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Spot FX Day Trading: The Jigsaw


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Spot FX Day Trading: The Jigsaw

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  #181 (permalink)
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After the double top with no demand on the second peak in the London open I was looking to short on a break and pullback to ice in the middle band at 1.3295 (this level has been important for a good few days now). A convincing pullback never came.

The down move did not progress and when there was shortening of the thrust into the LOD (also where price is oversold in two trend channels) I was considering a long. It's a good time in the session to get a reversal. The 1.3270 level is where buyers overcame sellers at the breakout yesterday so were there still buyers there today? Lots of tick volume at the low said there were, and the demand wave, the following no supply wave and price violating the trend channel put the odds in favour that the buyers may win out again.

I went long with a stop under the LOD (15 pips). My game plan said if we did get a reversal after the London open it may really get moving as EURUSD structure has been threatening a breakdown but none has yet come, each time it looks likely it doesn't happen - so someone is buying. And if too many are short there will be stops up above. So I played for a potential trend day with a profit target at 1.3308 (HOD at that point) and another floating way up there and to be managed later.

Then my monkey came out to play.

I brought in my first stop 8 pips to the top of the trend channel. Good lord man have you no patience! Happy with how the trade went thereafter. There was an almighty demand wave to the 1.3320 level (buying climax) and then a 50% retracement. The amount of demand off the lows gave me the confidence to hold for the rest of the session. The trend day didn't materialise as anticipated so at 17:00GMT I came out for a 2R winner.

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  #182 (permalink)
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mokodo View Post
....
Then my monkey came out to play.

I brought in my first stop 8 pips to the top of the trend channel. Good lord man have you no patience! .....

You got me confused here. Do you mean your target? What was the issue? You weren't confident it was going further?

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  #183 (permalink)
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Adamus View Post
You got me confused here. Do you mean your target? What was the issue? You weren't confident it was going further?

Thanks for the question.

Yes, the original profit target was 8 pips further away, I brought it closer to my entry as I 'needed' to get a 'result' on the board. Daft because the move had great momentum and showed no sign of stopping. So I discounted my idea and needlessly gave some profit away. Although I did not mention it in the post reviewing yesterday's trading, I also did this with the second target, although the trick I played on myself was more subtle with this one. The second profit target was originally at 1.3338 and I closed via a trailing stop which I think I set purposely too close so that it would be hit. So the 2R winner, could have been a 3R winner - if I had stuck pre-trade profit targets.

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  #184 (permalink)
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A good day. Game plan was actually fairly loose. I put on the lower two bands to frame the overnight action and just went with the price action thereafter. The strong close and other action yesterday could have made me more bullish, but I choose to stay unbiased.

First trade was short on an upthrust after a swift breakout to new highs with the key element of a buying climax (from 5 minute tick volume). I went short as price rolled over. I did not really have an exact entry rule here (I am exploring this by taking some trades), just went in with a stop above the highs of 15 pips. Targets were ambitious. I proudly thought I had called the top and dropped a target 3R away and another below that. Yes here was the home run. After a couple of legs down and some decent supply coming in, a bear flag looked like it was forming. What was actually happening was buyers again absorbing. As price has run 1R in my favour the stop was at breakeven and that was taken outas price popped back up.

I'm thinking these trades will more likely be countertrend and perhaps could consider getting in earlier with a tight stop and still get 2R+ or better on 20 pips retracement such as this. I'll keep testing them out and see where we go.

Once I had worked out buyers were happily grinding price up I was looking for longs. The second trade was a MACD with trend entry. It didn't get going before the initial jobless numbers were due so I scratched it a few minutes before the release.

Then, the mistake of the day, which was I completely missed another bite at the cherry, another MACD entry signal on the next rotation - or a spring entry. Yes two signals at the same time and I honestly did not see either setting up. Then a nice 40 pip swing. Sigh.

Although no improvement to the P&L, I am marking today as a good day, just feels that a few more pieces of the jigsaw are falling into place. Hard to explain, but I think focusing on just one instrument for the last few months has helped me get right into the details of my method. And perhaps Gary Player was right - 'the more I practice, the luckier I get'.

Stuck to my rules again and called the market pretty well too.

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  #185 (permalink)
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Game plan Friday was to expect consolidation or a range to play out. I took a long on a MACD signal expecting a test of yesterday's high and possibly the longer term resistance at the 1.3410-1.3420 level. There was a spring of the middle band at that point which gave me some confidence. But as soon as I entered I scratched the trade because I had entered late (about 6 pips) and I saw we were in the middle of the range between my upper too bands. A guiding rule is to enter near the bands and I was clearly in no man's land. The trade was not in my rule set so it was valid to get straight out.

I was not on my toes as the action in the London open was slow and was definitely not alert enough to risk my capital. After the scratched trade I stopped trading. Kids holidays here and a better use of my time and money was to take a family trip to the movies. Great fun.

On reviewing the action after the close looks like a couple of short set-ups were available, a pull back to ice and later a MACD trend trade, both at the 1.3360 level and after we had broken the demand line of the longer term rising trend channel.

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  #186 (permalink)
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Don't trade until 10:00GMT on Mondays - and had to shut down by 14:00. Even so there was some tradable action, I just didn't commit to the trade opportunity. I've marked a short entry it on the chart with a blue dot.

