Making Money Trading

[lurkerlurker]

GBPJPY Update

Just thought I'd update on this failed trade. Firstly, I took this signal on an hourly pin on a day of huge movement, against the trend. This is not one of the high probability setups that TD discusses here, however I thought I'd post it as it relies on a pin bar. I took the trade fully aware that there was a very high probability of failure, and I was disciplined in accepting the risk and not moving my stop away from the market. I did get a little nervous over the trade, and I apologise if my posting became a little irrelevant.

Kudos to TD, who advised that I moved my stop up from under the pin to under the hourly double bottom - this ultimately saved me 30 pips. Note that the market gapped open down 1 big figure, so I was definitely wrong on this trade. Not for the faint hearted!

As I took the trade so close to the weekend, I paid for a guaranteed stop with the SB firm I use, which would have protected me against the downside. It only cost 5 pips to do so, and given I was going long the GBPJPY over a weekend I was credited with interest which exceeded the GSO cost.

Follow up chart attached with entry and stop. Net loss 80 pips. This pair is now trading down below October suppoer, and in a congestion zone. I'll hold off on buys for the time being, but I'm not happy to sell as I see no logical place for a stop. Notwithstanding this, I've made a commitment to only take FX trades on pin bars (on timeframes of H1 and greater), so unless I see a convincing pin setup, no trade.

I'd like to point out that this pair formed valid bullish pins on 25/9 and 22/10 bouncing off the 230 yen mark, so I'll be watching for a similar signal on the dailies.

Good trading all. (and FWIW, despite my losing trade on Friday, I ended the week up, which is important to me given the losing streak I was on - the pips from the AUDCAD trade called live here by TD were also appreciated!)

 

[milan47]

Thank you. Point taken. I have missed the bullish candle on the 1 h. No trade.

Hey Milan47,

You already know what I am going to say about this setup, don't you?

You are really clutching at straws with this one.

Having said that, you have very correctly identified a key area to watch.

Let me go through each of your charts (not included here) and give you my thoughts:

Chart 1 - 1hr:

Firstly and most importantly, the pin on the 1hr chart has a body that is too large in proportion to its fairly short nose. Secondly, I don't personally use fib extensions. That is not to say they don't work it's just to say that I have not had any experience using them so I cannot comment on their effectiveness. At any rate, I can tell you that even if I did use these I would want to see the nose of a pin hitting them as close as you can get to dead on and not have it breaking right through as it did here (regardless of where it closed)

Chart 2 - 4hr:

You have pinpointed a very good area of resistance here. I zoomed out on the same TF and found this area is a significant pivot. I have marked this zone in blue. See my chart attached.

Chart 3 - Daily:

This is a very bullish candle right into our resistance area. I would be very reluctant to take a 1hr short setup in the face of this.

milan47,

I would suggest to watch your marked area and see how the market reacts to it.

 

[jitasb]

US Stocks and the TraderD method (part 2).

Hi Jitasb,

Secondly and this is personal to the technician, I lose faith in a trend line that has been broken for a significant period of time as happened here. I will keep the original line on my chart for a while afterwards to see if it retested from below but usually don't give much weight to a break back above it. I will instead re-draw in a new one.

In the meantime, I have a question to ask:

Can you post the same chart with:

i) A fib level drawn from the previous swing low (marked with an arrow on the chart) By sight alone I would say that the low of the pin bar would fall at or close too the 38, in which case you have added confluence.

ii) The 10, 21 and 50 EMAs on.

Hello TraderD

Thanks very much for you reply and the excellent points you made regarding the chart.
I did wonder about the trend line as I drew it actually in terms of it having been broken.

Any way as requested here is the same chart with the FIB levels and the three EMAs. You are spot on with the conflunece to the 38% Fib.

Out of interest is there any particular reason why you chose that swing low to draw the fib from ?
And in terms of the 3 EMAs, not sure what info to be drawn from that, especially as the gap up tends to complicate the picture ?

 

[forexbee]

Hi TD,

Thanks for your reply, got it boss, iam using MT4 platform

Looked thru GBP Weekly chart, now the pin which u pointed has formed like doji (just 8 pips diff in MT4 platform)...Still is that valid pin!

