Just making a thread here to continue from another thread where a few of us have been discussing the use of trend channels and price action to swing trade the dialy charts. I’m not posting up a new system here as all these methods are widely used and there’s nothing new or revolutionary in this method. It’s not really a ‘system’ as such either, more of a way of learning how to determine what price is doing and headed based on looking at the charts.
Over in the other thread some of us have moved from using MA crossovers and relying on other tecnnical signals to looking at price action and using certain candle formations for entry confirmation. This post is really just to beak away from the other thread which is about an indicator but gone off on different tangents and got quite confusing.
If you are interested in price action and pivot zones for swing trading the daily charts then please feel free to discuss your trading methods here. I’ll start with mine which is very much work in progress. My goal is to trade profitable without having to take excessive risks, spend lots of time in front of the screen, be awake at antisocial hours, get stressed out with split second timings etc. My trading plan ‘mission statement’ is as follows:
[B]“To consistently capture substantial profits from the FX markets with minimal time spent trading, minimal risk and minimal stress” [/B]
So - to achieve the above…
The [B]indicators[/B] I’m currently using are:
For an [B]entry set up[/B] I’ll look for a long trade if the price is trending up and it’s just bounced off a lower trend line/Fib level/S/R/pivot - preferably a confluence of more than one on a corrective move, ‘buy the dips’
A short trade is the reverse – the price is trending down and the price has bounced off the upper trend line on a corrective move, ‘sell the rallies’
For entry I now wait for confirmation. I want to see that the move is confirmed before jumping in, that means missing the beginning but I prefer a confirmed move to a bad trade
[B]The entry triggers[/B] I now use are specific candle formations:
Bearish Engulfing candle - BEEC
Bullish engulfing candle - BUEC
If the price has bounced off the upper trend line for a short trade I want to see a red bearish candle that is one of the above, the reverse for a long trade. Using price action instead of indicators I find far more interesting and also profitable. It also stands the test of time. It’s a massive subject that I’m only starting to learn fully.
For hammers/shooting stars/hanging men it’s not so important whether they are are bullish or bearish.
For inside bars the more there are the better
It’s essential to be aware of important S/R levels to prevent trading into them and picking the better set ups [B]that have just bounced off of them.[/B]
I will draw S/R lines on the weekly as well as the daily chart and use those as major levels.
Fib levels I like to draw when zoomed right out, sometimes I’ll draw more than one set of fibs if there is more than 1 recent extreme swing high/low
Trend lines, S/R levels and fib levels can sometimes all come together in a [I][B]confluence[/B][/I] which can indicate very strong pivot levels. The more the better
[B]So in summary[/B] - trade in the direction of the trend, wait for PA candles for entry triggers that occur at S/R, trend lines, fib levels and preferably a confluence of as many of these as possible.
[B]Money management[/B] – 2% always, the less risk the better. S/L x pip value = risk. If risk > 2% of account then no trade
[B]Stop losses[/B] – a few pips (about 10 or so) above/below the most recent S/R or pivit, but far away enough that it doesn’t get triggered by stop hunters.
[B]Profit targets[/B] – The next trouble area level be it a S/R line, fib ret or confluence. basically where you can see that price has stalled recently.
Currently I am only using 1 profit target per trade and closing the entire position at the first trouble area. This makes for a lot of 40-50-60-70-80 pip trades. In time I will add more T/P levels and add to positions and bank profits along the way of large trending moves.
R:R - The signal could be a huge hammer/shooting star and the next pivot level only 1/3 of the length of the PA candle away. Would I pass on this trade because of R:R? - Would you?
Those are my money management, profit/loss, risk/reward rules. If a safe stop is above 2% - no trade.
When my account is large enough so that I can take out more than 1 micro lot per trade I’ll put 2 positions and go for more pips with the second position using trailing stops etc.
When the price reaches + 40 pips move the stop to B/E. Never let a winner turn into a loser and protect your capital at all time
I’d love to hear some opinions of more experienced traders who use similar methods.