My journal - Spread-betting 7 FX pairs

[awe]

Is it just me or are those Tesco Cheese & Onion sandwiches for 1GBP not only great value but totally tastalicious too?

Well, obviously high from my sarnie fix I just blew 1% going long on the AUDUSD. My technicals were sound but I had forgotten to change the timezone on the FX news calendar that I use...

The net result. News that I thought had broken 45 minutes previously (and hadn't yet been updated on the calendar) was actually due to break in 15 minutes. Cue volatility and a shake-out of my position. The thing that will make me bitter now is that once everyone has digested the news and the market has settled down, the pair will probably resume the path I had predicted initially... "Would you like salt with that open wound?"

 

[awe]

How I use the news

Hey gang!

Someone recently asked for a bit more on how I interpret the news when trading. So I've recorded a video in which I explain how I use the news before and during a trade. I go into detail on the video, however my approach to using the news is actually quite basic, so for those of you that can't handle listening to me drone on for 7 minutes about it, I've written a summary below;

I enter and exit on the hourly timeframe based on technical analysis and set-ups. If I spot a potential trade I'll flip over to http://www.dailyfx.com/calendar and aftet ensuring I'm set to the correct timezone (Grrr!) I'll check for any upcoming news bulletins that are ranked of 'Medium' or 'High' importance, that might affect the pair I'm considering trading. If there is scheduled news within an hour of entering the trade I'll hold off until about 15 minutes after the news has broken. This gives time for the news to be digested by traders and get priced into the market again.

One caveat to this is, if the range between my entry point and stop is 300~ pips or so I may still enter as I usually consider this enough room for the market to absorb the news, price it in and then continue reacting to technicals like support, resistance, ma's, etc.

If I'm already in a trade prior to a 'Medium' or 'High' news release that hasn't moved in my favour much, is around even or it isn't going so well, i.e. it's in a drawn-down position, I'll likely leave it to get stopped if that's what's going to happen.

If the trade has already moved approximately 33% in my favour I may close it there and re-assess the market 15 minutes after the news has been released and I can see the price action settling down.

Note, it's only 'Medium' and 'High' importance news that I pay attention to as in my experience it's only that that really has an effect. My opinion may differ to yours but that's how I roll with regards to the news.

http://www.youtube.com/watch?v=EeBYprWXOGw

 

[awe]

You wait all week for a trade, then 3 come along at once!

After virtually a week off, 3 trades in one day!

Sadly I deleted the first video in rage as I hadn't checked the timezone on the economic calendar I was using and I was an hour out of sync, thus the news release shook me out. If anyone wants all the details on that trade then please ask but here are the raw figures for it...

Long AUDUSD | 13:17 | Entry 0.93195 | Stop 0.93093 | Limit 0.93522 | Lot size 0.53
News released 13:30 - positive for USA
Stop hit 13:41, 54.06GBP lost. Ever so slightly less than 1%

Those figures will enable you to re-create my chart at the time, you can see I was playing a temporary pull-back from a run up after a bounce of the 200 SMA.

Right, video 1. Entered a trade on the AUDUSD long again after a perfect bounce off the 200 SMA. Also put a pending order in on USDCHF long that isn't yet filled. Give me 7 minutes and I'll tell you why...

I'm hoping the final piece of news will 'shake me in' to the USDCHF long trade whilst leaving plenty of room with my stop on the AUDUSD trade not to get 'shaken out' there.

If you're thinking "But that's crazy, why trade with AND against the USD at the same time?". Well if you're read/watched the previous video about how I use the news then you may have already worked it out. As the price is already quite a few pips above my entry on the USDCHF and the distance between my entry point and stop being quite large (as I'm playing a lot bigger move on this pair) then I feel there's time and room for the price action to settle down and the run back up to recent highs to continue. You might think given the recent bounce of the 200 SMA that there will be resistance forming there; yes there might be. But as the 200 SMA is pretty flat, a break wouldn't signify a definite change of trend so I feel it's a weaker barrier when level. I could be wrong, but for what it's worth I think the price will close above the 200SMA soon and then take off. I'll be moving my stop to just above break-even once the price closes above the 200SMA just to be safe.

