Thread started to post up & discuss set-ups & technical behaviour outside of the main “system” theads.
Well this is exciting to be involved in a new thread. Couldnt resist getting in early. If you understand supply and demand issues then what you are really trying to do is to get in as early as possible onto a new trend and get out the door before everyone else. This can be done using price alone (thats right guys not an oscillator in sight!). I have taken the trade from this afternoon that Tess talked about in the 40-100 pip thread. On the higher timeframe 4H we note an uptrend as defined by the trendline (these and SR are all that is used, ignore SMA just happens to be on the chart). This area as it approaches the trendline is an area of supply further back in the chart denoted by the blue line. This is the set up since there is a high probability of a turn at this point. We now switch to a lower timeframe and for this example I have used the 5 minute. We get in as soon as we have a trend change here. You could use a candlestick pattern or perhaps peak/trough (if the trend is so strong there are no PT then drop down to 1 minute). In this example a break of the downtrendline provides an excellent opportunity. Any trail method to manage the trade would be appropriate but as always look for the stall and turn in areas of supply or round numbers which occur post news at 2.0100 in this example. Management of news is an item for another post
Not too much in the Data cupboard today to worry the currency market.
A couple Fed Chiefs rambling on about monetry policy at the Bundesbank gig in Frankfurt & Tricky Trichet jawboning later on in Lausanne. Shouldn’t really upset the apple cart unless they drop their guard!
So, prices will play out to the tune of the technicals into the weeks end.
Those players who managed to hang onto some of their stakes from y’days pop off the 9975 supports will now have the opportunity of dragging remaining stops up underneath this mini resting zone from the late NY profit taking.
Prices are gradually poking their head above the parapet & attempting to make a run for the weekly highs up here at the light 2.0180 ceiling.
For the Fibonacci fans amongst you, (particularly Jimmy’s students ) you’ll notice prices held steady at one of the favored kickbacks (62%) of the weekly extremes on Wednesday & Thursday. You also might want to keep your eyes peeled for the (regular) 78.6% touches, as they’re a pretty regular occurance on these volatile instruments
Anyhow, this little step up here under 2.0090 is a good a place as any to tuck your stops away for safety. If this thing decides to trot further, you still got decent value…if it gets hoofed back into late London/early NY traffic, you’re positioned at the value end of the move for final exit!
Given we’re still in the middle of a range on the hourlies, it’s not such a bad place to be positioned towards the end of this week, specially with Euro putting up a good fight
Decisions decisions, LOL. Prices are now pulling back from the assault on the week’s highs.
If you’ve still got your remaining stops tucked back at c2.0090 then you’ve got nothing to worry bout yet.
If you moved them up too soon above the mornings b/o pitch at c2.0125, then you’re now toast
When I’m trailing a move, I try keep my positions sufficiently covered to allow a reasonable “test” of the potential move.
It doesn’t always play our successfully, & occasionally prices will pull back & snatch the best intentioned stop camp before lurching away in the general direction…but the priority when seeking larger potential runs up & down the ladder is to do just that - allow price to test & re-test a level first.
What is actually occuring in these instances is a collective confirmation exercise.
Traders are seeking confirmation that the b/o is genuine & that the money flows are still in the Cable Bull camp.
If this assault on the weeks highs is a fake-out, then these guy’s definitely don’t want to be positioned. They’ll fold their hands & pack up for the w/end.
But essentially, they want to allow enough elbow room to properly “test” the waters.
So, the very short-term players will get their stops snatched (on this current wiggle back to c2.0125) by trailing too close, whilst the players seeking a more concerted “test & run” will sit back & adjudge what happens when & if prices make another run on 2.0175-80.
No doubt that will be an area where they’ll trim out a little more profit & depending on how the NY boy’s step up to the plate, they’ll decide how they want to play their remaining stakes as we ebb into the London closing prints.
On every move, every day of every session there are one or two differing agenda’s unfolding on these pairs.
You need to determine exactly which camp you belong to. This will then offer you a precise & confident approach when dealing with your carefully planned trade templates!
