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Spot FX Day Trading: The Jigsaw


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Spot FX Day Trading: The Jigsaw

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  #31 (permalink)
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Friday 10th August



Daily chart for this trade today, price looks like it has accepted the down channel resistance over the last day or two in which case I am looking for shorts.



Apologies if this chart appears a mess - it is. It's a compressed 15 min chart showing the last week or so. There are a couple of symetrical triangles forming, one over the last 10 days and one inside that forming over the last couple of sessions.



My entry chart. Red lines 1,2,3,4 are my stop, entry, target 1, target 2. The set up is a channel break out from low volatility. The yellow paint in the panels 2,3 tell me that ADX is <12 on both the 30 and 60 timeseries and the magenta paint says that level is extreme at <9. MACD histogram is very low and negative for the preceding 10 candles, my expectation was a break lower. My short stop entry is place outside of the swing 10 level which is also under the rising support line that is the lower bounday of the symmetrical triangle forming since the US session yesterday. Price breaks and the first profit target (with half the position) hits in 4 bars. I then sit patiently through the next five hours whilst the flag forms. The second profit target is at the 122 handle also a measured move of the first leg of the move.

I bottled it and came out after price tested the first leg low a couple of times without breaking it. Net for the 2 parts of the trade +36 pips +1.06R with 0.25% account equity on the trade.

I am trying to challenge myself to get more from high probability set ups such as this. My 'normal' approach is to get 1:1 risk:reward, but I want to stretch that which will involve patience. I think I was too confident in my abilites to do this (as it's new ground for me) and split the exits equally. I suspect that if I exited 75% at the first target and only had a smaller part riding on the second I would have given myself a better chance of holding on.

Overall pleased with this trade and the outcome. Done for the week now.

Until next week...

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  #32 (permalink)
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Monday 13th August



Breakout signal here on USDCAD. This is my 15 minute entry chart. The pair have been in a pretty steady down channel and this signal is in the middle of that channel. I had no expectation or preference as to which way the break may go, so set OCO orders oustide of the channel. The potential breakout is signalled by the yellow paint in panel 2 which tells me ADX on the 60 minute timeseries is <12.

Red lines 1,2,3 are my stop, entry and profit target. My entry was set 1 pip +spread above the minor swing high from the Asian session. This trade felt like I was nursing a sick patient, showed early signs of health then tailed off. I was hopeful as AUDUSD and NZDUSD were havng an awful time and I expected USDCAD to mirror some of that action. It did, but not enough to get to my target.

So the story of the trade was: held for 10 candles and then raised stop under a higher swing low. The second time I move that up it was taken out - as you can see from the chart price had rejected the local upchannel support which indicated price was going to rotate down. The price action had become barbed wire and I longed to come out at the market for a better result - but stayed with my rule set. +6 pips + 0.28R

Until tomorrow

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  #33 (permalink)
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Wednesday 15th August



1 trade today on GBPJPY. It's a breakout setup (yellow paint in the panel three indicates ADX on the 30min timeseries is <12 after which I am tracking for a break of the swing10 for the next 20 bars).

Red lines 1,2,3 show stop, entry and target. I got this entry 07:32 BST, that's right at the start of my session (starts 07:30BST). Price broke and came back for a rotation which I sat through. There was major news on GBP at 09:30. I have a rule for that which says 5 minutes prior if I've a profitable trade on protect it with a B/E stop and if I've got a trade on which is underwater just closed it out.

The reason I have this rule really is to prevent me from entering breakout trades prior to major news on that pair, as typically PA will be choppy until the news breaks and pretty wild afterwards - and I am not a comfortable news trader!

I entered before checking the news flow for the day and came out for a -2 pips, -0.1R loss.



Here's a daily chart for USDJPY which shows the context for a set-up I am live forward testing. Price is looking like it wants to reject the downward resistance line AND the range (blue box) it's been in recently. A close outside and above those two areas may say we are going up?



SIM entry chart. Green area is my "Area of Interest", where I was hopeful that I would see a retrace of the last frew days upwards action. I did and it was a sharp one. My entry is where MACD rolls off it's low AND RSIX is oversold. Stop is under the spike low and is 23 pips. This is a swing trade idea and close above yesterday's high over the next few sessions is what I would like to see. See how this one develops. Leaving profit target open.

