USDCAD trade. Month end profit.

Noticed an engulfing bullish candlestick forming at 1.0940 on the usdcad (thought I'd taken a screenshot - but can't find it!) . If you look on the chart above, which is actually taken after my exit., you'll see a bullish candle open lower than the bearish close but then start to 'overtake' the open of the previos candle. A true engulfing candle would have opened lower but then closed higher than the previous open - which this did not.

However fortune, in this case, favored the brave and I was rewarded with a 34pip gain eventually cashing out when the spinning top appeared at the far right of the image.

This months results are a total of 17.5% profit for the month of May. I'm very pleased with this and shall continue to refine the strategy I'm using at the moment. I am however going to open a demo account on another platform to test out some other trading strategies. I shall of course keep everyone informed.

Good Fortune - Cash

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Pennant Breakout Arrives as Predicted

As predicted on Friday our pennant was breached upward today on the eurusd. As it’s a holiday today though, the breakout was not as dramatic as I hoped and I closed the trade after a shooting star appeared. Still some nice pips – which is better than a loss!


Noticed the USDJPY pair had reached a turning point with a couple of bearish candlesticks at a resistance line.

Entered the trade and watched as the trickle of bearish candles (spinning tops) turned into a flood! Followed it down to a 20pip profit before the emergence of a bullish candle prompted me to closeout for 18 pips.
Now looking at a 12% gain on the account this month, which is not bad considering I had a 10% loss day earlier in the month.

Slowly refining, and defining a strategy. I think my main focus is still candlesticks. Then trending and pivots. It’s looking like a powerful combo.

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Pivot point trades and EURUSD Trend and upcoming pennant

More nice trades to finish off the week. Noticed an upward trend was forming (possibly) After confirmation of the fall from resistance, I wait for the second candlestick to confirm direction - then enter a sell order.




The currency does fall as anticipated, and I wait for the expected reversal at support. This doesn't happen however and our trade drops right through support ..... and carries on going. I let it ride, as I have a 15 pip TSL in place and it eventually gets triggered, closing us out for a profit of 33 pips - excellent!

If you have a look at the image below, you will see at close on friday, the currency is beginning to trade in a narrowing range. This is forming a pennant, which should eventually be breached. I think possibly up. But I am going to place a buy and sell stop above and below to catch the movement Sundays open. Keep your eye's on it!



Good old pivot points. Never let us down! This trade was really a no-brainer as the GBPUSD was trading off the Pivot and support almost to the pip. Made two trades (second one shown here) You can see the pair briefly touching the main pivot before re-tracing to the blue support, each time the bearish candlestick signalling our entry.



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Pivot Points explained

Hi All!
After yesterdays trades using pivots as an indicator for exit and entry, I had a flurry of enquiries for clarity.
So here we go.

How to Calculate Pivot Points
There are many methods for calculating pivot points (I actually use a software based one for MT4). The formula below uses the previous day's high, low and close, along with two support levels and two resistance levels (totaling five price points) to derive a pivot point.

The equation is;-

R2 = P + (H - L) = P + (R1 - S1)
R1 = (P x 2) - L
P = (H + L + C) / 3
S1 = (P x 2) - H
S2 = P - (H - L) = P - (R1 - S1)

"S" = support levels, "R" = resistance levels and "P" = the magic pivot point. High, low and close are represented by the "H", "L" and "C" respectively. Our high, low and close in 24-hour forex markets are calculated using New York closing time on a 24-hour cycle.

Using Pivot Points
When calculating pivot points, the pivot point itself is the primary support/resistance. The other support and resistance levels are less influential, but may still generate significant price movements.

Pivot points can be used in a variety of ways. The first way is for determining overall market trend: if the pivot point price is broken in an upward movement, then the market is bullish, and vice versa. Keep in mind, however, that pivot points are short-term trend indicators, useful for only one day until they need to be recalculated. I use them for re-enforcing any candlestick action I see

Pivot points are a useful tool, which when coupled with other indicators give a powerful prediction of future direction. The success of a pivot-point system, however, lies squarely on the discipline of the trader. On your ability to effectively use the pivot-point systems in conjunction with other analysis. The greater the number of positive indications, the greater the chances for success.

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Todays Forex Trades on the GBPUSD and EURUSD

Today has been a good day! Decided to use a combination of pivots and candlesticks just before the open of the Asian session.

