Forming a definable S/R strategy

[Zulu89]

GBP/USD Order

Depending on how the current candle closes, Im planning to place an order above the high of the inverted hammer and my stop below the current candle.

......Fair point and, in retrospect, I ought to have kept my big mouth shut. Ignore them - and me - for now.

Please dont, i think the number problem i have is finding reliable sources of information. So i appreciate all comments and critiques.

Hi Zulu,

P.S. I hope you're not getting behind in your Uni studies and spending all your time doing this? Apologies if I sound like a patronizing parent or tutor, but your Uni studies are MUCH more important than any of this stuff!

No dont worry, this is not having adverse effect on my studies. It takes up on average 2 hours of my day in total, thats 2 hours i could be wasting time watching tv or something. The main reason i decided to trade off the 4hr chart was that any lower and my studies would be effected. Time management wise i think im sorted

 

[Zulu89]

I was stopped out on the trade that i took last week, i was in it for 5 days. I think ill close my position if after 4 candles the trade hasnt gone my way.I dont want to be in a trade thats going nowhere for days on end.

 

[Zulu89]

It becoming quite challenging to form a strategy under the current conditions. The past two months really was one way traffic hence, capturing profits really wasnt as difficult. At the moment most of the areas im identifying as low risk are quite far from where price is currently at. I feel im somewhat limited by the timeframe i've chosen and all i can do is sit on my hands. However learn to trade in the current conditions is probably better for me.

 

[Zulu89]

I've decided to look at the 4 majors and the euro-pound yen pairs ive got a few questions i hope someone will be able answer for me.

What normally drives price of the usd/chf?

Whats the best way to determine risk appetite in the market?

Are the yen pairs always a reflection of the current risk appetite of investors?

Does Japanese economic reports have much on an effect on the price of the yen pairs?

 

[Zulu89]

So Far So.................

Haven't posted in a while, was busy with uni stuff and general tomfoolery, but its summer now, so no excuse.

Ok here's where i am now... im still demo trading and all my trades are based on and around S/R areas. i essentially have two main triggers that get me into a trade; the inside candle(IC) and the 'pin bar'. All trades i take are from the hourly timeframe.

Ive realised that if you go in search of inside candles and pin bars you find them everywhere, so i limit my search to events that occur at high value, low risk areas. In addition i only take trades from the start of the european session to early in the US session. I've noticed that more often than not the direction of a pair changes during the US session bringing an opportunity to enter a trade.

Example of Pin bar entry

This isnt the best example but we can see price rejected the 2979 level. i dont trade the pin bar but rather the candle that follows it. So i would enter on the break of the high of the candle following the pin bar.

Example of IC entry

I took this trade today, IC occurred at the start of the US session around a value area.

I have a general question. This trigger occurred over many pairs, would it be advisable to trade all triggers, as the pairs are all correlated?

 

[timsk]

I took this trade today, IC occurred at the start of the US session around a value area.
I have a general question. This trigger occurred over many pairs, would it be advisable to trade all triggers, as the pairs are all correlated?

No!
It's highly inadvisable to trade in the same direction in multiple instruments that are (highly) correlated. In effect, all you are doing is multiplying your risk. It's the same as having just one big trade - not a good idea at all!
Tim.

 

[Zulu89]

No!
It's highly inadvisable to trade in the same direction in multiple instruments that are (highly) correlated. In effect, all you are doing is multiplying your risk. It's the same as having just one big trade - not a good idea at all!
Tim.

Thanks for clearing that up for me. :clap:

No trades today, current market a bit choppy for me. It seems market participants are still uncertain as to whether the worst is over or not. A combination of mixed data seems to be the cause. Whatever the reason, i think i'm going to sit on the sidelines a bit. Below are areas i'll be looking to place a trade or at the very least, observe should price come a knocking.

USD/JPY

Yen hit 5 month low against dollar today, should current risk aversion continue ill be looking to short around 93.50 area.

EUR/USD

Trading in 300 pip range since the beginning of June. I'll be looking to play breakouts of this range or rejections back into it.


GBP/USD

Ive indicated an area of interest around the 6200 area. Not quite sure about this to be honest, though it did serve as support in mid June. Comments welcome


Trade Setup

FTSE100

Near term resistance at the 4214 price level, price was unable to break above the range of the 'Holding bar' ive indicated. 4hr trend is down, looking to go short below the low of the HB. Will see what the conditions are tomorrow morning.

Haven't really traded the FTSE before, wondering if there's any other bits of analysis i should be including.


All comments welcome :cheesy::cheesy:

 

[Zulu89]

My Trade setup wasnt hit today. better than expected data pushed price above the 4214 level, ending the session at 4236. My next area of interest to the upside is the 4305 level.

