Tuesday, November 25, 2008

11-24 EUR/USD Trade




While vacationing with my family, I sat down at my laptop yesterday evening and pulled up a EUR/USD chart. I skyped a fellow trader to ask what the stimulant was in the market that caused such a bullish move today. He informed me that Citi had been bailed out and that the market liked it. Stocks up....Eur/Usd up, that seems to be the theme over the last few months. I started looking to see where a possible bouce could occur. I went to the 4 hour chart and noticed that although we have had several attempts at the 1.2950 level, we had not quite "reached" it over the last few weeks once it broke. It also lined up nicely with the 62% retracement of the swing of the high at 1.3295 to the low of 1.2388. Looking at the 1.2950 I could see a very nice TSR area where support and resistance was evident. I was watching price when it was at 1.2912, waiting for a surge up. It was sitting right near the previous week's high at 1.2926 and in the past I would have traded it there. I really wanted to see it surge through to the 1.2950-60 level, and it did. I had an order at 1.2956 but did not get filled there. I watched price and when it did not hold above that level, I traded a pull back at 1.2942. My drawdown was very small and within an hour or so I had profited and left some in the market in anticipation that this might be a good pull back for a lower move. No one knows at this point and that's why I only have 10% remaining in this trade.

Sunday, November 23, 2008

UPDATE ON 11-19 EUR/CHF set up


Although I did not enter this trade ( I guess I should be called bonehead now) price certainly did what it does the majority of the time and would have paid a nice profit. I had some things to do and did not have the time to manage the trade but I also have been very respectful of late to this market. The EUR/CHF , however, seems to be honoring most of it's levels even when many of the other pairs are very irratic. The USD/CHF trade that I was tracking did not honor the level I was watching on it, but then again, the only thing I had to go on was a weekly chart so bleed through should be expected. The GBP/USD never got to the level so there was no trade there.

Wednesday, November 19, 2008

11-19 Pairs to Watch





There could be some possible trades developing. After reviewing a few charts this morning, a few pairs grabbed my attention. The first is the GBP/USD. If we should get a rally, the 1.5373 price level has a good confluence of fibs and a good support level. On the down side, if we were to get a drop to 1.4663 this also seems to be a likely area for a bounce. I am seeing some signs of bullishness but in this uncertain market where the dollar seems to be the safe haven currency, it's just a matter of wait and see.
Looking at the EUR/CHF pair something interesting to me is happening as I write this. We have had a close above previous resistance and now are revisiting the TSR area at approximately 1.5208. There has been one bounce at this level already by looking at the 15 minute chart so I am watching to see if this level will continue to hold or give way once again. This price level is key on the daily chart as it was previous support that became resistance last week and now is support yet once again, at least at the moment. The USD/CHF has been travelling up a trend line showing possible signs of weakness and right against a weekly support area near 1.2089. I will be watching to see if price breaks above and holds there or can finally break below this very strong trend line and break down some key levels.

Tuesday, November 18, 2008

Know When Not to Trade... Know Yourself

The past several weeks have been frustrating as a trader, to say the least. All traders spend their time analyzing the market so that when an opportunity presents itself, they are ready to capitalize. In the current market conditions, however, there are not too many opportunities. Over the last several months I have kept track of possible set ups and trades that have presented themselves. The problem has been that they seem to be few and even those that do present an opportunity may have one second guessing it's validity. Chris warned of this thin liquidity months ahead, but I don't think even he thought it would continue for this long. Not only are we in very thin markets but we are seeing a global shift in the market place. Nearly all the pairs have doubled their ATR's and levels that once was a confident play have become a roll of the dice it seems. As I said, I have tracked trades on this site and proved that price does it's thing over and over, but because of the current conditions I find myself cutting trades much too early. My account growth has slowed and most times I don't even want to look at the market, much less trade it. Am I losing my passion for this business? I don't believe that is the case. I truly think that I have finally tapped into the mental state that a trader must have to finally see true success. I find myself looking at the market and thinking of placing a trade but feel more comfortable than ever staying on the side lines, even through the frustration. Most times I watch price action and can fold my hands without feeling the need to take a trade. I don't like what I am seeing, therefore it does not entice me into the market. Of course I am still progressing and probably always will need to be on guard for that dice roller that use to be present inside of me. There have been a few times, although they don't happen that often any more, that I have felt a temptation to jump into the market. One such time was when the interest rate decision came from the Bank of England. They dropped interest rates much more than expected and I saw the pair start to dramatically drop. After a close below a key low, I was watching for the retest and was licking my chops. After the retest I thought about entering the trade short, but THEN....I considered the risk and walked away from my pc. I felt proud of myself. I was in a situation that in the past might have lured me in. The announcement sure appeared to be in my favor, but after that drop, it did the opposite of what I expected. When I checked the charts later in the day, it had gone up another 100 pips and I would have lost the trade. Looking on that situation and a few others like it where I did not enter the market, I have come to the conclusion that I did not make the choices that I use to make because I focused on the risk more than the reward. I have been saying something that maybe I have written in the blog before or someone else has actually said, I don't know, but it's true none the less....expect to win but prepare to lose. When I "prepare" myself to possibly lose a trade, I am finding certain trades become less and less appealing. I find myself not wanting to be in the market as much. I do not frown upon other traders who may enjoy being in the market a lot and scalping for pips, as long as they use risk and trade management. That is the ultimate key. But for me, right now I am content to stay on the sidelines and wait for the next good opportunity...whenever that might be, and even then I may just remain a spectator. One day the market will return to some resemblance of order but until then I must do the opposite of what all the leveraged traders have done and protect my account to trade another day, week, month, or however long it takes.

