No problem. Hopefully I’ve answered everyones’ questions. Some of these things I’ve done almost out of instinct for years, so having to write them down has helped me also.
thanks Graviton for very productive exercise,
yes, two questions are still remaining :rolleyes:
You are right, the MACD is not something I give that much weight to, but this is the time we can consider everything objectively, before we enter. Looking at it closely, one can see the down pressure is weakening, or the MACD is actually in the process of turning back up to centerline. So even though some MACD’s are still below centerline, they are actually confirming a buy position.
As far as the Swiss bank is concerned, they will sometimes just remove support from the Franc for no clear reason, allowing the Franc to free fall. So that manipulation can work both ways. It wouldn’t make much sense for them to support the Franc last week and let it fall this week though, and right now I think they are more worried about long term appreciation of the Franc against the Euro, so we are probably safe From the risk of the Swiss removing support for at least a week or so. Still, the risk of a sudden move down of several hundred pips is always there in this trade.
As far as entry, we have clear and valid entry signals right where we are. Generally, it’s good to look for three good reasons to enter a trade. We have a still valid CBL on the 1H chart, we have good support below around 1440 pips, we have good trade filters. That should be enough. But as you’ve pointed out, there is a contraction on the H4. Price will either break out of this contraction higher or lower. Dropping down to short time frames, we see a tight squeeze on the M15 with the price just now touching then upper BB. The M5 is already breaking out high.
Optimizing entries in long term trades is a critical element of success. We don’t want to try to cover up a sloppy entry with a wide stop loss. Better to paint a picture where we can enter with a more narrow stop loss, and if the market doesn’t perform as we expect, we cam quickly exit and try again, perhaps even getting a much better entry for our effort. Once in though, we will have two objectives, not to lose anything on the trade, and not to tighten up stop loss to fast kicking us out of the trade and missing the bigger pips expected later. My trade plan never allows me to move a stop loss against the direction of the trade, so it’s important to get this right.
So let’s plan this out in detail while we have all the time in the world. Let’s assume for entry, that we believe price will continue to move up right after entry. That is the definition of a good entry. If price opens gap up, we will wait to see if the gap is filled back downward before entry. If price opens gap down, we will enter on the first sign that price is filling that gap back upward. if price moves steadily upward right after open, we will immediately enter. If price moves steadily downward, we will wait for it to hit a minimum and turn back up to enter. If it moves against us within 1 hr of entry by more than say 30 pips, we will consider that a bad entry and manually exit and rethink our entry. What do you think of that for an entry plan? Any comments?
That limits our initial entry risk to 30 pips, so we could actually make a couple tries at entry without too much damage. But, later, after we have been in the trade a while, there could be some volatile moves and we don’t want to get kicked out prematurely and we can’t move the stop loss against the direction of the trade, so even though we will exit manually at -30 pips within say an hour of attempted entry, we will want to set out stop loss wider for entry to this long term trade.
We only need about 50 pips of stop loss to get beneath the 1440 support, but we really don’t want to get kicked out on a quick spike latter. 2X that 50 pips or 100 pips should be sufficient to keep us in the trade in case of a quick spike. Looking closely at RenaLa’s excellent charts, we see if we drop below about 14230 we have dropped below a downtrend line, a point where our trade has failed. But that is about 260 pips below the current price. A very wide stop loss. The trade has the potential of traveling 500 to 750 pips, so that would give us a reward to risk ratio of 2/1 to 3/1, not really that bad. By using multiple lots very wisely, we can double that reward to risk ratio without taking on additional risk. My daily ATR shows a value of 157 pips and weekly is 255 pips. My 4H ATR is 78 pips. So good stop loss values are 50, 78, 157, 260 pips. The usual temptations are to set stop loss too high, taking too much entry risk to cover a sloppy entry, or too low for fear of taking too much entry loss. We’ve taken care of sloppy entries above, so no need to set too high, eliminate the 260. We know this is a long term trade and we can rarely enter a long term trade and stay in it with less than 65 pips of stop loss, or less than the 4H ATR, so eliminate the 50 pip stop loss. That leaves us with a range of 78 pips to 157 pips for a good entry stop loss. We just don’t want to cut these entry stops too tight for these long term trades. 78 pips just seems tight for such a long term trade. Even 157 seems a bit tight, but since it’s the ATR of the daily chart, and we will be trading the daily with the weekly as the higher TF reference, it makes some sense. So that’s my read on initial stop loss, it should be somewhere around 78 to 157 pips. What say you?
