do that.

[FiatFap]

@wrtm_19

To clarify - I'm a nub on a demo account and i've almost finished the pip school, but don't let that put you off, i love this chart analysis

You mentioned you don't trade retracements; you could try this:-

Use the 5min time-frame and notice when the wave hits your channel boundary. Then look at the stoachastic, RSI & MACD, if they are all good to go, then place your 'counter-trend' trade.

I've been playing with a 100 pip stop loss and a trailing stop, custom set at 50 pips....i've been getting great results

However, this only works in trends with a clear channel, so other analysis will be needed for breakouts, etc.

p.s. i also use pivot points to analyse the waves in the channel and their 'springiness' to their proximity to the days S&R.

[wrtm_19]

@wrtm_19

To clarify - I'm a nub on a demo account and i've almost finished the pip school, but don't let that put you off, i love this chart analysis

You mentioned you don't trade retracements; you could try this:-

Use the 5min time-frame and notice when the wave hits your channel boundary. Then look at the stoachastic, RSI & MACD, if they are all good to go, then place your 'counter-trend' trade.

I've been playing with a 100 pip stop loss and a trailing stop, custom set at 50 pips....i've been getting great results

However, this only works in trends with a clear channel, so other analysis will be needed for breakouts, etc.

p.s. i also use pivot points to analyse the waves in the channel and their 'springiness' to their proximity to the days S&R.

Well no I don't trade the retracements but let's say that I add positions once a retracement has finished.

Do you use an arbitrary take profit level? or how do you determine it.

[DRA]

After you decide on a direction/bias say from a daily/weekly chart, you can trade the retraces on say 4H/1H exiting at possible extensions points.

[marsalis]

I agree with Fiatfap, that statistically intraday trading can be more profitable than swing trading. but like you said, "your analysis has to be bang on."

In my opinion, not only does your analysis of the ever changing market conditions have to be "bang on", but you have to have the deep focus to constantly stay on top of the market and the guts to put money on the line when you think you're going to see the market move or swing. It's a tough thing to do that takes practice and experience to get the hang off.

Not everyone can do it, but I think it would be well worth it.

[FiatFap]

After you decide on a direction/bias say from a daily/weekly chart, you can trade the retraces on say 4H/1H exiting at possible extensions points.

It's crucial to only trade retracements, when the trend is in a nicely defined channel using a 5min chart! I wouldn't trust analysis on any longer time frame, as you're going against the 'moving ocean liner' (the trend) and guessing its associated ripples

You want to be a little shark, pecking away at both sides, as it swings in the well defined channel and using a 5min chart, allows you to see immediate movement, just before the swing happens. Using a 1minute chart can further corroborate the change, if you see doji's et al.

Crucial to set your stop loss @ 50 pips (or less) and not to set a profit limit; just action a trailing stop stop as soon as you place the trade. Today i've found that once the analysis says go, you'll be riding the gravy train for bounce off the channel boundary that should be drawn for the chart. Once the indicators reverse, it's time to tighten the trailing stop or manually exit.

This is a numbers game, where you may be wrong and you'll loose 50 (or less) pips, or if you have very good indicators, then you'll hit the counter trend.

I also want to add, that i look at 9 different currency pairs, so you have more chance of spotting a nice channel trend

Not best to trade a retacement, if the overall chart on a 5min map is choppy water. Don't trade noise is one thing i am learning. Also, never place a trade in the middle of a channel - it will bite your bum and go against you, as the capricious Forex Gods look down and laugh at your ineptitude Go long on the troughs and trade short on the peaks.

[gasanvill]

Lets say a swing trader (1-5 day position), goes long @ 100.00. The trade goes well and it ends up @ 100.50 at the end of the week and you close the position with a healthy 50 pip profit

Here's my hypothesis....

That 5 day trade consisted of many back & forth Elliot waves; it's the nature of wave patterns 'ya know

So if you trade the retracements, you're also catching the downs within the long uptrend and hypothetically, you can capture 100% more pips, so if you get your peaks and troughs just right, you can double up your pip value over the swing trader with a healthy 101.00.

Intraday trading can be statistically more profitable, but your analysis has to be bang on.

What are your thoughts?

If you are a newbie, here is my advice: trade only in the direction of the trend, make a weekly and a monthly goal. Once you achieve your goal, then stop trading. Trying to catch everything will lead you to disaster, at least in this first months when you are learning. I´ve been in forex for 2 years, and that is what i can tell you from my experience. Retracements are not recomended for newbies.

[FiatFap]

Excellent advice gasanvill, thanks.

Had a disastrosous day today (demo account), trying to chase retracements on multiple charts, using the 5 min interval. It was messy and the GPBUSD was horrendous; wouldn't touch that pair with a 50ft barge pole.

Back to disciplined trend analysis on H4 down to 15 minutes, and setting orders near S&R's.

See how that pans out.

[gasanvill]

Excellent advice gasanvill, thanks.

Had a disastrosous day today (demo account), trying to chase retracements on multiple charts, using the 5 min interval. It was messy and the GPBUSD was horrendous; wouldn't touch that pair with a 50ft barge pole.

Back to disciplined trend analysis on H4 down to 15 minutes, and setting orders near S&R's.

See how that pans out.

Scalping for a newbie is like trying to run before you learn how to walk.

If you want, you can take a look at my system, that uses bigger time frames. You can find it at the section HOLY GRAILS --> Free forex Trading Systems.
The name of my thread is "MY system: Stochastic and fibonacci"

enjoy!