I first learnt this approach from Jimmy Young although I am aware that there are many different versions. Clearly I am not going to reveal Jimmys tehnique as this is proprietary information. However I have adapted it sufficiently for my own use to feel comfortable that I am revealing what I do and not what Jimmy does. Indeed I introduced to Jimmys group the idea of using the 60SMA Jimmy is so fond of as the stop for the trade. I will outline the rules and the 2 winning trades for today. I trade GU and GY
At the europe open mark the high and low for the day. Trade the breakout with the stop 1 pip below the 60sma for GU and 50 pips for GY. The trade is closed out at a 1R profit level. If the stop on the GU is less than 20 pips then look for another reasonable place for the stop in the region of 20-30 pips. If it is more than 40 with spread included do not take the trade
This simple technique has had a net 6 winning trades this week and net 10 since the start of September. I have traded it since October last year (with various changes along the way) and have not had a losing month. The worst monthly return based on a 2% risk per trade was 3% and best was 32%
This is the final trade of the week that I am still sitting on. Its based on a momentum trade as prices approach the round hundred and I went through this on the 40-100 thread. This is the 8th successive winner with this strategy this week although overall I find it works about 60% of the time so beware of the old regression to the mean. I bought at 85 and sold half at 2.0200 so my stop is now at be. Final profit target is 2.0215. I would normally go to bed and let this thing run but with the weekend coming up I am just going to go quietly insane as this thing winds oh so slowly to its target. Have a good weekend all
Trading classic patterns can be very rewarding and GY was certainly putting the ‘flags’ out last night. For those wanting to read more there are many books on technical analysis but my favourite is the classic by Edwards & Magee ‘Technical Analysis of Stock Trends’. A flag looks like its name suggests and is a small compact parallelogram of price fluctuations. Uptrend flags as shown usually form after a rapid and fairly extensive advance which provides a reasonably steep price track on charts. It is tilted back moderately against the prevailing trend. Many holders are of course taking profits in this run up (dont forget the crowd behind the pattern). Eventually the pressure of profit taking halts the mark up and prices churn. Rallies within the pattern fail to reach previous highs and the bottoms fall. Classically for a share volume falls as the pattern advances but obviously we do not have that information in fx. Overall it is called a flag because the run up forms the pole and the consolidation which is roughly parallel top and bottom looks like a flying flag. Suddenly prices erupt with a new wave of buying and practically duplicates the original ‘mast’ atop which the flag was constructed. There are many ways of trading these. Aggressive traders will look for an entry signal along the support line while more conservative ones will buy the marked break out positions
When you read about these things in Babypips school it is important to recognise that they are more than just theoretical constructs. An understanding of them allows you to plan a trade, make reasonable stops and put the odds a little more in your favour. Again using GY last night there is a very nice example of resistance becoming support at a round number and if you were in a trade or trading this the trendline would have been a nice warning that the move was coming to an end. In the longer term of course looking into next week we will be looking to see if this round number becomes an important area where the forces of supply and demand continue their never ending battle
An early upside break in the Europe open may be premature or even a fake out. It would best be traded on a retest above 2.0220 but given the previously demonstrated supply in the area of 2.0220 - 2.0300 I would need a lot of convincing to take such a trade without it being driven by some fundamental fuel. Any trade would be short term for limited profits (say 1R) in the absence of convincing upside momentum
Wish I had Tess’ ability to stay with the trend longer. Anyway for what its worth here is my take on this morning. There was significant momentum in the Asian session (if you doubt this look at a 5 min chart) and a temporary floor was found above 2.0220. This therefore met my broad requirements to take this long. At this point there were a number of ways to trade this. I took the Asian breakout strategy and was out at 1R. I was concerned about the break into the 2.0270 area and this is where Tess has so many advantages in her approach. However James got in earlier at the OB and is still in as we backtrack below 300. The round number strategy was also successful. Pound is clearly bullish but with significant overbought levels on all timeframes there is due to be a retracement at the very least. We are 20 mins prior to London coming into the game and it is not unknown for them to reverse direction. There has been an ib permitting a retracement trade but if this is going to keep going up will look for an ib entry off the retracement
Those stops were well & truly safe as events closed down of Friday. Tokyo offered a leg up last night, by shunting price a further half cent up from Friday’s close, to pester that next s&r @ 2.0270. And prices have continued thru as Frankfurt kicks into gear for the week.
I’d expect this level to be re-tested, but it again offers the opportunity to trail the remaining stakes (stops) up to rest underneath the 2.0200 round number, securing 200 pips profit on the remainders.
The 4hr chart highlights the upcoming likely battle zones on Cable’s trek, where more concerted resistance will be waiting (the months highs/stiff supply traffic).
Hi Tess, when you are using this sort of strategy over several days do you tend to just stay with it and wait eventually for your trailing stop to be taken or as with shorter term approaches will you look at upcoming areas of supply and make an exit then?