The signal was a with-trend short, entering on the MACD histogram rolling over. The context that said this trade had a good chance of working out was:

- yesterday's close was at the daily low = expect more weakness this morning
- solid supply wave through the London open
- up waves off the oversold level in the trend channel showed no ease of upward movement = sellers active
- 3 pushes up into resistance at 1.3309

All this said go short. So why didn't I? My routine is to do my pre-session prep, write a game plan and decide any key levels for the day. My game plan said range or a momentum down day. Then I added in my levels. The short entry was close to the lower band and I think I was 'expecting' a range to form off this level - simply because I have placed it on the chart. What a ludicrous idea!

The bands are helpful for me to frame price and to remember where key levels are likely to be in the heat of battle. What I have found though is that they work better when framing a range - for obvious reasons. I believe if the lower band was not on the chart I would of taken the short. The lesson is the prevailing trend trumps most other considerations. The daily trend at this point was short so I could take the short signal. Something to mull over.

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  #187 (permalink)
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No trades today. I've a couple of days prior to a much awaited family holiday for the test of the month. Thought the best use of my time for the rest of this week was a review, which I've already started. As always extremely illuminating to trawl back through the journal, trade cards and screen shots.... And so far have spotted the following:
  • A pretty good spell, considering I am testing out my amended trade plan. Actually very happy with how I have developed.

  • Old habit creeping back in - over complicating my entry rules. Rather than build up a understanding of the price action and enter on a nice clean set up, I have been adding tick box after tick box. The result has often been delay or confusion at the time of commitment. I think a clearer way forward is to track the key features of the price action as the day unfolds and when I have the cards stacked in my favour (i.e. context & confluence) I can trade a simple set-up with a entry signal I can not mis-interpret. I can easily strip down the existing set-ups and apply a simple oscillator entry.

  • Because of the extra conditions I layered on over time I have filtered out more good trades than bad - speaks volumes about 'not wanting to be wrong'.

  • Looks like I am more relaxed the tighter the stop I have. I have never had a problem taking a stop and have never moved one either. I would like to test out using slightly tighter stops, the PA on the Euro certainly allows for tighter stops than I currently use and looking at my MAE figures, on average, I could bring them in. If I do this, perhaps I will be less precious about any individual trade as I'll be able to dial down the risk to an 'I don't care' amount.

  • I had hoped that I would be taking more signals over the last few weeks. I've been too selective and have not really got a decent sample together. I will reset this process on return from my holiday and aim to be more aggressive.

  • I've found that by focusing on the one instrument I've been able to identify more subtle clues in the price action. Some of these features (e.g absorption prior to break out, climax reversal) I have been pretty good at spotting, so I think I'd like to incorporate set-ups to test whether they are tradeable features or not.

  • There is definitely a shift in my confidence in the last few months. Whilst there is a lot of work to do on the details I no longer fret that I will end up back at square one, or two. That was the phase I was in previously, where I would make some progress and somehow slip back and feel again and again that I was making such slow progress! Now I believe with my current skills, experience and methodology - and across a decent sample size - I would not lose money.

  • Have enjoyed the process of trading for the purpose of building up a decent sample of trades to review - rather than approaching the SIM trading with an eye on paper profits. If I can find a way to bring this mentality over to live trading I think it could be helpful. Focus on the process, don't worry about the result.

  • Linked to the above, I am doing away with ideas of profit targets for the month. These have been in the back of my mind, I suppose I needed to see a monthly return to prove to me and others I was 'succeeding'. But such ideas can only skew results downwards.

  • Very recently started working with a trade buddy. So far I've found this an excellent way to have my methods and ideas challenged. In fact this review was prompted by being unable to provide clear answers!

  • Overall I have been (for me at least) incredibly chilled out - serene even. For the last few months I've enjoyed my trading more and combined that with more quality time with my family.

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  #188 (permalink)
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mokodo View Post
  • Old habit creeping back in - over complicating my entry rules. Rather than build up a understanding of the price action and enter on a nice clean set up, I have been adding tick box after tick box. The result has often been delay or confusion at the time of commitment. I think a clearer way forward is to track the key features of the price action as the day unfolds and when I have the cards stacked in my favour (i.e. context & confluence) I can trade a simple set-up with a entry signal I can not mis-interpret. I can easily strip down the existing set-ups and apply a simple oscillator entry.

I like your aim - build up an understanding of the price action - and that's what I try to do.

At the set-ups in real-time for me, I don't see clear entry signals. I enter when I have seen enough to convince me that there's going to be a move out of the set-up in a particular direction. Of course in hindsight I see clear signals, without doubt, but I don't consider them 'clear' in real-time at the time. I'm simplifying my approach but essentially that is the crux of it.

I just try to observe all the market behaviour as it happens, so that my subconscious can work it out and when something is about to happen, I'll get a feeling about it and with training, it will become a good risk. The subconscious is much quicker and more successful than the conscious mind at this sort of multi-variate analysis.

If I'm confused while watching a set-up, it's because my subconscious has either not been trained enough to know, or it hasn't seen enough.

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  #189 (permalink)
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Hi Adamus,

Thanks for stopping by. Yes, I hear you. Very much the way I am viewing things, been moving in this direction for a while I think. I still will be using simple set-ups and a mechanical entry signal, but the decision to pull them out of the tool box will be driven by interpretation of context and price action rather than mechanical rules. Guess it's an attempted shift to start trusting my experience via subjective analysis, rather than putting the 'responsibility' on a set of mechanical rules.

When are you planning to start up your trading / journaling again?

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  #190 (permalink)
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Your charts are quite colorful

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