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  #34 (permalink)
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Off on me hols and back on 3rd Sept. No trading for me today as I was tying up some other business matters. August has been thin on opportunities for my current set-ups to say the least (only 7 trades), but another positive month on the board. +65 pips for the month, 3 winners 4 losers, average loss for the losers is -0.1R and average win for the winners is +0.77R.

I have started work on my development plan and will finalise that whilst I'm away. Bottom line is that it's time to start increasing my risk per trade (again) and my trading account so that I can see if I can translate moderate success with pennies in to moderate success with larger amounts. I'm intent in bringing on another set-up and redoubling my efforts to progress as a trader in a really structured way.



Here's the sim swing trade one day on for the set-up I'm forward testing. Target is the 80 handle which is just short of a previous high. I'll bring the stop to breakeven and place my target order and see what's happened when I get back.

Until September...

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  #36 (permalink)
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Tuesday 4th September

No trades from either of my two live set-ups today. Back from my break in France and spent yesterday making the transition from 'holidayer' to trader. Labor Day yesterday as well so did not trade and spent the time catching up on the last 2 weeks of price action and noting up my charts. Didn't look like I missed much, quiet, choppy and rangey for most of the pairs I follow.

Good news flow due up this week for the forex markets so I expect to get my teeth into something. I have also made some domestic changes so I can trade the London open on Tuesday, Wednesday and Thursday each week. And my day to be involved with my other business is now Friday not Thursday. Those changes should expose me to 25% or more opportunities for my current set-ups.

I have made great progress since going live (again) in May and I have covered a lot of ground and poured the hours into the trading and particularly the self development work. Hadn't really noticed how tired I was as I was enjoying it all so much. Good break and time to reflect and glad to say I feel as enthused about trading now as ever before. Most reassuring is that, with the benefit of time away, I have not felt the need to come back and change anything. I'm happily hitched to my style of trading and now see the work primarily on self-development. If I am being honest I even admitted to myself that my set-ups probably aren't even that 'good' but I seem to be able to make them work for me and, as importantly, I believe I can improve performance the more experience I have with them.

My development goals are three fold for the next few months:

Firstly I am working on 'extension'. My plan was to first get a few set-ups I was comfortable with and focus only on the entries. That is why I purposely set 1:1 risk:reward targets and put a great deal of effort into choosing entries where I felt if the trade did not go my way the loss would be as small as possible. So I was trading set-ups that were good at not losing much rather than making a lot. Now I have become reasonably proficient at this I want to explore the exits as a subset of the entries I take - i.e.still focusing on keeping losers as small as possible. To tilt risk:reward in my favour I will be splitting exits in two. The first part at 1:1 and the second at a further level I determine as achievable.

Secondly is my ongoing work to bring a further set-up into my stable. This is called CHSR (just shorthand for Channel Support Resistance). I mark up daily and compressed 15 minute charts before each trading session to help me get a handle on market structure for my two existing set-ups. This potential set-up is just an extension of that work. I will be looking initially for areas of interest where price may accept or reject the CHSR. I am looking for both intraday day and swing opportunities with this set-up. Objective is work this live forward test to uncover a tradeble rule set and to have a set-up with a greater R:R. I am working towards 1:4

Thirdly I am collating a portfolio of all my set-ups. I hyperlink screen shots of each trade for review and have noticed common features for different sub-sets of each. I have a suspicion that by trying to categorise the different types I may uncover another layer of information that will help me identify the leaders and the lagards.

Lots of other work on the self development front going on in the background too. I have introduced a 'passes' sheet. All of my trades are rule based but discretionary. That being the case the 'marginal' trades can have a big impact. Those that are taken and those that are not. My passes sheet catalogs those I don't take and the reasons so I can review alongside the trades I did take - completing the picture (the passes can therefore also be included in the portfolio). This sheet also forces me to take vaild trades when perhaps I am not feeling confident and I am looking for a reason not to commit. The reason is when I come to write out why I will pass and find there is no reasonI have to take the trade. Definately helpful in getting some of the emotion out.

Another step change I am looking to make is on commitment. I used to wrap myself in 'money management' in efforts to limit losses and that worked - but of course it also meant I limited gains too! So I am stripping that away and using a simpler approach. By doing this and by incrementally increasing my %risk I want to see how I react to having a meaningful amout of skin in the game.

Ramble over.




