Lessons Learned From Making a Little Profit Today

I have 2 totally different subjects I want to talk about today.  The first relates to the question, "When are the best times to trade forex?"  Now I can tell you that I used to trade whenever I felt like it.  "I'm bored, let me trade during the Asian session.  I'm bored, I want to trade in the afternoon, 3 pm EST."  As an absolute beginner, you're told that Forex is a 24 hour market.  YES, that may be true but a lot of you that have been doing this for a while know that just because it's a 24 hour market doesn't mean you actually should place a trade at any time around the clock.  A lot of what I'm talking about relates to the shorter time frames and also if you want the best entry on longer term charts.  Most of the time, if you trade outside of the European and US sessions (2 a.m. EST - 11 p.m. EST) your chances of getting stopped out definately increase from my experience.   Of course you have a great chance of getting stopped out during the 2-11 time frame but you also have a greater chance of hitting your target.  I've found the Asian session almost untradeable.  There is absolutely no volatility or direction and the time it takes to watch the market isn't worth what you may get out of it.  CORRECT ME if I'm wrong but if any of you have found a successful way of trading the Asian session, let me know.  You could stick to higher volatility pairs like the GBP/JPY but with a 9-11 point spread, your already in the hole if you place smaller stop losses.  After 11:30 a.m., there are times when you can catch some volatility but I generally exit my positions around lunchtime because a lot of the time you just get consolidation.  

The second thing I want to talk about are my entry mistakes. 

I think it is important to mention the numerous times that I have been burned when I've entered a position a bit too early.  Generally I have 2 rules when channel trading during higher volatility sessions especially when I'm trading the 15 minute charts:

1. Entering before the candle closes is a big NO-NO unless #2
2. Allow the price to push at least 10 pips past your channel line

Today wasn't a bad trading day, I made $320 but should have made twice that amount.  I entered long on the GBP/USD when it closed above the upper channel by 1 pip.  The problem with this is that I'm putting too much faith in my charting software and not taking into consideration that momentum may have waned and this is just the tailend of the upward move.  For example, forex quotes are not the same amongst brokers and software providers.  An upper channel line drawn on Esignal chart may be different from an upper channel line drawn on a Tradestation chart.  So just because the GBP broke the upper channel line on my Esignal chart today doesn't mean that it broke the upper channel line elsewhere!  So I could have increased my chances of profiting if I would have given the price a little more breathing room.  I'm learning from experience that not giving the price a little breathing room or not waiting for the candle to close can cost me money.

Popularity: 3%

Asian Session May 8th

Journal Entry

{mosimage}

I decided to trade the Asian session and shorted the USD/JPY.  I was just stopped out at 0 profit/loss. 

I shorted the pair on a break of the support trendline and a break of RSI trendline.  It was good entry execution.  I waited for the price to break the trendline and then waited for the 15 minute candle to close.  After I was up 20 pips, I moved my stop to break even at 111.52.  My limit was still 111.05, right above a lower support line.  The trade was up as much as 28 pips where I typically would have closed the position.  Tonight, I wanted to show a little restraint and patience so I waited.  The pair never made it back down before stopping me out for a scratch.  

Should I have taken the 28 pip profit? Would you have?  

Popularity: 3%

Most Volatile Pairs during Asian Session

Before I dive into this post, let me tell you that from everything I've read and watched from Rob Booker (and from everything he has directly told me) it doesn't seem like the Asian session exists to him.  Now he hasn't told me this exactly but he seems to concentrate his effort on the NY Session from 7 am EST - 11 am EST.  I told you earlier today that when he was working full-time, he was trading the European session and he did tell me yesterday that you will get a lot of trade opportunities from 4 am EST.  So from the information I've gathered, I'd have to say he recommends trading during the hours of 2 am and 11 am EST.  

What about the Asian session?  For those of you that work in the United States or Canada or anywhere close to the Eastern Time Zone, the Asian session gives us a chance to actually trade when we get home from work without having to get up in the early morning hours with 1/2 a nights sleep to trade the European session.   

I will ask Rob if he recommends trading the Asian session or if any of his student have success doing so.

What I wanted to do in this post was to mention the most historically volatile pairs during the Asian Session thanks to Kathy Lien from FXCM.  Kathy did a good amount of research on this subject and I thank her for the information though I have asked for absolutely no permission to use it.  These PIP ranges are for the time period between 7 p.m. - 4 a.m. EST

Currency Pairs	PIP Range
GBP/JPY	112
GBP/CHF	96
USD/JPY	78
USD/CHF	68
GBP/USD	65
AUD/JPY	55
EUR/CHF	53
EUR/USD	51
USD/CAD	47
NZD/USD	42
AUD/USD	38
EUR/GBP	25

As you can see from the chart above, the best options for risk-tolerant traders during this time period are the GBP/JPY, GBP/CHF, and USD/JPY.