Re the AUDUSD, I feel that although the news is of 'High' importance, the 200 SMA being angled is quite a barrier in case the news doesn't go in my favour so my stop is a few pips beyond that for good measure.

See video 2 to see how things pan out after the news...

 

[wellray]

Hi Awe, looking at Aud/USD, resistance at 9320, I guess you went Long? But if so, I'm wondering why you didn't wait until price gets to around 9400 i.e. a breakout. Minor support at 9140, which if gets near I think would be good for a long bet. What's your thinking / analysis?

 

[awe]

Hi Awe, looking at Aud/USD, resistance at 9320, I guess you went Long? But if so, I'm wondering why you didn't wait until price gets to around 9400 i.e. a breakout. Minor support at 9140, which if gets near I think would be good for a long bet. What's your thinking / analysis?

Hi, wellray!

If price had broken 0.94000 I would have waited for a pull-back to that level before trading long but with my current method of trading looking for a 3:1 risk/reward ratio on trades there wouldn't have been anything recent (in the last year) to use as a benchmark for setting my goal/limit/profit target for the trade so I may have not traded at all, hoping to trade the preferred bounce off resistance and down into the channel.

Today started with a nice drop bouncing nicely off the 200 SMA before another 5 consecutive green 1hr bars, I was predicting a pull-back before a contination upwards towards the 0.93540 level. This was a pretty tight trade but the recent up-trend and strong upwards 200 SMA lead me to believe the price would still continue upwards. Cue timezone quirk and a shake-out however a further re-enforcement of the 200 SMA as support ensued so a long was still considered possible.

With hindsight I have been extremely fortunate with AUDUSD today as after closing my second trade, for a nice profit this time, the 200 SMA has been smashed to the downside. Close call.

I had lines drawn around the figures you mention so perhaps next week we'll see some nice action from those areas.

 

[awe]

I've just added video 2 to the series for today on the post on page 8.

 

[awe]

Monday 19th April 2010 - New week

Hi all,

Here's a 6 and a half'ish minute video giving my opinions on the scheduled news for today and a re-cap over my USDCHF trade from Friday that is still open and nicely green.

I also give my thoughts on two pairs that I'm considering trading today; USDJPY and EURUSD. Of the two the EURUSD looks the more favourable as the trading range I'd be looking to work in is widest and therefore in my opinion more predictable. Would wait until after 10:15 BST to get in though so that the 'Medium' importance news can be priced-in to the market.

 

[awe]

I'm still alive

Hey all,

Just a quick note to say that I've not forgotten about or lost interest in this journal.

The recent volcanic eruption in Iceland and subsequent closure of UK air space until yesterday has meant that I am two members of staff down until the middle of next week. Thus their workload is now my workload as my other staff are already at capacity.

Therefore with trading still only providing play-money it's had to take a back-seat.

I do intend to give this journal more attention as soon as time permits.

I received my copy of 'Trade your way to financial freedom' by Van K. Tharp today and it looks better than I'd feared so I'll be ploughing through that over the coming week or two.

My last video showed my open long trade on USDCHF where I'd just moved my stop up to just inside break-even after a nice move north. What happened next...
http://www.youtube.com/watch?v=_ziVgWg0R2w

That's it for now people. Happy trading!

 

[awe]

Hey all,

If any of you use Twitter or Facebook to stay in touch then feel free to follow/add me. @MitchellMann on Twitter and 'Mitch Mann' on Facebook.

 

[wellray]

Hey Awe, with the benefit of hindsight for USD/CHF, regarding moving stops.... we always want to protect profit asap. while at the same time giving the trade some room, however you placed your stop right on a point of previous resistance and support, which ultimately was retested and hit the stop. I think stops should be placed slightly away from these for that reason. In this case it would also have meant the possibility of a losing trade, so tough one.
Re. trading the plan, can you spell out your rules to enter a trade? In this case you waited for a green candle to breakthrough resistance, touch the 200 then entered on a pullback, to jump on the breakout up. but this wouldn't be a setup for all trades right?

 

[awe]

Hi wellray,

I appreciate the attention you give my trades, I see you're new to the forum but what's your experience with trading? I'd love to know more about how you do it too.