Pls see the GBPUSD pin on hourly...not sure whether did you see it 09-Nov-07... Looks like a good setup with pivot, fib peeked thru...

A Doubt, sometimes when the market makes a new high and we dont find support / resistance, how would you act in this situation...Eg: this GBPUSD doesnt have good support/resistance on daily.... but when zoomed into 1Hrs chart could find some Pivot (S/R). Would you depend on this to take a trade...

(Have marked question mark for the pinbar which doesnt qualify...Just confirm pls...how do you trade gaps when you are on trade as SB firms normally close and open position and sometimes could get gaps during that open&close)...


Fxbee

 

[trader_dante]

Out of interest is there any particular reason why you chose that swing low to draw the fib from ?

Hi Jitasb,

Fib levels measure how much of a particular move a market has retraced.

If you follow this line of thinking it is of interest to us to know how much the market has retraced from:

a) The low that the market put in just before it gapped up

b) The previous swing low which is also the lowest point in the range

And in terms of the 3 EMAs, not sure what info to be drawn from that, especially as the gap up tends to complicate the picture ?

The gap up has drastically altered the alignment of the three moving averages. The 50 in particular has gone from drifting sideways to being pulled into a sharp angle upwards. In addition the 10, 21 and 50 are all moving up and away from one another. The pin shows that the market has retraced back into the zone of the 10 and 21 and it is here that I would look for the market to confirm a continuation of the original move upwards.

 

[trader_dante]

Hi FXbee,

Looked thru GBP Weekly chart, now the pin which u pointed has formed like doji (just 8 pips diff in MT4 platform)...Still is that valid pin!

The close was 14 ticks higher than the eye of the preceeding bar but for all intents and purposes, this is a pin bar.

Pls see the GBPUSD pin on hourly...not sure whether did you see it 09-Nov-07... Looks like a good setup with pivot, fib peeked thru...

You are confusing a pivot with resistance. For an area to be a pivot it must have been tested from both sides (it must have acted as both support and resistance). Since this is at a new high it has never found support here and the 2.1130 area is therefore only resistance.

The other point I have to enquire on is your fib level. The 100% level will always lie at the point where you draw the fib FROM. If you have drawn a fib FROM the highs how can it bear any significance to the price still being at them?

sometimes when the market makes a new high and we dont find support / resistance, how would you act in this situation...Eg: this GBPUSD doesnt have good support/resistance on daily.... but when zoomed into 1Hrs chart could find some Pivot (S/R). Would you depend on this to take a trade...

I am always wary taking a position on the hourly timeframe when there is no support or resistance on the daily. I will do it on rare ocassions but the reasoning behind this is best spoken about if and when I trade them rather than try and outline the cases I would do it in now.

In this case you had the pin reaching the top of the ascending channel, some solid hourly resistance and a good looking pin. That was enough to consider establishing a short position.

(Have marked question mark for the pinbar which doesnt qualify...Just confirm pls...how do you trade gaps when you are on trade as SB firms normally close and open position and sometimes could get gaps during that open&close)...

The pin you have marked with a question mark IS a pin but it has a very short nose and as such does not show enough of a firm reversal after that huge fall that preceeded it.

Just confirm pls...how do you trade gaps when you are on trade as SB firms normally close and open position and sometimes could get gaps during that open&close)...

Are you asking me if and how I trade a gap for profit or rather how I would manage a position that has gapped against me?

 

[Reas]

Hello TD,

Another question about the drawing off s/r, trendlines etc.
You told us you did draw them on the daily and then switch to hourly to add some more possible lines.
Does the same apply for the weekly and monthly charts?
I mean, at what timeframe do you start drawing the lines?

greets,
Reas

 

[lurkerlurker]

Slightly off topic, but how wrong was I in GBP/JPY? We're down another 5 big figures since I exited my long. I see cable is also off 2 dollars. USD is also recovering against EUR. Anyone know what is going on?

 

[trader_dante]

Hello TD,

Another question about the drawing off s/r, trendlines etc.
You told us you did draw them on the daily and then switch to hourly to add some more possible lines.
Does the same apply for the weekly and monthly charts?
I mean, at what timeframe do you start drawing the lines?

greets,
Reas

Hi Reas,

Thanks for your question.