Once you catch a wave (in this instance to the bullish side) & you’ve booked profits/trailed up etc, the trade offers alternative options.
You can do as you’ve suggested in your post, & play the trade in the direction which offers the least path of resistance, ie: buy Cable on pullbacks, thus compounding your position & advantaging yourself as Cable racks up the handles.
You can simply do nothing but trail remaining stops up & passively manage the trade.
You can even play the pullbacks/retracements via a seperate acc’t using your preferred set-up’s (IB’s or other strats), thus catching (extra) profit opportunities on the ebb & flow of price movements.
Although these multi handle runs don’t occur as often as we’d wish, they do afford tremendous potential to rapidly compound an account. Trouble is, we never quite know when the next one is appearing
But…that’s the pay-off to sticking rigidly to a defined set of rules.
The smaller timeframes (5/15m) can get you in near the beginning of a potential multi-cent run. Once you’ve established your base position (booked a little profit) & managed to slot your remaining stops into a suitable safety zone, you then zoom out to your hourlies & manage the trade.
It requires patience & immense discipline not to tinker & fiddle with the trade, & to be honest, only 2 or 3 out of 10 will sprint on to return above avg profits - but you don’t need that many of these type of trades to make the venture worthwhile
And Cable, GBPJPY & EURJPY certainly provide adequate momentum & intra-week range potential to fulfill those criteria!!
I think I might have partly answered this in the previous post Tony
But, essentially, yeah - I’ll put my faith in my trailing stops.
They’re situated where they lay for a reason.
Eventually when I get taken out, it’s usually at an area on the technical map where I’m no longer interested in holding that particular position.
Sure, occasionally I’ll mess up & get stopped out prematurely - but I’ll usually get another opportunity to climb onboard again if the move is still genuine.
While you could argue that there are entry signals here in terms of ib/ob etc the reality is we are locked between 2 significant areas at 40 and 70. I would want a clear close above the trendline and 70 to resume a long position and a close on a significant down candle below 40, preferably after a failed retest of 40 as resistance. Sometimes it is what you dont lose that makes the difference to your bottom line
If you got into this last night well done. I couldnt get the patterns to line up and didnt want to take a punt. Disappointing after waiting all day! The break of 240 came, there was an immediate challenge, then an IB for those using that system but stoch in the wrong direction. Tweezer top was bearish then almost an IB prior to the move down. Anything after that was too close to the profit target around 2.0215 - Sigh. Always another day
I have taken this from my GY trade earlier tonight. Following an entry signal (in this case James OB) there is often a backtrack to near to the stop. This is probably common to other entry systems too. A split entry could vastly increase profits on these short term trades although of course for those that dont retrace you would be in with substantially less lots. In the example with a stop of 46 pips say you have 1 lot then you return 1R at +46pips. However at a 20 pip stop by buying onthe retrace you could now purchae 46/20 lots with the same % risk and in addition this will return 1R at + 20 pips. I will be looking at this closer to see how tradeable an idea it is. Can anyone fault my logic here?
Hi Tony if your still about would it be possible to
give me the formula for the calculation of R please.
Hi DD. R is simply the risk reward ratio so a 1R trade returns the same as you have risked. So if you put on a trade with a 20 pip stop and it moves 80 pips your trade has returned 4R. I find this a better way of comparing returns. These concepts are very well covered by Van Tharp in Trade your way to financial freedom.
This is one of my favourite set ups at the moment (since meeting you Tess). It has now worked well for me several times (twice last night alone). But taking a long where I did after a dramatic fall always feels like stepping in front of a speeding train (and the old heart races a bit I can tell you since in some ways I should be looking for a short). Tess, do you take such a trade at this point or do you wait for more confirmation of a turn perhaps double bottom or the first pullback of an upswing (both occurred here)
The example you show is of an entry within a very defined range on the GBPJPY (234.55 - 228.20).
In the example you posted I’d usually wait for a little further confirmation before firing an entry off.
But that’s just my view according to the usual parameters I adopt for trading that type of environment.
If I was tackling that particular pair, looking to trade the well developed range it’s currently displaying, then I’d have preferred to execute nearer the extreme boundaries.
That’s not to say your entry was either dangerous or ill-prepared, simply that it wouldn’t have been of interest to me.
As long as the trade fits your criteria for that particular event (a range set up) & you can locate an appropriate protective (stop-loss) zone, then you’re good to go.
I’ve included a chart highlighting where I’d have been looking for an entry if my arm had been twisted to get aboard
But as I say - that zone wouldn’t normally tempt me at all.