I’m an amateur chartist. I use clues left by price action to deduce future movements. I try to read order flow and spot important zones that may attract a large number of similar orders.
When entering a trade I consider the following in order of importance:
[ol]
[li]Directional bias: If this is incorrect, 2 and 3 are irrelevant.
[/li][li]Placement of Stop Loss: I place my stop loss defensively so that there is a very low probability of it being hit if my directional bias is correct.
[/li][li]Entry Zone: These are zones where I expect a large number of similar orders to be present. If I am correct this would cause an explosive movement in favor of my directional bias.
[/li][li]First Opposing Zone: This is the nearest significant zone where orders against my directional bias could be clustered. I will usually take partial profits at this level.
[/li][li]
[/li][/ol]
I manage my risk by setting a desired pip value (e.g. 0.02% of account balance) and then calculating standard position sizes for each pair that I trade. I set a cap on the total percentage risked by open and pending orders (e.g. 5% of account balance).
I prefer this method of position sizing over risking a fixed percentage on each trade as it gives me an incentive to focus on trades with the potential to earn lots of pips. Risking a fixed percentage per trade encourages shorter time frame trading with tighter stop losses, which, in my opinion, negatively affects consistency.
Currently, I am trading exclusively on the H4 time frame focusing on the majors, yen pairs and a few crosses.
I will be using this log to post before and after snapshots of my trades together with my reasoning.
I was going to post some charts for next week, but saw news from Cyprus that might cause some serious gapping. So I’ll wait and see how the markets open on Monday.
I really feel sorry for those people. Imagine waking up one day and finding out the government decided to just take 10% of your life savings to pay the banks.
It is as hard as we make it :). I used to look for confluence between multiple fib retracements, support/resistance, trendlines and fib extensions…across multiple time frames. Going through 10 pairs left me drained and still uncertain of my analysis. I finally had the sense to apply Occam’s Razor to my methods and I was left with just two principles:
I’m looking at possible setups on EURGBP and NZDJPY. Trend on EURUSD is not so clear, and stop on EURJPY would be too big.
The rebounds from these zones might already have started so I’m not sure if my limit orders will be filled. However dealers will be working hard to fill most of the institutional orders at these levels so I’m expected a ‘stop hunt’ before a major move begins.
Nice one Yunny. I like how you stagger your entries. I would have missed that trade entirely even if I was looking at that zone, because my entry would have been near your blue line.
I closed the remaining position in AUDUSD earlier.
Sell Limit orders on EURGBP, NZDJPY and USDJPY were triggered yesterday and I’m still holding onto those. Things might get choppy due to the Cyprus saga, but I’m just going to follow my policy of ignoring the news.
Bias>draw some S/D areas>set Entry, SL, Targets>wash, rinse and repeat