As much as I am trying to give you a clear answer, I have no hard and fast rule on this.

I make the majority of my profit on the hourly TF. So in almost all cases when I trade this timeframe I START at the daily and then switch to hourly, add additional areas as you have understood above and wait for the price to react to them.

If I trade daily bars and upwards, I will have an eye to what is happening on the higher TFs above.

 

[trader_dante]

Slightly off topic, but how wrong was I in GBP/JPY? We're down another 5 big figures since I exited my long. I see cable is also off 2 dollars. USD is also recovering against EUR. Anyone know what is going on?

Hi Lurker,

I try not to concern myself to much with the fundamentals.

However as far as I know the fall in the carry trades which began Friday was due to rumors that China would raise its interest rates in order to combat inflation.

Over in the UK we've got renewed fears of the credit crisis and a gloomy survey from the Institute of Directors showing that business confidence has fallen. In addition we've got a cooling housing market and no chance of rate rises in the immediately foreseeable future.

Remember that today the US has Veterans day - a public holiday and many markets are closed which means we might see exaggerated moves due to thin liquidity.

 

[forexbee]

Hi FXbee,

The other point I have to enquire on is your fib level. The 100% level will always lie at the point where you draw the fib FROM. If you have drawn a pin FROM the highs how can it bear any significance to the price still being at them?

Hi TD,

Thanks for your explanation, got the point on pivots.

I didnt get your point on Fib question!, i had a fxcm online class sometime back recently, they said fib lines are drawn based on how the trend iam looking at...Eg: If market iam looking is downtrend then i draw from recent high to low. In this case 100% comes in the high and then descends. i hope you didnt question this... at the sametime i think you are querying about why not draw fibs lines from pin rather than from previoud high!? if so, just tried and was not sure whether is it good to draw on the pin.

Are you asking me if and how I trade a gap for profit or rather how I would manage a position that has gapped against me?

Yes, Basically would like to know how would you look when you hold position overnight and you find a gap during the open & close by SBfirm.

Iam not sure whether gaps can be profitably traded. May be you can explain is it good to or not...

Saw your GBP chart...looks to be a good pin, but still it doesnt contain in previous bar! is there any relaxation on it like if it have a good confluence & pivots then not to look for pinbar body contained in previous bar!? ( I hope its upto individual decision on how we feel right!)

Fxbee

 

[trader_dante]

I didnt get your point on Fib question!, i had a fxcm online class sometime back recently, they said fib lines are drawn based on how the trend iam looking at...Eg: If market iam looking is downtrend then i draw from recent high to low. In this case 100% comes in the high and then descends. i hope you didnt question this... at the sametime i think you are querying about why not draw fibs lines from pin rather than from previoud high!? if so, just tried and was not sure whether is it good to draw on the pin.

Forexbee,

The reason we draw fibs is to measure how far a market has retraced. We look for price action at one of the retracement levels which is the 23.6%, 38.2%, 50.0% or 61.8%.

On your chart you have the nose of the pin pointing up through the 100% level. Since the moment the market reaches this, the whole of the move has been retraced and price has returned to where it was previously trading at, this is not a level we can make any kind of meaningful trading decision from.

Yes, Basically would like to know how would you look when you hold position overnight and you find a gap during the open & close by SBfirm.

If the market has gapped through my stop I will be taken out automatically if I had no prior warning. I never use guaranteed orders so I would, of course, experience slippage depending on the severity of the gap.

However in most markets I have advance warning on where it will open. In the FX markets, for example, I use www.xe.com to check my positions over the weekend. For some commodities, such as Wheat which I am watching today, you can get a pre-open report from the CBOT. Also, some brokers quote markets at different times so even if my broker is not open, I often know where the market will be trading when it does.

If it has gone through my stop but is very near to a strong support, pivot zone or fib level (and I can move my stop) then I will move it to this new level.

If it has gone through my stop and there is no support in sight, I will usually let the market trade for the first hour and then mark off the low or high of the day. I will then put my stop just beyond this.

Iam not sure whether gaps can be profitably traded. May be you can explain is it good to or not...

As I have said previously, I know many traders that say gap trading is some of the easiest money they make in the markets. I personally have had no experience doing it.