A bit more about entry. Since we will be entering near the open, we can’t use a Stop Buy to enter. A gap up open would put us in at a high point with risk of the gap closing down and giving us a bad entry. It will have to be a manual entry after we see how the market opens to follow our entry plan.
On the daily chart there are multiple 150 pip swings. So i would go with your 157 pip stop.
But on original entry wouldn’t you want your stop like you have posted before to be around 10 pips? To show that you picked the correct entry. Then after a move in our direction maybe after adding our second lot we would then increase our stop loss in a gradual method in conjunction with our increased lots?
Not sure what do you think?
Q:
Why PA should filled the gap. It can be filled in weeks. Is it?
what we do if PA won’t filled the gap?
If price opens gap down, we will enter on the first sign that price is filling that gap back upward. if price moves steadily upward right after open, we will immediately enter.
If price moves steadily downward, we will wait for it to hit a minimum and turn back up to enter.
Q: we have to know how do we know where is a minimum??
If it moves against us within 1 hr of entry by more than say 30 pips, we will consider that a bad entry and manually exit and rethink our entry. What do you think of that for an entry plan? Any comments?
what if we wait until green downtrend line (inside the green side channel see 30M chart) is broke thus we do avoid a loss in 30 pips?
I need more time to think about the rest
H4 chart dosen’t confirm long entry.
before we move ahead with long position, there is high probability that PA will retrace 50% -68% of last move before it continue to rise
we should enter when retrace is over
That’s one of the differences between day trading and long term trading. Day trading is risky by nature and we want to take only small losses to reduce our risk and increase our staying power, and make up for those with a really big gain. In long term trading our objective is to stay in the trade long enough to make hundreds of pips. Thousands would be even better.
If we use very tight stops in long term trading, we will be stopped out more often than we can collect the big pips. Still, we want a reward to risk ratio of at least 2 to 1 to even consider entering the trade. I think you are correct and to have a good chance of making good pips before being kicked out by a swing down of 150 pips, which occurs all too often, we should go with the initial entry stop of 157 pips. Does everyone agree with this logic, or is there a different point of view?
Question about which open of the market do you use? The market will officially open in a few hours (Sunday for me). To make this trade, do we need to be up and waiting for the EU and watch the action?
here is weekly chart
you can see what I mean
would PA more likely hit red monthly downtrend line and then continue to rise??
well, at list we can wait until daily retrace is over
Graviton, what is your TP level?
I’m looking for a minimum TP at 2X stoploss, or about 315 pips. I would like to get more than that out of these trades though.
Generally, I will ride these trends until I see clear retracement. I usually don’t enter with a fixed TP.
Yes, breaking above the descending triangle formation on the 30M chart that you have drawn up for us is a very good price action confirmation that this trade is proceeding as we intend. Highly recommended and we only have to wait 10 pips or so for that to occur. Well worth the wait.
As for gap filling, it usually occurs within a short period. We have to wait and see. A few gaps are never filled, but most are filled in a short period of time, 1 to 5 days.
if price descends on open and slows it’s drop and turns back up on short term charts, we will consider that the entry. I’d watch the very short term chart for that if it happens, like the 5M chart. It’s unlikely to make more than 10 or 20 pips difference, but that might save an early exit with a 30 pip loss and re-entry. I will only try a max of twice to gain this entry for today. If I can’t gain entry in two tries, I’ll be done for the day. I usually can get good entry in two tries, but sometimes it’s just not a good time to try to enter and I wait till tomorrow. We’ll see.
Can everyone go to MP’s chat room so we can all look at the entry together?
its about 100 pips above blue down channel.
PA still in the retrace?
I know its only 10 pips to that but its 30 min to close
Yes, that down channel is on the monthly chart. Not likely to affect us much in the next few days, but if price can’t break above it, it will limit our profit. It shouldn’t affect our entry though.
Yes, it’s hard for me to comment without having seen the opening price action. I’ll likely go long if the market dosen’t gap way up, but moves steady up. I wait otherwise till I have a good entry.
Well, it opened gap 16 pips up or so. Not much, just waiting
Gap closed, entered