Tuesday, September 30, 2008

9-30 Trade on USD/JPY 4 hour Fractal break retest



As of this writing, I just took a trade on the USD/JPY pair. I opened the chart and saw a rally going back to previous support on a broken fractal. After a rally of 170 pips, it was going into the TSR I located. I didn't even have to draw a fib on this, as I figured I would at least get a reaction to it. I got filled at 105.17. Looking at the 1 hr chart, it is pretty easy to locate the strong area of SR that it is retesting (weekly lows of the fractal-range). I managed it off the 5 minute chart and 10 minutes after entering got a break down of the smaller fractals, a break of an intraday trendline and a quick surge that paid.
I am locked in now but left a percentage open. With risk aversion still in the market, it would be nice to see another big leg down from here. If I get stopped I think another good level to short is 105.59.

Friday, September 26, 2008

9-26 AUD/USD Fractal (TSR) Trade




After some more backtesting and watching the AUD/USD range for a few days, I took note of a candle close on the 4 hour chart. After a bearish close, I waited on the retest of the TSR and traded short the retest of the former fractal now acting as resistance. I was filled at .8336, just shy of 38% retracement but a nice TSR area based on longer time frames. After the entry, I had a drawdown of 10 pips plus spread. I got a rejection of the lower (older fractal) support and got confirmation as the surges broke down the smaller fractals. This trade was trading with the overall market flow with confirmation on the longer TF.

Saturday, September 20, 2008

USD/CHF Trade 9-19 (Fractals and confirmation)

This trade confirmed to me that just because you miss the initial bounce at a level, does not mean you miss the trade. After speaking with other traders, I realized that letting price tell me what to do is of upmost importance. Too many times I try to get the first hit but don't realize that after that trade is over, price is not willing to give up and will come back to the area, or near it and fail once again and continue with the flow. I have come to a conclusion this week. I am of the opinion that there are key areas but there are key price points, which are much more precise. Many traders can define an area, but not the price point which leads them to more emotional decisions. If a trader can locate the key price point, even when wicks are poking through like tooth picks through plastic he can understand what price is doing. Well, needless to say, I have not been a savvy trader because I thought that once the first hit was over, the trade was done. I have seen otherwise just by observing price the last two weeks. It all comes down to fractals as Chris has shown in his course. Understanding price and the way price moves with the larger fractals is simple, yet so difficult to implement. I think there is support/resistance, which can be wicks or highs and lows, but I also have come to see that there is also "true" support/resistance which is like an axis. Price will either break on the other side and retest before continuation or it will hold and fall back into the range. Understanding this is of utmost importance to me now. By understanding what price is telling me, I am not only able to anticipate where we are likely to get a bounce, but after the bounce I can now observe with confidence, the likely next move it will make. I do this by locating TSR or true suppport resistance. TSR is profound and is like a magnet. price will be drawn to it with the bodies and certain wicks. The chart time I put in this week, just focusing on TSR has been like a light bulb turned on in a dark room. This trade I placed on the USD/CHF pair shows that just because you miss the intial bounce, does not mean the move is over. After viewing the 4 hr chart, I located a key "area". I did not trade the bounce, because I was not on the charts at the time. After looking, I saw that this pair had traveled quite a ways and was continuing to make new highs into some serious price obstacles. This was around 6am EST when I zoned into this pair. I did not know which way it was going to come out of this fractal, but was going to let price tell me. I also was not willing to buy, as I felt it had gone too far and the overall pattern on the longer time frames seem to be a bearish BBB (Bull Bear Battle) pattern. Many times the last leg of the BBB will be the one that will rally ( or in a bullish one fall) to 79% and then break in my anticipated direction with force. Knowing this, I really did anticipate one of two things. Either it will rally to a higher level of SR, which I had at 1.1310 or it would start to break down from here. The five minute chart gave me clues as it started a BBB pattern of it's on. I should not trade patterns on lower time frames unless they are setting up that way at a key area. This was the case here. The 5 min. made lower lows but could not break above the fractal and hold. I could have traded the top of the fractal but was not comfortable at this point to do so. Thus, after viewing the 1 hour chart on the candle close of the 7am EST candle, I traded the retest of the broken fractal. I never suffered drawdown. This had to be one of the best trades I have made because of the way I was able to put all my tools to use. Price had confirmed what it was going to do. Of course, it can do anything from this point, but the majority of the time, this type of trade will pay and as long as I manage properly, I will come out with profit in my account overall. The key to this is if this had been a fake, I could have likely cut my losses short because I would have been able to see price not willing to break out of this fractal. Fortunately for me and by waiting on the 1 hour close, it did what I anticipated and fell to a nice pip profit.