Well I kinda thought that as the move had gone so far any pullback would be short-lived before continuing as we had the price confidently above the 200 SMA. On further review, yes you're right, it stopped right on previous resistance becoming support and moving back off up after, pretty text-book really. In all honesty, I totally missed that. My time for trading last week was so limited I just opened up on Monday when I had chance to see how it had developed, saw the nice move north, thought I was home-free and moved the stop to just above scratch. Gutting.

I'll summarise briefly what I do as I think I've covered it in the initial posts;

I look at 7 pairs on a daily time-frame and have about 1 years worth of price data. I'll try to identify trends and short-term price consolidations like regular bounces in a clearly identifiable channel. If the market is part way through that channel I'll dive into the hourly and look to get in on the back of it and ride the rest of the move. On the hourly I'll check for further S/R and MA interaction areas with the price and use those to judge if it's a good time to be entering a trade.

I'll then pick a stop and a limit based on previous S/R, MA's, chart patterns etc. I plug those figures into my spreadsheet that then gives me the entry price for a 3:1 R/R ratio and the lot size required to ensure I only risk 1% of my bank in any single trade.

Happy trading!

 

[wellray]

Thanks, I guess that's a mixture of rules with an amount of discretion. I previously tried trend following but won a load and lost a load - couldn't stick to the rules really but ultimately the timeframe didn't suit me and the way of choosing stocks - I should've been doing some fundamental analysis too I think. I've been reading books now and on the message boards trying to find "an edge" for swing trading. I'm looking for 3-15 day swings rather than intraday and I'm starting to use S/R & MA's now again to enter and exit on uptrends. I spreadbet using IG (although experience of IG has been poor). I liked DionysusToast's mixture of fundamental + technical although it's a lot of work.
I do need a method to follow as the more discretion, for me, the more emotion and attachment comes into play and profitable trading needs to be boring. I do look at charts draw the lines and do the techical analysis and then ask Why? Why do I think it will go in that direction? Hopefully I can become comfortable that TA is sufficient for stocks or commodities or forex - the search is on!

 

[awe]

Thanks, I guess that's a mixture of rules with an amount of discretion. I previously tried trend following but won a load and lost a load - couldn't stick to the rules really but ultimately the timeframe didn't suit me and the way of choosing stocks - I should've been doing some fundamental analysis too I think. I've been reading books now and on the message boards trying to find "an edge" for swing trading. I'm looking for 3-15 day swings rather than intraday and I'm starting to use S/R & MA's now again to enter and exit on uptrends. I spreadbet using IG (although experience of IG has been poor). I liked DionysusToast's mixture of fundamental + technical although it's a lot of work.
I do need a method to follow as the more discretion, for me, the more emotion and attachment comes into play and profitable trading needs to be boring. I do look at charts draw the lines and do the techical analysis and then ask Why? Why do I think it will go in that direction? Hopefully I can become comfortable that TA is sufficient for stocks or commodities or forex - the search is on!

Your journey sounds very familiar to me and I'm sure many others. It's a well-trodden path that's for sure!

I don't think there's a shortcut to experience and finding out the hard-way. I think if someone can come along, learn a proven trading methodology and stick to it then they're not human.

I've tried SO many indicators but came to the conclusion that they're all just different ways of displaying the information that's already in the charts, so I've kinda gone full circle and back to just drawing my lines and using S/R and MA's.

TA works, in my opinion, because aside from supply and demand (which I don't think affects FX as much as stocks and commodities) it's all about emotions (greed and fear) or perhaps not even that so much nowadays as plain old expectancy. What people expect to happen given certain things. The beauty of it in my opinion too is that it's so predictable. Thousands of people thinknig "the price bounced solidly off that level before, it will probably do it again so I'll put a long/short order in now just in case" when all those people thinking the same enter those orders it becomes a self-fulfilling prophecy and that re-enforces the belief in those people for next time.

The real magic I think is in money management. I still buzz about that since I discovered for myself how I could pick more losers than winners and still make money. Sure I'm in the infancy of my new trading path, but I do feel this is as close to "cracking it" or having "an edge" as I've ever been.