Daily chart for USDJPY. Update on the swing trade I set on the live forward test of my CHSR set-up prior to my break. Red lines 1,2,3,4 are stop, entry target1, target2. Entry was on a pull back after a break of the range. Ambitious targets were missed but I raised the stop under the next swing higher low after the entry so returned to a scratched trade.

Until tomorrow...

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  #37 (permalink)
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Wednesday 5th September

Showed good patience today as no valid set-ups, but a couple of marginal calls that I passed on. Correct decision. So September is slowly winding up for some action and I am getting into sync too. I did have a trade on the set-up I am testing which is swing trade on EURUSD. Charts and explanation below:



Price perhaps accepting both the overhead channel resistance on both these channel (blue box area) and with some weakness shown by MACD histogram divergence



Entry chart is the 15 minute. Red lines 1,2 are the stop and entry. Targets left open for now as I will see how this develops. I'm aiming for an average Risk:Reward of 1:4 for these swing trades and anticipate taking full stop losses where I am wrong.

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  #38 (permalink)
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mokodo View Post
Thirdly I am collating a portfolio of all my set-ups. I hyperlink screen shots of each trade for review and have noticed common features for different sub-sets of each. I have a suspicion that by trying to categorise the different types I may uncover another layer of information that will help me identify the leaders and the lagards.

How are you doing that then, if it's not going to give away any secrets? Are you using a wiki? I tried something like that for a while but the wiki software changed all the image names when I uploaded them and made it difficult to re-use them, let alone get them back.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #39 (permalink)
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Adamus View Post
How are you doing that then, if it's not going to give away any secrets? Are you using a wiki? I tried something like that for a while but the wiki software changed all the image names when I uploaded them and made it difficult to re-use them, let alone get them back.

Hi Adamus, good to talk again. I hope you are well. Not a techy solution at all. I just screen grab the chart and place it in a word doc so I can add my notes. I keep an excel file of all my live trades which includes a hyperlink to a screen shot too. The portfolio idea is just another angle to analyse set-ups.

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  #40 (permalink)
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Thursday 6th September



Daily chart showing the market context for this trade. Very low daily ATR and range for the recent period pointing possibly to an uptick in volatility. Summer trading over and news flow starting to get going again. Price looked poised to accept either the up channel support or the longer term down channel support. The blue box shows the area of interest for a breakout either way.



Here is the compressed 15 min chart, maybe a saucer shape forming there?



Here is my 15 minute entry chart red lines 1,2,3,4 are stop, entry, target1, target2. Yellow/pink area in panel 3 shows ADX on the 30 minute is low (<9 = pink) so I am tracking for a potential breakout for the following 20 bars (5 hours). MACDh in panel 2 is low (paints black under 0.01 on yen pairs) but is above the zero line so my bias was for a break out to the upside. But I set OCO orders for a break either way.

Break was to the upside with a 30 pip stop (under the daily low). Then things got a bit messy. I held the trade 5 minutes prior to BOE rate decision and closed for a -6 pips. I re-entered at the original entry price 5 minutes after the release. Ironically the trade only got moving on the ADP US job numbers release which is not a 'red' news event for this pair so I am permitted to hold through it. My thinking is that the better than expected job number got dollar shorts covering and were buying back dollars against yen - but lord only knows the reason, fundamentals are a complete puzzle to me.

One of my goals currently is to work on 'extension', essentially viewing each trade with a profit target determined by analaysis, not just on a 1:1 risk:reward. As this is new ground for me my approach is to split my trade in two and take off a proportion at 1:1 and then place the second at a further level I believe will be reached. In this case red line 4 is that second target which is the limit of the 20 day volatility band (thank you Fat Tails for this great indi) and also 10 pips or so shy of resistance set back on the 21st August high (left lip of the saucer). Plan is that as I get better at this to assign a greater proportion to the second portion of the trade, so eventually I get AIAO with just the higher target. I existed 80% of the position at taregt1 and the remainder at target2.

Once I factored in the loss on the news effected trade I have +31pips and 1R winner.

My swing trade on EURUSD that I SIM traded was stopped out at 1.2643 (previous post has the details). I still like this analysis and have set a sell stop at 1.2625 with a 40 pip stop to have another go. News spike stopped me out last time and may again. I would like to see a risk sell off into the US close today as eveybody empties the cupboard prior to jumpy jumpy NFP Friday.

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