Yen pairs pushed upward today on what seems like increased risk appetite based on Tim Geithner's comments.

Nothing really screaming at me for tomorrow. Will be keeping a close eye on the usdjpy though.

 

[Zulu89]

JP Morgan obtaining better than expected earnings plus Long term purchases fell 19.8B USD, im guessing this is the reason for the slightly mixed day i had today.

Entered a EUR/JPY Trade today, was stopped out for a small profit. Here's what i was looking at.

Entered at 132.05 at the break of the inside candle, stop placed at 131.58.

After the initial push upward, i moved my stop under a recent swing low on the 15 min TF (132.33) and was stopped out on the way back down.

Any comments on my management of the trade?? :cheesy::cheesy::cheesy:

 

[Zulu89]

I'm struggling to coming up with a strategy for managing a trade once it has been placed. My problem is being relatively new to trading there is still a certain amount of fear and i want to be able to take of some profit before price action retreats and potentially takes me out of a trade. I guess what im asking for is a suggestion for an optimal management strategy. I have a few ideas:

1. i can move my stop to break even when price reaches a specific level (say 1R), however i could end up sufficating the trade and get stoppped out earlier than expexted

2. i Could book partial profits at fixed levels....but this cuts down on profits (a potentially great move could just become an accetable one, in terms of PnL)

3. I could hold a position and let the chips fall were they may.

Any form of assistance would be most appreciated.

On another note

There hasn't been many opportunities for me lately so i was thinking instead of trying to bolster my R:R. I was thinking i still take my setups from the hourly chart but fine tune my entries on a 5 min.

Are there any threads where a strategy like this is shown, or more importantly is it advisable?

 

[MakkaPakka]

No!
It's highly inadvisable to trade in the same direction in multiple instruments that are (highly) correlated. In effect, all you are doing is multiplying your risk. It's the same as having just one big trade - not a good idea at all!
Tim.

Rather depends on what you were going to do as an alternative doesn't it? I.e. if you are spreading the same number of units across a number of pairs (even highly correlated ones) you ARE reducing risk.

MP

 

[timsk]

Rather depends on what you were going to do as an alternative doesn't it? I.e. if you are spreading the same number of units across a number of pairs (even highly correlated ones) you ARE reducing risk.

MP

Hi MP,
That rather depends on what you're trading. If you're trading say the FTSE and DOW - then I'd say you're not really spreading the risk at all and doubling up on the spread, possibly paying more in commission than you would with just trading one instrument, plus the added risk of poor fills and slippage etc. If, on the other hand, you're trading individual equities, then I agree there's an argument that you're spreading the risk because any one of them could get hit by good / bad news that's specific to the individual company that doesn't affect (as much or at all) the share price of the other correlated companies. Perhaps you had another example in mind?

As for the alternative - in the example above, just trade the FTSE or the DOW, but not both.
Tim.

 

[Zulu89]

"When managing a trade should i only consider binary outcomes, i.e. im in the trade until my stop is hit or my profit target is reached or should i learn to recognise when a trade will turn against me?

The USD/CAD trade i took yesterday is experiencing some to-and fro motion in a previous vibration area, i could get stopped out on this one, but ill think ill wait to see what happens."



Hi Zulu

Stop and Target no discretion

No Stops in your judged range

imho and experience is your best option


If you opt for tight stops you must be prepared and AVAILABLE to re-enter as per your method requirement. I would advise against, benefits are questionable over the long run and it is far more time intensive. More chance of emotion / discipline compromising

if you opt for discretion keep very detailed records regards what it is you think you identified that indicated the trade should be closed before Stop or Target hit. Variables:!: :?: .......... KISS

Timeframe analysis, you could consider use - month week day to get the big picture if your not already, H4 for usual method entry , might weed out a few bad ones with limited profit potential

good journal, all best with it :clover:

feel free to bin my thoughts, just passing by

latter

Andy

Thanks Andy those are excellent suggestions, and i think your right, experience in the end will prove the best teacher. Ill keep plugging away..

 

[TAjammy]

hmmm, im trying to trade retracements better, trying to get away from the normal 'buy the breakout', trying to be more risk averse and trade the retracement's reaction to previous support and the high presented by the initial breakout-if it goes above the high il short. By the way, in that chart i would have changed the timeframe to at least 1H, to try and trade that inverted hammer, by maybe seeing one candle below it and going short, rather than shorting after that rather large H4 candle

 

[Zulu89]

hmmm, im trying to trade retracements better, trying to get away from the normal 'buy the breakout', trying to be more risk averse and trade the retracement's reaction to previous support and the high presented by the initial breakout-if it goes above the high il short. By the way, in that chart i would have changed the timeframe to at least 1H, to try and trade that inverted hammer, by maybe seeing one candle below it and going short, rather than shorting after that rather large H4 candle

Hi there TAJammy,

In the current market im taking more of a short term view, ie ill be trading via the intra day time frames.