Monday, November 17, 2008

11-17 EUR/USD Trade by Rodney Guerzon


This is a trade that was sent to me by a fellow trader that I met at a Chris Lori seminar in Raleigh, NC and has become a good friend over the last few months. This guy has studied and learned price action using the same techniques that Chris teaches and is doing very well for himself. Rodney and I have discussed the price behavioral aspects of trading several times and realize that this one component is a major factor from moving from amateur to professional status as a trader.Couple that with discipline and overcoming the psychological hurdles and therein lies success. He implements discipline constantly and I respect what he is accomplishing. He sent this EUR/USD trade shot and if looking at the base of support that the pair broke, Rodney traded the retest on the first attempt going with the direction of the flows. One thing that Rodney is also implementing is when you get confirmation by a closing on a 1 hour chart or above, you can take the retest of the TSR area on the very first hit and get paid the majority of the time. Rodney's picture shows exactly this type of set up as a bearish commitment candle closed a few candles before retesting the 2505 area. Another thing I noticed about this chart and something to keep in mind is how the next candle after Rodney entered dropped quickly and paid him, but if he had NOT taken profit, look how it came right back up into the range rejecting wanting to go any lower. Then, the 2505 area comes into play again as price closed with a bullish candle above the level. You can't really see it clearly on the chart but after it closed above, it made a second attempt near the 2505 but not quite reaching it before paying nearly 100 pips in a long trade. Like Chris says again and again, "you do not have to know which direction the market is going to be profitable". You just look for price to show you a level, wait for commitment one way or the other and if you can observe this over time, you will see that you can profit on these types of trades much more than you lose. I do want to stress that in this market these particular set ups are paying more pips than over the past several years, especially on the euro as it has become very volatile. The thin liquidity offers more pips because the ranges are bigger. As Chris stresses, we must change and adapt to a the current market environment and if the ranges start to get smaller, we must expect our profit to be smaller as well and adjust to that. At that point these inside the range trades may not be worth the risk because of the smaller profit potential. Right now, however there are very few patterns developing in this market. Even when they do, they seem to be 50/50. Knowing price behavior and trading that alone gives a trader a big edge in this environment and these types of trades seem to be very probable. Again, I tip my hat to Rodney for his success and I know Chris is proud of him as well. Way to go Rodney, and thanks for the contribution.

