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%

Should have traded when it fell back in channel.

Journal Entry from European Session Monday Morning

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I'm just now entering a journal entry for a trade I made this morning at 4:30 am.   We had a breakout of the upper channel GBP/USD at 4:30 am this morning and I thought we may see a little volatility so I went long at the close of the candle.  As you can see, it was quickly stopped out as the price entered back in the channel.

According to Rob Booker's rules, if the price falls back into and closes back into the channel, you can reverse your trade or place a new trade if you were stopped out.

I was stopped out and should have went short on the GBP/USD once this happened.  I would have had a stop at the bottom of the channel which would have been good for 50 pips or so.  

There's always next time. 

Popularity: 3%

Volatility this Wednesday, Thursday, Friday

I've been trying to keep on top of economic announcements because they are at the core of the Rob Booker channel trading strategy.  I've created an Economic Announcement PDF with notes that were modified from material provided by Rob Booker.  

According to the calendar, we can expect volatility in the market on Wednesday, Thursday, and Friday this week.  Before then, traders may be sitting on their hands waiting for Bernanke's announcement on Wednesday afternoon. 

 Forex Economic Calendar 08/05/2006,14:43 561.15 Kb

Popularity: 4%

May 2nd NY Session

I'm in short trade right now, USD/JPY at 113.25 with a 30 pip stop.  It's currently down 15 pips.  I just really need a winning trade right now.  I'm not going to do anything stupid though and I'll follow the rules and hopefully I'll come out on top.  

I opened the trade at 8:30 am when we started to get some volatility.  It has since dried up.  There are no major economic releases today.

I'm about to get stopped out.  I have to admit that I'm fighting with myself over the stop.  I want to move it up so bad.  I won't touch it. 

I didn't touch it but I was stopped out.  Wow, I don't know how many trades I've lost in a row.  Since signing on with Rob Booker, I have 1 winning trade and 9 straight losers.   One thing is for certain, I'm great at picking the bottom when I'm shorting.

Trade Details

The red thumbtack is where I went short.  I was stopped out
2 candles later.  I went short after a close below my lower channel. 
The volatility dried up and the squeeze dissipated quickly after 8:30
am.  

 

 

 

 

 

 

 

 

 

 

 

Popularity: 2%

Studying in Advance for Next Week

Booker has me a lot more attentive to upcoming Economic Releases and the trade opportunities that can arise.  Therefore, taking 1 day at a time, I took a look at the Global Economic calendar for Monday, April 24th to see if any pairs may exhibit volatility due to any releases.   It generally looks like a light day with NO economic releases out of the United States.  The UK does have a couple of releases at 4:30 a.m. EST including Retail Sales (month over month), Public Finances, and Money Supply (month over month.)  Last month during the retail sales announcement, the GBP/USD moved about 30-35 pips following. 

Therefore, I will plan on getting up at 4:00 a.m. Monday morning to look for a trade opportunity in the GBP/USD using short-term charts (15 minute?)

I'll be going through more of Rob's lessons this weekend and will keep everyone updated on my progress.

I hope everyone had a great trading week.   Have a relaxing weekend. 

Popularity: 3%

TTM Squeeze Indicator Update

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I've received many requests for my version of the TTM Squeeze Indicator. I can't technically call it the TTM Squeeze Indicator because it doesn't have the exact functionality as the indicator that costs $300+.  Specifically, the difference isn't with the actual squeeze indication because that is exact.  The difference is with the corresponding momentum histogram.  While my momentum histogram provides the same trading direction as the TTM proprietary Squeeze indicator (bullish or bearish), it may not provide the smoothing characteristics that seem inherent in their momentum histogram.   So my indicator will provide you with the exact functionality as the TTM Squeeze Indicator for SQUEEZE indication and entry direction.  What it won't provide exactly is momentum change for exit.  They recommend that you exit when the momentum oscillator starts weakening.  I would recommend the same but I cannot say for sure that their momentum oscillator is any better than using the MACD or Momentum indicators for exit.  From my experience, it is best whether your using the TTM or my squeeze indicator to get additional confirmation for exit.  

Either way I find this indicator to be great for showing an "explosion" of volatility and even though you can create this indicator yourself using Bollinger Bands, Keltner or Donchian channels, and a momentum indicator, it just doesn't compare to having a nicely formatted custom indicator with colored dots. 

The real reason for this post was to let everyone interested in this indicator to give me a little more time to release the newest version of it.  Right now I'm providing the FP Squeeze Indicator (Forex Project Squeeze Indicator) version 0.1.  After I've completed version 1.0, it will more closely emulate the TTM indicator, most likely as close as it possibly could.  The only way I can see it emulating the TTM indicator closer is if John or Hubert from TTM reveal more about their momentum oscillator.  

Currently I only provide a version for esignal but I'm thinking about providing it for MetaTrader also.  I've received requests for Tradestation but unfortunately I don't use Tradestation so I don't have any way of programming it on this platform.  

Look for the newest version next week.  If you want me to notify you when it's complete, drop me an email and I'll add you to the list.

Popularity: 7%

Understanding Market Structure

There is another decent article in Stock & Commodities magazine regarding market structures.

Sometimes I neglect to identify the underlying market structure before entering a trade.  I’m hoping this post will help you and I.

This article identifies 4 market states:

1.     High directionality - low volatility : prices moving steadily up/down with no or little reaction or correction.  Trend following systems work fine in this scenario and oscillators will continuously give false signals.

2.    High directionality - high volatility : trend is well-defined and corrections are deep and volatile.  This scenario favors swing traders and counter-trend traders.

3.    Low directionality - low volatility : no or little direction and moderate volatility.  This is a very difficult environment to trade in and traders should wait for a new trend to ultimately emerge.

4.    Low directionality - high volatility : no or little direction but deep swings.  This market state favors swing, counter-trend, and short-term traders.

Click Read More to Continue reading. 

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Popularity: 2%