Wow I can honestly say I wasn’t expecting so many quality replies! Thanks guys! I’ll split this long post into two areas: the psychological side of things and then my strategy.
A little more on the psychology of my trading:
I think revenge trading definitely came into play initially but after stopping for a while (when I had only $600 left) I learnt to ignore the fact that I had lost money. When I placed that next losing trade, getting my account down to $500, I think the issue was because of the timezone I’m in. I placed my stops and take-profits, then went to bed and let the trade run (when I’m sleeping the UK and Europe wake up and I’ve read that this time period is often the most volatile).
So now I’ve switched to A) using a demo account and B) Not holding over night. *Note: during my day (Australia/New Zealand) the volatility is low but trades tend to hold support and resistance… so I read…
Also, I’ve found it extremely hard to do trend trading as I get very emotional about the trade when it’s in the red… or even worse… when I have a decent profit then the next day have none etc.
Now for my strategy:
I’ve combined the Cowabunga strategy (from babypips!) with simple price action, but on the 4hr chart, using the daily chart for a “birds eye view” of the overall trend. So I determine S&R levels and candle stick patterns for entrys but also use a MacD, RSI and moving averages to determine the short and long-term trends.
Settings are:
Charts: trade on the 4hr but refer to the daily to make sure there’s no conflicting patterns etc.
EMA: 5 & 10
MacD: 12,26,9
RSI: 9
Rules: For price action setups I ideally look for pin bars on the daily or 4 hour, but if there are none then I use the cowabunga system, primarily looking for ‘tails’ of candles to support my decision to go in a certain way. I place stops above the previous high on the 4hr. Sometimes lower depending if there were large previous bars or something irregular.
For the cowabunga system, MacD must be facing in the direction of the trade, RSI must be above 50 for long or below 50 for short and 5 EMA crossing 10 EMA for short, or opposite for long. When trading, I ideally look for pull-backs into the Traders Action Zone (TAZ) - This is the area in between the two EMAs.
In the below examples, please note that the thin blue lines are my S&R levels. Also, these are the 4hr charts only (I didn’t want to bore you guys any more than I probably already have!)
Examples:
Notice in the above chart, it appears that momentum is slowing and, more importantly, the RSI appears to be bouncing off the 50 mark with the MacD facing downward so I would ideally go in for a short position with aim of reaching the previous S/R.
In the above, I saw a large downward move (which my demo account made a nice $150 profit on), then consolidation (blue box). It appears to be pulling back towards the TAZ (in between the two EMAs), with the RSI already negative and MacD facing downward. I would enter short on this position.
And finally, in the above the pair pulled back to the previous 4hr low and has entered into consolidation. MacD is down and RSI is negative but this support has been tested twice before so might bounce back.
Well there you go guys and gals. Let me know what you think! And be honest. I know some are probably shaking your head by now but I’m still learning!