Saturday, November 15, 2008

11-15 High Probabilities

After nearly 4 months of journal entries on trades, there is one constant that remains the same. Price behaves the same way the majority of the time. This journal for me has actually turned into a training tool and not only for me, but for others as well. I don't mind that at all. Sharing the knowledge that I am learning, especially knowledge that produces positive results is very rewarding for me. It also keeps me on my toes. I have had other traders like Dick, Rob, Myron, Rodney, Steve, and Panos tell me that this blog has had a positive impact for them and even stumped me at times with some questions. It has helped me to dig even deeper. Patterns, range extremes, divergence- all have their place in trading. To me, price action and it's behavior becomes more clear everyday and I post these set ups only to show that it happens over and over and to re-affirm that price is the only indicator you need. One particular set up that I have noticed become one of the highest probable winners is restest of a consolidated fractal. Of course, there are always fractals, but some are so well defined that if you only traded this particular method, you could profit quite often. Rob pointed the trade on the USD/CAD out to me. I realize that I post trades that have already passed sometimes. My goal for that is to get the attention to recognize these attributes and then anticipate these to happen again. The USD/CAD one hour chart shows a clear area of consolidation of price. Support for an entire trading day held, however, the next day was broken. A quick rally to the base of support into TSR paid quickly. One that I was stalking, but missed was the EUR/CHF pair. I don't know that I have ever traded this pair but it seems to be a nice one to look at. I was looking to go short as the pair was approaching a base on the daily, which I did not post here but can be seen on a daily chart. This one hour shows an area of sensativity around 1.5157. After a big run up on 11-13, it held above that level for 4 hours before committing below and on the first retest of TSR you would have been paid 30 pips. The after math of 100 pips is always pretty to see, but you never know if you are going to get that or not. The concept that stands out to me, as taught to me by my mentors has been to get a good entry at the "right" level which I call TSR, then take profit. Usually, after a break and commitment from a key area like the 1.5157, if you take the first retest, you will get paid a high majority of the time. Even after going like the energizer bunny straight up on 11-13, when it closed above, the first retest of that area LONG paid 30+ pips. I would not want to trade long after a parabolic move, but I am just proving the point that these areas are very sensative and when price approaches them, it comes off quickly. To me, that is why locating and watching price at these areas is so important. Price does this over and over. Looking at multiple pairs, you can locate these areas and then just wait until price reaches them, then let price tell you if it is going to commit or not. It comes down to what trade is going to give you the highest probability. A trader can scalp, intraday trade, swing trade or trade any way they want but if they will look for TSR and practice this, journal this, price will validate and will be the main factor in their decision. The bodies or closings and opens, certain wicks that hit the level and come off quickly (better seen on a lower time frame) and even doji closes like seen on the USD/CAD pair shown can give a more clear picture of where the true price level that is the axis for price to hold above or break below. This will improve entries and help to secure profit sooner and quicker. Price will show us, all we have to do is watch.

Friday, November 14, 2008

11-14 Take Profit


This is yet another entry to show that you do not have to know which way the market is going to be profitable. The USD/CHF pair was consolidating through the early trading day and had formed a nice dealing fractal. When I opened up the chart, I saw that price finally broke above. Although the 1 hour candle had not closed and we were only 20 minutes into the candle, I moved to a lower time frame and the 5 and 15 min. candles had closed above my TSR level. On a pull back I grabbed 24 pips. I took my profit because the New York session was just getting going and I kind of traded this set up to once again prove to myself that price behavior does this over and over. My mindset was in the moment of catching price doing what it does "most" of the time in this situation and it paid. After I exited the trade, the pair proceeded to come back into the range and continue opposite the way I traded. Once again it proves you don't have to know the direction to be profitable.

Thursday, November 13, 2008

11-13 Crappy Market, Good Attitude

Everything is bad I hear. Everyone is losing their rear in the market and this is a tough market environment. I agree that the environment is tough. Traders the world over are standing on the side lines, many of them because they have lost mega bucks over the last several months. Of course we have to be careful in this market. Normal trade ranges are out the window and the liquidity is very thin. Patterns seem to be non existant and trends are relentless. However, if you are patient and attentive with the presence of a positive attitude, out of the blue a trade can set up. A trade going with the sentiment, the flow and one that can pay very well. I am posting two such examples that are soley based on price action and support/resistance areas. I did not trade these set ups, but saw them very clearly after the fact ( what good is that?). My point is, some set ups are there but a trader must expect the unexpected to catch them. The psychology also comes into play when trading these setups, I think much more so than normal conditions. After relentlessly trending, there is an unexpected rally and you might think to yourself, "this thing is finally turning around" and we watch a nice set up, going with the sentiment and flows just come and go because the fear of entering this environment against such an aggressive move against the flow. I do not blame anyone for not trading in an environment they are uncomfortable with. This market is very difficult to discern most times and I am lost to what is going on. But, when I recognize a very good level of support, especially a recent level and then a break, I should be preparing for a retest of that area for it could offer a good trade. I must be within my risk parameters and even scale back more because of the very low liquidity in this market.



The first example is on the USD/CHF pair. On the daily chart, we had a clear close above fractal resistance and then the very next day a retest. Looking on the 15 minute chart, a clearer entry can be seen. On the AUD/USD pair, a clear break and hold below support and a retest late in the session. This can happen when you least expect it but can offer a bounce or even a resuming of the trend. I do agree that this market environment can kill accounts, but keeping a positive mindset and waiting on just the right thing can offer some money making opportunities.



