Forex Trading Thoughts and....

This was a classic IB entry on the 5-min GBP/JPY chart. Previous day's high at 140.50. Price was rejected at 141.00 35 minutes earlier. The IB helped form the lower high for a run back down to test the ascending trendline which starts at yesterday's low of ~135.80. This yielded a nice profit. I really wish all trades were this easy and smooth.

The session got off to a roaring start today and didn't let up. Cable and Geppy both plowed lower from the opening bell in New Zealand. I didn't find much opportunity from a couple of hours before the London open through the lunch hour. I managed to scalp off about 25 pips on trades I thought had a decent chance of turning into a retracement moves on cable. No go. I've been concentrating on cable as my main focus lately. It might do me well to head back over to the geppy camp. It's been running pretty nice the last few sessions. I'll be keeping a closer eye on it this week. It's looking like the GM news of the Obama Administration rejecting their latest plan, yet offering more cash for restructuring(though not through bankruptcy) will take it's toll on the U.S. market Monday morning. Futures are already in substantial negative territory. There is a long shot outlook that the market could view it as a positive in that possibly more of the deadwood that's ...

I'm out of here until Sunday evening(Monday morning Euro/London). There's not too much going on with end of Q1, end of the Japanese fiscal year and G10 this weekend [I meant to write G20. And it's not this weekend it's this Thursday. Sorry for the misinformation] addressing currencies. This should be an interesting meeting. I'll be keeping a keen eye on what ever statement they release and try to have a reasonable analysis together before the start of next week. Don't forget that the UK switches to BST(GMT+1) this Sunday at 1:00am. This means everything starts an hour earlier for me. Thank God. Every so often I miss moves because they happen an hour after I sign off for the session. Have a great weekend!

Oh. My. God. Price action was so crazy tonight I can honestly say it was un-tradeable on a short term basis. I was able to get this long trade early on. Thankfully it ran far enough for a scale out at +38. At least it was profitable :-) I can only suspect this hodge podge of price action was the result of book squaring in anticipation of the end of Q1. It may continue like this through the end of the week. I sincerely hope not.

Nothing good to report except that I didn't take a loss. Nor did I have any profits. GBP/USD traded in a tight range during the very late Asian session to the mid-morning London session. I got caught in a couple of trades that looked like good setups and took two small losses. Fortunately, at the very end of the session I was able to find a nice little 40 pip runner that brought me back to break even. Whew! Tonight should be much better. Something I didn't touch on in the post on strategy from a couple of days ago are exits. Particularly where to exit and how much. I'm pulling some thoughts together as I realize this is a real weakness in my trading. They're discretionary(not a bad thing), but sometimes much too early and without reason. I'll address this in an upcoming post.

This was a very nice entry and scale out. Unfortunately, I moved my stop too tight in regards to price action. Cable can really be a mover and I didn't give it enough room. Stop loss should have been kept at entry. It was a 50 pip pullback. That's really no surprise on cable. Time to look for my next opportunity .

Since my trading strategy has morphed somewhat over the last few weeks, I thought now might be a good time to post a recap for further explanation. At this time, I'm only monitoring two pairs: GBPUSD and GBPJPY. GBPUSD has been moving briskly over the last couple of weeks, providing plenty of opportunity to bring home the pips. GBPJPY, normally a volatile pair, has been giving off fewer clear signals and has a reduced range over the last couple of weeks. I would describe my strategy as a discretionary bag of tools of which there are three or four that get used over and over depending on the situation. The strategy I employ consists of a top down approach. This means I start by analyzing the higher time frame charts, then drill down to lower time frame charts. I use candlestick patterns on the lower time frames to pinpoint entries using inside bars, outside bars, spinning tops, hammers, inverted hammers, etc. I start my analysis with the weekly chart, marking the previous weeks hi/l...

