My Forex Diary

Beginner Questions
21

After several days, I decided to give you guys an update again.

Weekend:
On the weekend I was busy writing on my trading panel. I finished it so far, that it lets me input Entry / Stop Loss / Take Profit laevels through clicking on the chart and drawing two rectangles (from entry to sl and from entry to tp). It would then calculate the maximum position and risk / reward in $, % of equity, etc. based on a maximum level of risk (i set it to 2% of equity). (You’ll see screenshots on the charts later on).

The next thing I want to work on is a panel where I can put up orders based on the values from my risk / reward calculation.

I also started reading Pit Bull, and am now halfway through it.

Today, during work:
As I am working 12 to 14 hours a day, there isn’t much time for trading. So, I decided to trade on my iphone based on price action. The 4h/1h/15 minute chart combination seemed most reasonable. With this it is possible to go an hour or so without looking at the charts and still not miss too much of the action. Yet I would not have to wait days for something to happen…

I entered one trade based on the following scenario:

1.jpg700×467 48.8 KB

Reasons:

  • Price closed below resistance
  • Shooting star
  • Next to candles opened below the shooting star
  • Stoch was on overbought + crossover

I felt rather confident about it, however, I also realized that it would be stupid to trade overly large positions on my phone… This is about learning and not about making money anway (that’s why I am still on demo).

After a few hours prices hit a bottom and started to turn up again:

2.jpg700×467 41.7 KB

As a busy time was approaching during work, I decided to cover and take the profit (2.70 $ for a 1k lot).

Today, afer work:
I watched the charts and noticed that both GBPUSD and EURUSD were nearing a resistance zone / trend-line. Also Stochastics was on overbought in both cases. See charts below:

eurusd.jpg700×357 27 KB

eurusd.jpg700×439 51.3 KB

What I need to work on:

  • I am always to fast entering trades.
    For example when I see a setup, I often lack the patience to wait for the candle to close and maybe even the next to open, I want to trade right away. This is disastrous. I need to work on that!

EDIT: I just saw I forgot to change the order type in my panel for GPBUSD. I sold it short! Just so there are no confusions.

22

You know this morning I checked my positions and realized they had gotte stopped out. I thought, well, you can’t win all of the time. Remember, about half of your trades will undoubtedly be losing trades. I only lost 2% of my equity per trade, so live to fight another day it was.

However, when I came home from work today, I wanted to take a look at the charts and analyze what I had done wrong. This is what was presented to me:

eurusd.jpg700×346 27.9 KB

gpbusd.jpg700×346 33 KB

So I got stopped out only to see the market reverse and go in my initial direction after all. This sucks.
Since I started trading I had always had issues with entering trades at key levels, but also with placing my stop losses. I definitely need to work on that. Maybe I should code a stop loss, that only triggers if the market closes above a certain level. I’ll have to look into the matter, for now I should just place wider stops.

However, I also realized that the market initially went in my direction, hide support, reversed, broke resistance and reversed again only to break the first support from which it initially bounced off. I definitely need to watch the charts more. It sucks that I only have the evening for trading at the moment. However, one and a half month to go till I get a one month break and then start university.

What I learned today:

  • I need to place wider stops
  • Not take a trade in related pairs at the same time (gpbusd and eurusd tend to move in the same direction, so I actually lose 4% of my equity instead of 2 if they move against me).
  • You need to watch the markets more. This is hard to do now, but I hopefully have more time during uni.
23

Nice read. It takes much humility to post your Trading Diary publicly, I commend you for that.

Just my 2 cents. You would experience a higher winning ratio if you factored in measures of Volatility. Add a few indicators that tell you when the market is truly exhausted. Stochastics is a commonly misunderstood IMO as it truly does not tell a Trader what the Professional Traders are looking at when they think “Oversold” or “Overbought.” They watch key levels, daily highs/lows, monthly high/lows, Pivots etc…

I trade with the philosophy the “Less losing trades I place, the more pips I make.” Kind of backwards from Crowd Thinking, but it has worked for me.