Tuesday, November 11, 2008

11-11 Price, Price, Price


Many times over the last 3 years I have been confused about my trading set ups. I have tried to make something out of nothing and traded when I didn't have very many reasons to do so. Much of this was due to not truly understanding price action. The main understanding of that became apparant to me a few months ago and has started to stand out to me more and more as I saw the same thing happen over and over again. There will be times the market will not do what I anticipate, but if I let price show me and confirm that there is a true set up there, I will win much more than I lose, and that will continue to put profit into my account. I think that understanding price begins with knowing where the fractals (dealing ranges) are and understanding where True Support and Resistance is in relation to those fractals. Once I can determine this and I can see a key consolidation and the a break and hold by price, a trade can be placed on the retest of the level with confidence that the trade will pay a high majority of the time. An example can be seen on this USD/CHF 15 minute chart as the price traded to the highs of the year, but could not hold and broke down, first by breaking a consolidation (fractal) and confirming by holding below for some period of time. A retest of the support area offered a trade and paid quickly. Understanding this can transform anyone's trading and has helped mine in so many areas. I am so thankful to Chris Lori for really forcing me to focus on this. Understanding price action and how it behaves and then knowing what to look for can keep a trader out of a lot of bad trades, not to mention the patience and discipline to wait until you see these kind of patterns.

Thursday, November 6, 2008

11-6 Locating True Support Resistance






It has become very apparent to me that locating the right area of support and resistance is one of the most vitale keys of a good trade set up. TSR may not seem to be well defined but looking closer and focusing on longer time frames can give a definite price the pair has struggled with and has been sensative to and help with a good entry. Looking at the AUD/USD can certainly prove this analysis. After the daily candle closed above the fractal resistance on 11-



4 (CHART A), it now showed that it had committed to holding above. That does not mean it's going to the moon. It just showed me that if I would find the TSR that it had committed above, I could certainly put the odds in my favor of a winning trade with minimal draw down. I looked at an area it could now use as support. The 38% retracment of the move from the lows on the day lined up nicely with the TSR I had chose based on candle closings, wicks and the majority of an area of daily highs (1 hr chart B).



I set an alert for .6860 or so and got alerted. A trading partner had also looked at this with me and we agreed that .6835 is the true price. The low of the day was .6831 before moving up to retest the previous days high for a run over over 200 pips. After that I observed that price did not want to commit above those highs. From the methodology Chris teaches, price was at the extremes of the range and did not want to go outside, for whatever reason, yet I was still looking to go long on this pair as it still seemed to me to be bullish with that close above TSR yet again on the daily chart. I located another area by looking a little closer to see what the pair may seek out as the next likely area for a pull back. I set my line at .6697 or so and got up to see that the pair has hit it almost to the pip. Looking at this chart (4 hr chart C),





it is a clearly defined area the price has struggeled to go through nearly every time is has come into contact with it over the last 5 weeks. The thing I like is the higher highs and higher lows showing a bullish flow at the moment which puts the odds more in my favor. Locating these areas are of upmost importance in my trading success. Combined with risk management, discipline and trade management to secure profits, even in a very low liquid market I can still see areas that give good opportunities, I just have to wait on them a little more and let the set up define itself. Although I did not trade either one of these, just knowing that price has went to my TSR and offered a good profit builds confidence in the ability to understand TSR price points. I am also keeping in mind that it has come back down below the previous TSR and the daily highs that was resistance earlier this week and closed on a daily chart. Right now it is in the middle of the range of the highs and lows of the week, but it did make a new high this week and has not taken out the low as of yet. I will observe to see what price may offer.

Wednesday, November 5, 2008

11-5 Possible GBP/USD set up UPDATE

I am stalking this gbp/usd possible gartley pattern set up for a short trade. The level seems to be 1.6250 and there are a nice confluence of fibs there as well. I don't know if it will achieve the level today, but if it doesn't then I will regroup as there could be a larger gartley building on the 4 hour chart. UPDATE...as of this morning, 11-6, price has not reached the area but could do so today. Still watching to see if this is a possibility.

11-5 GBP/CAD and EUR/USD










After looking at several good setups last night, some of which came to offer very good trades, I focused on a couple of pairs that were setting up nicely. The GPB/CAD, which I don't trade that often lately because of the HUUUUUUGE spread, was in my opinion, too good to pass up even with a larger spread. After a day of consolidation at new lows, I got a close above TSR as seen on the 15 min chart. I entered the trade and within the hour had secured a nice profit. I am hoping this will turn into somewhat of a position trade with all of my profit already out and only 10% remaining. The next set up happened on the eur/usd. After a close above TSR and with the flows of the week up, I waited on a retest of the level that the euro had struggled with for the last few weeks, the 1.3000 area. After a confirmed bullish close above, I took the retest of the area. The TSR was really at 1.2980-90 but the trade paid 20+and I got stopped out with just a few pips.

11-4 EUR/USD TRADE


On this particular trade I lost. Losing is part of the game and my level didn't hold. I was looking at shorting the eur/usd at 2965 as it came straight up 500 pips. I thought my level was good and was based merely on SR which I guess I could have been a little more attentive to the fibs, but the market decided against me. I was stopped out for a loss...NEXT!