For risk-averse traders, AUD/JPY, GBP/USD, and USD/CHF provide more moderate volatility.

The only problem I see with the risk-tolerant pairs, at least 2 of them is the spread.  The GBP/JPY spread at FXCM is 9 pips, the GBP/CHF 15 pips! The USD/JPY offers the lowest spread on FXCM at 4 pips.

The risk-averse pairs are a bit better spread wise with AUD/JPY at 8 pips, GBP/USD at 5 pips, and the USD/CHF also at 5 pips. 

Popularity: 4%

My first trade in weeks

Just like that I'm back in the game.  I made my first trade in weeks going short on the USD/JPY.  Why did I decide to go short? Quite simply because of the strong resistance directly above my entry.  Early in the Asian session today, we saw the pair push as high as 118.69 but it couldn't hold. I'm looking for the pair to come back down to the 116.75-118.00 range perhaps retracing to the .618 fibonacci from the 4/3/06 high of 118.80. 

{mosimage} 

Popularity: 2%

Waiting for a Yen pullback?

I’m waiting on a Yen pullback.  The price has been hanging around the S2 pivot point all day.  Depending on where the pair is during the Asian open, I may be shorting this pair if it pulls back a little more.   Remember that this pair is trending on the 240-minute and momentum indicators aren’t worth a bit.  Right now I’m watching the Directional Movement Index, pivot points, and trendlines.  The pair will have to pull back quite a bit for my continued interest, at least to the high 116’s.

The chart below shows the S2 pivot point at 116.08, .09 below the price (bottom red dotted line).  The pivot point for today was 116.807 (thin solid black line)

 

 

 

 

 

 

 

 

 

 

 

 

Popularity: 3%

Staying with the Trend

I have started the week on a positive note and sit at +$1000.  I have been watching the DMI indicator to confirm that a trend is still in place before buying or selling a pullback.  Though I have done this successfully today, I have a hard time holding on to these trades and have not followed my own advice on where I’ve been placing my limits..  Once I can net about $300-$400 on the trade, I’ve been exiting.  Now this might look good on paper right now but the simple fact is that I don’t do this when a trade is going against me which means that my risk/reward is poor.  I set a stop but never a stop that triggers when I’m only down about $300-$400.  My stops are usually a minimum of about 30 pips so this would net me a loss of $900.  One bad trade and I’m back to square one.

Call this rationalizing but I feel like exiting now with a smaller profit may be sufficient due to the lack of liquidity in the market until either the Asian or European sessions. 

I’ll continue to work on holding on to my positions longer when the pair is going in my direction.  I should learn my lesson after exiting my USD/JPY position last week right before the big 100 pip move down.  I could see using my exit strategy if I was trading the 15, 30, or 60 minute charts but I’m usually trading the 240-minute (my favorite period.)

Popularity: 3%

USD/JPY 2006-02-21

UPDATE!!!  The pair has dropped another 70 pips since I exited.  That is why I am far from reaching my goal.

TRADE

Date: Tuesday, February 21st

Entry: Short USD/JPY at 118.78.

Reason for trade/setup: This trade was mostly based on the fact that resistance was up above at 119.00.  Furthur confirmation was obtained from the crossover of the Stochastic (9(3),3) from overbought territory. 

Initial Stop:  119.06, which was 6 pips above the high of the entry day.

Initial Target:  118.00 which is the top of the Ichimoku Kumo or cloud.

RESULT 

Exit: 118.35

Reason for Exit:  Profit taking.  I needed to get back on track this week.  I couldn’t leave $1000 on the table

Profit/loss:  43 pips / $1070

Trade executed according to plan? no; early exit

Outcome: After trade entry, the pair played with the 119.00 resistance level for the entire U.S. trading session before finally finding more sellers than buyers at the Asian open.  The pair then stalled at 118.40 during lunchtime in Japan on Tuesday evening.  The pair retraced almost back to the 119.00 mark on Wednesday during the European session before heading back down.  There is solid resistance at 119.00.  I exited the trade before my target.  The main reason was for my need to get back some of my losses from the week.  I didn’t want to leave $1000 on the table.

 

 

 

Popularity: 2%