After a tough week of missing several excellent entries, I finally caught a couple of good ones in a row. The first was a break of the 1.4500 round number. Unfortunately, I was not able to grab the optimal entry at the bounce off the 4-hr 50% fib retracement. Still it was a good profitable trade. The second trade was the one I'm really proud of. I recognized price was making a play for the previous day's high(and weekly high) at 1.4597. In particular it made it's push in the last 15-mins before the London open and failed not only to reach the 1.4600 round number, but also failed to reach 1.4597 previous day's high. I took a short entry off an inverted hammer on the 5-min chart and the rest is history. Nice bit of profits added to the account.

Wow! Price action has been crazy this session so far. That tells me the market may be illiquid until the rate announcement from the U.S. Wednesday morning and GBP MPC minutes are released later this session.

It so happened I missed an early bird signal and wasn't able to find a comfortable place to jump in the mix yesterday.

Very nice trade on GBP/USD(aka cable). Entry @ 1.4032 above 4-hr horizontal S/R and 23.6 fib retracement taken from the 60-min chart. Cable had been trending up nicely since the New Zealand open. The run up was helped by buy triggers the big boys had in place. From ForexLive.com: Sources report good “Russian” interest for cable this morning and particularly strong buying interest from one particular UK corporate. Technical resistance is now seen lying up at 1.4170/75. I closed out this trade at 1.4102 for +70. Trading three full lots equates to $2100. Not a bad haul for just shy of two hours work. Not all sessions are this quick and easy. The pendulum swings both ways.

Wednesday's session was difficult to get a entry I believed would move in my chosen direction. The trend for both GBP/USD and GBP/JPY was down overall. Both were slowing their descents by the time London opened for business. Movement was slow for GBP/USD covering very little ground on it's inevitable march upward. UK Trade Balance data was released and shown to be negative. I waited for a drop that never came. Finally, I found an Inside bar formation that looked to fit the bill. No go. I took a loss for -16 when the subsequent candle invalidated my entry. That was the extent of my trading for Wednesday. I couldn't reconcile the price action of a stronger GBP to the poor Trade Balance data. Hopefully, the tea leaves will be clearer for today's session.

FXWords.com has a great couple of pages on candlestick patterns. Their examples don't just show the pattern, but also show a series of candles before and after the pattern to help visualize just what you may see.

I've come across a fantastic forum thread over at Babypips.com called Alternative Technical Templates . It's run by a few savvy currency hedge fund traders with a good bit of experience. One of the few forums where real pro traders are selflessly giving the best advice. Read it and you'll become a much better trader.

I've been following a pretty good forex blog lately called Forex Live . It's put on by some of the guys that ran Rueter's now defunct FXHub. This is one(the only?) of the few blogs that actually posts information on money flows into the market and what area of the world they're coming from. Check it out if you get a chance.

This trade started off good enough with an entry based on a lower high with an inside bar(IB). It ran down to +23 where I scaled a portion and moved my stop to entry. It eventually moved to +35 or so and retreated back up to take my stop. At least I ended up with a slight bit of profit. Better than a loss any day. These types of trades happen. They seem to take place after days where there are huge moves, like yesterday. I think there's just a lot of indecision in the market as it digests what to do next. Another post 'Big Day' pattern I've noticed is the smoother, more predictable moves happen at around 4:00am GMT. Why? I have no idea other than Asian traders booking profits.

Tonight's trade is based on price weakness at a reasonably strong resistance level. Looking at the chart, we can see price had broken through the 1.4100 round number support which then turned it to resistance. Price then made a move back up to test 1.4100. This is where the market showed it's hand with a series of weak 5-min candles culminating with an inverted hammer on the 15-min chart at the London open. The trade was eventually closed for +62.

This entry was taken when an inside bar showed up after price put in a lower high and the RSI(14) was very close to touching overbought 70 level. I scaled just over 1/2 the position at +26 and closed the remainder at +45 when the next inside bar showed up and the RSI(14) was touching oversold 30 level. This would have been a great close and reverse opportunity, but I was not quite ready to take it on. Hopefully next time. Overall, I wanted to stay with the longer term down trend on cable so I was looking for short opportunities on price pull backs. This session was a little slow compared to last night where price moved substantially lower. Unfortunately, I was returning from a weekend get away with the Mrs. and was unable to participate in that session.