What we are doing here is trading pull-backs in downtrends, over the longer time frames of 4H and Daily23/3. Because of the larger-size Stops Loss orders we need to protect a position, entry is very important though perfect entries should not be the ultimate goal.
The goal should be “safe” entries that may leave a few pips behind, but reduce our risk of draw-down.
But it is more important to identify the trend correctly.
And, looking from an even bigger perspective, we are finding and trading pairs that are in long term trends.
This means that:
we ignore currency pairs that do not exhibit nice trends;
we correctly locate SUPPORT and RESISTANCE levels;
we correctly identify the higher probability turning points following those pullbacks;
we place our entry into the market to capture the resumption of the longer term trend.
Doing this correctly on the higher time frame, from 4H to DAILY, will result in a larger number of pips, generally speaking, unless you are a skilled and competent Swing Trader, or Spot Trader, trading those styles.
But claiming a “larger number of pips” is going to hold true, only in the perspective of time spent at the computer.
This form of trading is called Position Trading, because there are times when we can get into longer-term trends that can last for months. And it can allow us to live a life outside of the computer screen.
In the EURAUD chart attached (first chart) it is clear that the trend that commenced on Monday 23rd March 2009 and ended with a serious rally on Wednesday 19th May 2010 was a Position Trader’s dream. Yes, I concede there were instances in this time, where stop-out occurred … quite a few, but then, opportunities to rejoin the trend came just as frequently.
The top-to-bottom move was worth between 5,000 and 5,700 pips, as a straight buy-and-hold event. But by faithfully taking stops, and re-entering might have caused this yield to increase perhaps another 20%. I do not know - I didn’t trade it, and I haven’t gone back over it meticulously enough to calculate this … it is a generalisation over that 14 month period.
Don’t miss the point that there was a serious opportunity there, and that the SAME opportunities exist even now, in one of the worst choppy markets I have seen.
I have refined the appearance of my charts for simplicity. In the second attachment, I show how the removal of the Rainbow-look, replacing it with a monochrome-look, enable traders to highlight a specific MA, allowing more accurate trade management. For example, some like the 35 EMA as a strategic indication of Support and Resistance, and I have highlighted this EMA in red. Simply select and change the colour as desired.
The other streamlining is the change to te MTF Stochastic appearance … also now in Monochrome, with the 14.1.3 stochastic now red. I find this setup less distracting Of course you may customise to your own tastes.
The charts attached should be self-explanatory. I am trying a different way to annotate my charts, so hopefully these will appear clearly once posted.
EDIT: I apologise for the poor quality of the charts … I will experiment with a better format. The problem occurs through the difficulty I have of drawing lines on MT4 charts, and using screen-shots instead. If anyone knows how to draw lines/arrows on MT4 charts, I would appreciate the heads-up on that.
Best wishes
Ivan
… so if there is an opportunity for a trade, let’s focus on one.