Thanks for your Thread, it is great for your trading development, and for others to learn at the same time.

FSK

24

Thank you for your comment, I greatly appreciate feedback, as this helps me see develop as a trader more easily! :slight_smile:

Regarding Stochastics, I generally only use it as a confirmation. I decided that I like the 15/1/4 timeframe best. So what I basically do is I draw my trend-lines / support and resistance levels on the 4 hour charts. Then I watch the 1 hour / 15 minute chart for entry points at those levels (candle-stick patterns etc.). I use stochastics as a kind of confirmation of a given trade idea. I would never trade based on it’s information alone. (Well, at least in theory I do this, the execution lacks a bit of skill at the moment :P). After all it can stay in oversold/overbought quite a while before it actually goes the other way again.

The problem EURUSD chart was that I was oblivious to a resistance line further up, which I should have taken into account when enterign the trade or at least when placing my stop.

May I ask which you had in mind when writing that? Do you mean something like Average True Range?

25

First off, nice work identifying what the Market sees from their/it’s perspective. I say “Their,” as I feel Trading is a pure Social Game. Anticipating what the next person is looking at, that person being Buffet and Soros :wink: You could have easily asked the question “why didn’t they see what I see?” Rather, you explored other S/R levels, nice work.

daily highs/lows, monthly high/lows, Pivots These are my top “indicators.” I know they are non-traditional, as people equate an indicator as being a mathmatical formula. I try to keep is simple and keep the water clear, de-mudified!

FSK

26

Thank you!

Actually I wanted to look into pivots when I read about them in the school of pipsology. Not having found them in Meta Trader, I put them aside for a while. I’ll include them in my trading panel in the future so that I can see if they are for me.

Regarding daily/monthly highs/lows, I try to look at them when drawing support and resistance line. I’ll have to pay more attention to them again.

27

You are welcome. My suggestion is to use them in the exact same manner you are using trendlines. Match them up with other indicators, prior to taking a trade.

An early pitfall I found myself in was taking trades Plain Vanilla Pivots, very devastating if you ask me. However, once I began to line them up with other key points/indicators, I have experienced consistent success.

Enjoy! nice talking with you.

FSK

28

Right, so since my sister came back from the US (she was in California for a year) and with the upcoming holiday in Italy, I decided to better stay out of the market. After all, as I have experienced already, if you don’t give the markets your undivided attention, it gets fed up and parts you from your money :stuck_out_tongue: (or to state it differently, if you don’t have the time to research your trades properly, don’t trade).

Now, this is all over and I am back. I tried some scalping again yesterday. What I found was that my Risk/Reward calculator is wanting in a 1 minute environment. For one it calculates the spread wrongly (ie it assumes I set the risk to where I actually sell instead of where the candle’s current price is) and for another, I disregarded pipettes. I’ll have to fix this ASAP.

I also had some time to read in Italy, so I started with ‘Trading in the zone’, which is quite good. However, it, combined with the trading plan chapter on babypips, also made me think. I mean if I should setup a trading plan and stick to it no matter what (which makes sense to me), wouldn’t it be better to remove emotions completely from trading? I mean, if I define set rules, which I adhere to no matter what, wouldn’t it be better to create an EA that trades based on these rules everytime? Obviously I would have several systems within this EA and trade according to the environment (as I now have in my trading plan). It would also never risk more than it should and adhere to the stop losses everytime.

I also figured that trend-lines are a bit sub-optimal for entering trades. That is because by the time I can establish a trend-line, the trend is about to reverse and I should actually look out for a break out. I might look into Pivot Points combined with EMA cross-overs. This would also be easier to use in an EA. I mean, surly I could use fractals to calculate a trend-line, but an EMA-Crossover + Pivots is certainly easier to code.

I was also considering moving my diary to meetpips, once I figured out a perfect time-frame and trading-plan that feels good and that I feel comfortable sticking with.