I guess what matters, is why price is reacting at a certain level rather than the time frame it is reacting on.

So as long as you draw your lines from higher timeframes and wait for price to react around them..i think it doenst matter what timeframe you trigger on.

I took this trade today. Break retest of the asian high

Closed at last week high... (purple dashed line - last trading day high)

 

[Zulu89]

Morning people..... i just finished reading 'How Charts Can Help You in the Stock Market' by William Jiler. Its the best book I've read that focuses on support and resistance. 'TA of the financial markets' by John Murphy is good but because im trying to base my method around support and resistance, Jiler's book suits my needs a bit more.

Looking for a book that deals with trader psychology, are there any suggestions on ones i should read??


Anyway...

EURUSD Asian breakout trade today

Entered once price returned to previous breakout level.

I booked profits on 2 mini lots(demo) at 1.4300, reason being, is price has had trouble staying above that level recently. The last time price held above 1.4300 was in early June, before reversing the next day.In addition there's no major news due and momentum seems to fallen.1 mini lot is still running in case price does hold above 1.4300. Stop moved to 1.4269 below recent low.

********************************
Edit
********************************

Last remaning contract was stopped out for a 3 pip loss whilst i was typing this post.

Oh and if it isn't clear....the red dotted lines mark the asian high/low range; the purple dashed lines mark the previous days high/low; the green line marks the high/low of the previous week; blue lines mark s&r levels taken from the higher timeframes.

 

[timsk]

Looking for a book that deals with trader psychology, are they any suggestions on ones i should read??

Hi Zulu,
Mark Douglas and Dr. Brett Steenbarger are the acknowledged heavyweights in the field of trader psychology. The latter has some very good articles that are well worth reading right here in the T2W 'Articles' section.
Enjoy!
Tim.

 

[Zulu89]

Hi Zulu,
Mark Douglas and Dr. Brett Steenbarger are the acknowledged heavyweights in the field of trader psychology. The latter has some very good articles that are well worth reading right here in the T2W 'Articles' section.
Enjoy!
Tim.

Thanks Tim, gonna go through some of those articles later today, anything that would help me maintain discipline is greatly appreciated.

Trade Idea

I have a long bias on the USDJPY pair, the failure of price to close below a support level (94.65) and the formation of an inside candle could indicate a reversal back to last weeks highs.

Entry could be on the break/retest of the inside candle on a 5 min chart

Just ideas.......i will be watching to see how price reacts once NY session starts.

George

 

[timsk]

I have a long bias on the USDJPY pair, the failure of price to close below a support level (94.65) and the formation of an inside candle could indicate a reversal back to last weeks highs.

It could, on the other hand . . .
There's a nice HS pattern on the hourly and the failure to close below support only applies to this TF. Price has closed below this level on the 5 min' chart and, looking at this chart in isolation, some traders will conclude this is little more than a dead cat with a temporary HS consolidation pattern before price continues on down. You could set a stop sell order around the 'neckline' just below the low of the large bear candle at 12.40 @ 94.65 ish. That way, you've got both eventualities covered and you let the market decide which way it wants to go without you having a bias in any one direction.
Just a thought . . .
Tim.
PS. If you're a lover of Fib' levels - you'll find this is roughly a 50% pullback of the retracement from the low at 94.53 (ish) to the high at 94.81.

 

[Zulu89]

It could, on the other hand . . .
There's a nice HS pattern on the hourly and the failure to close below support only applies to this TF. Price has closed below this level on the 5 min' chart and, looking at this chart in isolation, some traders will conclude this is little more than a dead cat with a temporary HS consolidation pattern before price continues on down. You could set a stop sell order around the 'neckline' just below the low of the large bear candle at 12.40 @ 94.65 ish. That way, you've got both eventualities covered and you let the market decide which way it wants to go without you having a bias in any one direction.
Just a thought . . .
Tim.
PS. If you're a lover of Fib' levels - you'll find this is roughly a 50% pullback of the retracement from the low at 94.53 (ish) to the high at 94.81.

TBH i didn't really consider the possibility that price would go lower, i just kinda assumed that it would go up. The double top on the one hour timeframe is staring me in the face, i should have been more flexible with regards to my analysis and as you rightly say, i should let the market dictate which direction i should be trading.

There's still time to get it right.

Thanks for your comments Tim always helpful