Friday, September 12, 2008

Focus on Fractals




 I have done some closer examination of fractals and how they can contribute to my trading. The longer time frame fractals are the ones that I should focus on more, then scale down to smaller time frames. It seems that many times I had been looking for wicks and not really picking out the true points of price sensativity. If I look at the opening and closing of certain candles, especially in groupings along with wicks that are rejection candles I will find where a few candle wicks line up with the full bodied candles and show me exactly what the rejection candles are having trouble with. A clear example of this is the USD/JPY chart (4 hr) where support was seen for 16 hours and then committed below. After that closing, it rallied to the true key area and a trade set up was in play. After looking at the 4 hour chart, a true entry is found with my tools on a smaller time frame.(15M)

Monday, September 1, 2008

9-1 Good Quote from Chris Lori

In the month of August, I can certainly point to some good trading opportunities. However, I can also point to many more opportunities that did not fare so well. So, what does one do? Do I subject myself to trading in a low risk environment or simply play the waiting game. This quote from Chris Lori's "Face the Trader Within" kind of sums it up nicely...


Patience Pays
Our young friend, the gunslinger, goes hunting with his dad who has 30 years experience carefully stalking his prey and hunting them down. As the two of them head out toward the forest, gunslinger says to his dad; "Hey dad! Let’s run into the forest and shoot us a deer"!
Dad replies; "No, gunslinger; let’s quietly walk into the forest, hide ourselves, and wait for the deer to come out, once they are in perfect position, we shoot them all".
Patience is a key discipline of trading. It is ideal to wait for the market to move to a level of high probability to enter a trade, but waiting for the market to arrive at your prospective entry point can be no fun.
The human mind views making money as an enjoyable experience, because it inspires dreams of all the things one can have and do if they make a lot of money. For some reason, trading is considered an easy, or convenient, way to make a lot of money, but people do not resolve themselves to the fact that it is neither convenient, nor easy. In fact, people may find it so inconvenient, combined with their greedy desires to make money; they will frequently put on a trade without premise, because they are unwilling to wait for the proper time to enter a trade. They want to run into the bush and shoot at the first deer, regardless of what the probability is of hitting it.
I can assure you that this approach to trading will cause great pain, suffering and financial loss. Although the wait may seem agonizing at the time, I would prefer to endure a lengthy period of stalking a decisively good trade, rather than taking a shot in the dark and have to suffer through the pain of a poor decision. An irrational shot in the dark trade 8
typically results from focusing on greed and the thrill of making money, rather than possibility of loss and pain.
The markets will often go through a long period of consolidation or confused price action, which does not lend to good trading opportunities. If you do not have the ability to recognize and admit to the reality that the conditions for trading are undesirable, you will probably lose. If the market does not make sense to you, then stay out! On the contrary, the ability to wait through market indecision can pay very well when one side of the market begins to take control. You will end up with a twofold benefit; you will save from losing money in the choppy conditions, and you may reap considerable benefit when the market breaks out.
If you run into the market like a gunslinger and begin to shoot at anything that moves, you will probably have run out of bullets when a prime target walks right in front of you.


Becoming a good trader to me is not about wins and losses, but knowing when to trade (that will take care of the wins and losses). That has become more clear to me this month than ever. Part of becoming a good trader is accepting certain trues whether you want to or not. Being stubborn only sets you back. Chris's techniques have enabled me to grow my account consistantly. Once you are consistantly growing, you must take the next step of growth which is looking at the overall environment and recognizing whether it is a higher risk and less probable one or continue trading away. This is where I think I need to focus my efforts more, just to insure that I am the trader I need to be to bring ultimate success.