So, as you can see, I have a lot to think about right now.

29

Well, so I took FSK’s advice and looked into pivots and previous days highs / lows in conjunction with what I already know.

So, yesterday evening I saw a nice setup with a R1 pivot right at a trend line. I figured there is a good probability that this might hold, so I set up a pending order. I set my stop loss after the previous days high, that coincided with the MR2. I also decided to place the take profit level below the previous days low (this is a downtrend after all…) and use the S1 line as my target.

This is how it had played out, when I came home from work today:

eurusd-h1-metaquotes-software-corp-3.jpg700×414 30.1 KB

As you can see, the entry was nearly perfect (I would have liked to scale in and out, but you can’t do that with a pending order?). Furthermore, a stoch crossover confirmed the trendline. Later that day, price moved down, made a new high and even broke below S1 and found support at S2.

However, I nevertheless got stopped out and the trend played itself out without me. Just look at the wick of that candle in the circle. It even moved up to MR3! Had I been there, I might have scaled into a position once I saw it close below the trend-line and resistance areas.

Even though this trade was a loss, I consider it a success. After all, that wick certainly was not the norm. However, I realized beforehand that everything can happen on any trade and therefore, set my stop loss. I think it was only reasonable to assume there is something wrong with the trade, once price starts making higher highs. So taking the loss at where my SL did, was good.

All in all I quite like Pivot Points, because they give me all, an entry point, an exit point and a stop loss.

30

As I will have to work again tomorrow, but still want to learn a bit about pivot points, I decided to set another pending order for tonight.

1.jpg700×363 31.7 KB

Entry:
As the trend is still down, I guess price will retrace up to the trend-line before going lower again. The 61.8 and the 76.4 retracements seem to be the most promising to me. Out of those, the first is probably the safer bet.

  1. The 61.8 retracement is hit more often than the 76.4
  2. The EMA 200 is ranging at this point
  3. It coincides with the pivot point.
  4. There is a visual line of resistance there that held several times in the past (Unforunately, this has been cut off in the screenshot)

However, I should not disregard the option of price going higher and hit the 76.4 retracement, which is right at the trend-line.

Stop Loss
As said above, as the 76.4 level might be a potential retracement point, it would be wise to place the stop outside of this area (also outside of the trend-line). I decided to also take into account the MR1 and the swings high price and put my stop loss above that. So, I should not get stopped out unless
a) price reverses or
b) another shakeout candle like the one from yesterday appears (unlikely imo).

Take Profit
I used 1.20771 as a take profit level because

  1. If price reverses at the 61.8 level, this is the second fib extension.
  2. the S1 pivot is at this level

Emotional
Well, I am just playing around with different tools right now, so I don’t worry at all. I also have my stop loss at a max of 2% of my equity, so that’s fine too. Worst that could happen is
a) price retraces earlier and continues on the trend without me ever being the wiser or
b) I get stopped out.

31

Update: The trade above got stopped out.

However, I have been working on my trading plan over the weekend.
Basically I am now using pivot points like s/r. I look for hammer, shooting stars etc. near them.

I have also created a simple EA based on that. It currently wins on about half of the trades.
Since I have only used the pivot line above it and the pivot line below it as sl and tp levels, it doesn’t make any profits yet.
However, for next week, I wanted to build in simple money management and a system to let my profits run (although I am not 100% clear on that yet).

32

Looks Good

33

I agree with what StormGirl said!

34

Thanks guys!

Just to give you an update. As usual, I am only able to either trade or work on my EA for about 2 to 4 hours a day, after work. So in the last week I have been busy with the EA.

I have tweaked the entry point so that it uses the last three days pivot points and looks for pivots that are near each other. If there are pivots relatively near to each other, it uses this as a range of where a reversal might occur. This is basically what I did with support / resistance levels as well. If I see a possible support area, I would look back and see if there was another area of support near it so that I have a certain range. This minimizes false breakouts, as support areas (and pivots as well for that) are never just a line, but rather a range. Once I have the EA done, I would like to experiment with this a bit. For example what happens if I only use R1, R2, R3 to short and S1, S2, S3 to buy (hoping for a reversal). What happens if I monitor all pivots?