Saw your GBP chart...looks to be a good pin, but still it doesnt contain in previous bar! is there any relaxation on it like if it have a good confluence & pivots then not to look for pinbar body contained in previous bar!? ( I hope its upto individual decision on how we feel right!)

You have to remember that I have had a good deal of experience playing these bars now so I am able, in some cases, to make a decision based on what I can only refer to as my gut instinct.

I would suggest that while you learn the setups you stay with the "rules" (e.g. looking for the body to be contained within the previous eye) and once you are more experienced you will find that it can become more discretionary.

 

[trader_dante]

Market call - December Wheat

Entry

I have an on stop buy order long December Wheat at 767

Stop

My stop is at 743

Target:

Open

This is not a recommendation to trade.


Why I took this trade

Daily TF shows a pin bar at the bottom of a falling wedge (See chart posted after the previous session close)

Where I would look for potential problem areas

The resistance provided by the top of the falling wedge.

 

[forexbee]

Forexbee,

The reason we draw fibs is to measure how far a market has retraced. We look for price action at one of the retracement levels which is the 23.6%, 38.2%, 50.0% or 61.8%.

On your chart you have the nose of the pin pointing up through the 100% level. Since the moment the market reaches this, the whole of the move has been retraced and price has returned to where it was previously trading at, this is not a level we can make any kind of meaningful trading decision from.

Hi TD,


Could you pls provide a chart on fibs lines pls. i Understand your point on fibs... but would give me more insight if you could provide a chart.

Thanks, Fxbee

 

[black bear]

Day Pin Bar Spotted

PIN BAR DOW CLOSE

Tail wrong way round but no support for a wee bit if it goes

Andy AKA

 

[trader_dante]

Hi TD,


Could you pls provide a chart on fibs lines pls. i Understand your point on fibs... but would give me more insight if you could provide a chart.

Thanks, Fxbee

Sure.

Drawing Fibs in an uptrend

We draw fibs in an uptrend to see how far the market will retrace.

So, we start at a SWING LOW and draw the fib UP to a SWING HIGH. See Chart 1 of Gold

The circled area is the swing low so we click on that and drag the fib level up to the recent high and then release it.

As you can see, Gold has retraced 23.6% of the move up it made from the lowest point on the chart to the recent highs.

Drawing Fibs in a downtrend

We draw fibs in a downtrend to also see how far the market will retrace.

We start at a SWING HIGH and draw the fib DOWN to a SWING LOW. See Chart 2 of the Usd/Cad

Here you can see that the pin bar circled appears at a swing high. If we draw the fib from here all the way down to the low we can see that the market is heading towards the level where it will have retraced 38.2% of that whole move down.

 

[Splitlink]

I'm assuming that this a downtrending market and have drawn the Fib from bottom to top. Right now, this GBP/USD chart ar 1005 BT (1105 CET) looks, IMO, a good sell.

Any criticisms? My main one is the distance of the stop---54 points away. What opinions are there on that point?


Regards Split

 

[Splitlink]

+1125 The index rose and I have shorted at 2.0687

Split

 

[trader_dante]

I'm assuming that this a downtrending market and have drawn the Fib from bottom to top.

You mean you've drawn it from TOP to BOTTOM

Right now, this GBP/USD chart ar 1005 BT (1105 CET) looks, IMO, a good sell.

I'm watching this too but losing interest...

Any criticisms? My main one is the distance of the stop---54 points away. What opinions are there on that point?

The distance of the stop doesn't bother me at since if I was to take this short the first real support I see at yesterdays lows offers a reward of nearly twice the risk.

If you look at the daily TF you can see that price bounced almost directly off the 50 fib from one of the recent swing lows and a significant S/R pivot. See point A

It is worth noting that the market is now holding above the July highs. See point B

 

[Splitlink]

You mean you've drawn it from TOP to BOTTOM

No, I drew it from bottom to top ! Now, why the hell did I do that?

I've redrawn it again now on my own chart. Doesn't seem to have made much difference, fortunately.

Thanks

It's proving a sticker, but I'll hold on. It'll take me a while to digest your remarks on risk/reward I'm a bit slow on Fib, I'm afraid. But I'll get there.

Split