Good luck and please stay in touch.

 

[awe]

Not gonna post a video just to give my thoughts for the markets as it'll be far quicker and easier just to post it here;

GBPUSD - Seems to be trading in a narrow range for the past 2 weeks with most daily candles covering a significant amount of the channel so would make a continuation trade difficult. Waiting for a break to the high or low side.

USDCAD - The overall trend here is still down with the current lows not having been seen since July 2008 so makes trading in my opinion difficult given the usually short daily ranges. Can't see anything happening on this pair for a while.

EURGBP - Broke to the downside of a sloping support line that I'd drawn and has retested previous support from January. If this support breaks to the downside I may put in a short position. I actually quite strongly think this will happen and it'll be a nice and pretty fast move. I may also go holidaying in Europe too if that happens and gets near out Oct 2008 lows.

USDJPY - I see resistance around 94.580 which if broken could see a nice run up to around the July 2009 high or a nice bounce off that resistance could see price fall back into the current channel to the 92.050 support area with no major MA interaction.

EURUSD - Recently this pair has been retesting the previous support at around 1.32770 and it hasn't broken. If it does we could see price move down to around the April 2009 lows. If it bounces properly we could run up to around the 1.36070 level or more conservatively the 1.34990 level.

USDCHF - Price recently re-visited the highs of February 2010 and failed. I'm hoping to see two consecutive red bars before entering a short position and riding the continuation of the recent channel down to around 1.05060

AUDUSD - I think Ill be staying away from this pair for a while yet. Nothing seems to be happening and it's proved for a couple of very hairy trades lately. I've got a triangle drawn on my daily chart which should run out of room over the next couple of days. I think I'm only likely to play a break to the upside of about the 0.93730 resistance area, but even then I'll be cautious.

In short I'm closely watching; EURGBP, USDJPY, EURUSD and USDCHF.

N.B. - This is purely based on technical analysis, if I do consider entering a position I'll also refer to the news releases affecting these pairs.

 

[wellray]

I agree, it's the greed and/or the fear, but hardest is the discipline. I'm reading pozzyp's journal at the moment too. He's a pro sharing his setup rules for intraday forex. Very interesting and might be worth a look for you

 

[hamham]

Hi
Just started looking at you journal looks good.
Im new to FX and need all the help i can get
regards

 

[awe]

Hi
Just started looking at you journal looks good.
Im new to FX and need all the help i can get
regards

Hi hamham!

Welcome to the board and thanks for posting. I hope my journal can be of use to you and if you have any questions feel free to ask.

My immediate suggestions for a new FX trader would be; if you haven't already done so, open a demo account with a broker and get used to their trading platform, I use MetaTrader 4 and can highly recommend that.

Then read read read! Get all you can out of services like investopedia.com and from the brokers online literature resources. IG Index and Alpari both have some good online texts you can read.

And thirdly, join a forum like this one and ask questions!

Happy trading!

 

[awe]

2 potential new trades

Hi guys,

Here is a video documenting my reasons and thinking behind two trades that I've entered (but have not yet been filled/executed).

I've gone for a short on cable (GBPUSD) and a short on fibre (EURUSD).

Give me seven minutes, and I'll bore you to tears...
http://www.youtube.com/watch?v=3CLlVhnnnfQ

UPDATE - Neither trade has been filled yet. I've adjusted the stop and limit on cable to move the entry point down slightly in the hope it will get filled today.

UPDATE - OK so my short order on EURUSD got filled. Here's an update video...
http://www.youtube.com/watch?v=3N1wnwUiYpU
I stopped recording too early, I hadn't gone over the news...
http://www.youtube.com/watch?v=q4DoK4E_hsg

I forgot to mention how the news at 13:30 might affect my cable trade. If I get filled on the order prior, then it will hopefully have the same beneficial effect I'm hoping it'll have on EURUSD. If I'm not filled on cable and the price moves away I'll probably pull the trade.

Best,
awe

 

[awe]

Not trying to thread bump at all, honest!

Just forgot to add my Skype ID in a previous post. It's mitchell.mann1

 

[LiamH]

Hi awe,

Interesting and informative journal you've got here, will be adding this one to my favourites.