I have also been thinking hard about my exits. I am not quite sure which I want to use yet. I thought about using the high / low of the higher time-frame as an exit point. So for example on the five minute chart in a down-trend, I would use the high of the previous half hour candle to set my stop loss. Or, I could not do that and simply move my stop, once price breaks a pivot. I’ll have to experiment with this.

However, the main problem during the week was, that I could not get it to update my stop loss. Whenever I executed an SLTP order, it would say “ERROR: Invalid Stops”. This has cost me several days and grey hair. Nevertheless, I think I have fixed it yesterday (by using CTrade class instead of manually executing the orders :P) and can now start coding the exit strategies to play round with.

35

Right, it’s been silent from me for about a month now.
While working 60 hours a week, I have been busy coding my expert advisor.

I encountered several problems a long the way. One, that I was still not able to solve, is that it produces too many signals. Some good, some not. So it takes trades, that I would never take. So, I decided, that I would rewrite it to notify my per email if there was a signal and I could decide if I want to take the trade or not.

This gives me the best of both worlds:

  • I don’t have to sit in front of the PC all day watching the charts
  • I can still look at the chart if there is a signal and decide myself if I want to take the trade or not.

Basically what it does now:
General:

  • Plot Daily (pp, s1, s2, r1, r2), Weekly (s1, s2, r1, r2) and Monthly (s1, s2, r1, r2) on the chart (calculates GMT pivot points)

Before-Trade:

  • Watch for reversal candles (shooting star, hammer, inverse hammer, hanging man and doji) near pivot points (3 pips below / above)
  • Mark bullish signals blue, bearish red, neutral (dojis at pivot point level) yellow.
  • If a signal was detected, send me an email with time, pivot, price, risk of trade (whatever is lower, 2% stopClose or 5% hardStop --> see below) etc.

During Trade:

  • Detect that I have an open position
  • Employs a two bar high/low stopClose shadow trailing stop (ie get the high / low of the last two bars and if the current price closes beyond these price, close the position. also move the stop down as price progresses)
  • Uses a hard stop at three times the average true range beyond the stopClose (this is a safety stop. e.g. if my internet connection fails, i still have a hard stop with my broker, that gets me out of the trade)

After Trade:

  • Send me an email that the trade was closed (profit, etc.)
    -> before trade

So, I will use the next few weeks / months to test how well this works and do improvements.
Also if I have time, I’ll try to improve the automatic entering of trades.

36

Right, today I took three trades on the five minutes chart. All of these were losers, except one, which gave me a neglectable profit.

The main problem, was my two bar low close trailing stop.
It simply was too tight. Especially so, when the trade moved into a consolidation phase.
I should either change it to only use candles that close lower than the previous bars close or use a different one.
I’ll have to think about this a bit.

Also five minute charts didn’t seem ideal for my circumstances. If I want to trade during work, a thirty minute chart seems to be a better option. Also when I start university 30 minutes seems to give me more room than 5 minutes.

I also discovered some bugs in my tools, which I need to fix. For example, today it sent me about 400 emails - about 10 for every signal… I already fixed this, however.

The way want to do trading in the future is to combine pivot points and candles sticks with support / resistance and daily high / lows. For this purpose I should extend my tools to be able to set some points on the chart (lines), which will then be watched by my candle-stick recognizer as well. I also want to include a picture of the chart in the email, because that would make judging if the signal is worth trading far easier.

Entry signals for now:

Sell:

  • Shooting Star / Hammer / Doji at Resistance
  • Close below low of pattern candle
  • Close below the 3 and 5 period PP-MA
  • SLow (14,3,3 or 9,3,3) Stochastics should be overbought for some time, cross and then close back below the 80% line

The last two are there to confirm the signal.