In Diagram 1 You can see how the Blue Pivot for the day was tested several times. The emergence of bearish candlesticks prompted me to enter a trade at 1.2853
........our trade drops to 1.2828 where we see the arrival of a bullish candlestick which arrives right on the main pivot (diag 2)– we are out, for a profit of $1320 in less than an hour NICE!

As the GBPUSD chart is looking very similar we try the same on this pair. Again our trade is giving us some nice pips – I go to make a cuppa, putting in my stop loss and, as the trade is 15 pips in profit, a TSL for good measure.
Coming back from the kitchen I see we have been bounced out of the trade.....
............but the TSL has saved the day and I still bank $400 - nice hours work.

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Back to Basics....Again! Damn Forex!

Well a disasterous 24 hours left me with a 10% loss on my account. Three trades all stopped out within 2 pips. Especially infuriating as the trades then reversed to head in exactly the direction I predicted.

Retiring to lick my wounds, I decided that a more philosophical approach was required! Turning to the book of Tao (Dao) I found this quote which seemed very appropriate for Forex trading!

"When undecided, do nothing. More will be revealed"

That lasted about 24hrs!

I decided that I would return to basics as some nice trending occured as well as the USDJPY behaving itself on the pivots.

Three trades - three winners. Back in the saddle again!

Pics of the trades below. Simple uptrends traded on the downward bounce from resistance yeilded some quick returns.
And this one!

Traded the downward reversal on this example below, as the pair had been bouncing between the pivots. - Bit more risky this trade, as the margin had been narrowing - but luckily I managed to catch the fall.


That's all for now. Good luck and have a great weekend.
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Trade On The EURUSD

As promised here is the completed trade on the EURUSD I placed earlier this week.

I had noticed a possible downward trend forming. After placing a couple of trend lines (although this formed more of a pennant/flag) I waited for confirmation at my resistance line.
This being confirmed by a bearish candlestick, I entered my sell trade at 1.2810 the trade continued as predicted and, as I couldn't watch the screen I entered a TSL (trailing stop loss) as well as my usual stop loss. Notice on the 1Hr chart below, that further confirmation is given for the downward movement by the formation of a staggered head and shoulders .
Although my trade went 30+ pips positive at one point, my TSL saved my blushes when the trade reversed while I wasn't watching and cashed me out for a profit of $600.00
See how the trend was eventually reversed in the diagram below. Which often happens in a pennant or flag trading trend mentioned above. The narrowing trading range eventually causes a breakout.
More later - That's all for now, Happy forex trading.
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Consolidating What We've Learned.

I’ve been scratching my head this weekend, looking for interesting candlestick formations and clusters to write about. I came to the conclusion that I was entering a consolidation period. Every instance I looked at, when the market opened on Sunday evening, was a situation that had been covered – more or less – by one of my previous posts. I have a couple of trades running at the moment and I will post them up tomorrow, they just reinforce the information and analysis techniques I have already talked about with one exception.

I was looking at the EURUSD charts today. I noticed a possible short term trend (down) developing. As usual, I check this info on other timeframes, and noticed that as I went out to 1hr, 4hr and 1day timeframes different trades present themselves. As I am concentrating on short term trading (hours rather than days) I was more interested in the 30min 1hr and 4hr timeframes. As I said above the 30minute chart showed an emerging downward trend. (although as I write my trade is in negative territory) This was possibly confirmed by a head and shoulders chart emerging in the 1hr and 4hr chart. However if we go out to the 1day and even monthly chart the trend becomes reversed to a clear upward trend – still well within the trendlines. When the trade closes out, later today I’ll post screenshots of these charts.

It’s a well known fact that as you increase the length of the timeline the decisions become easier to make, as the information becomes clearer and more reliable. – But, LARGE margin, and stop loss is required to trade this way. The upward trend on the EURUSD has a resistance and support gap of over 180 pips for example (Trade has just turned around and gone into profit again – exciting!) Check back tomorrow, when all will be revealed.

But to continue my point about consolidation. In my opinion, sometimes MORE information and MORE indicators, knowledge and technical analysis can lead to information paralysis. A simple set of indicators and a clear strategy for how to implement those indicators WORKS. Let's not try to fix what isn't broke. As someone wrote on a forum recently when discussing my trades "The old ways (candlesticks) work - and work well"

More tomorrow - Good Luck!
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Japanese Candlestick Clusters - More Reliability

Multiple candlesticks reinforce the possibility of a reversal. For example, if we see an upward trend peaked by a shooting star and the following candlestick is also a reversal sign – or sign of indecision by the market – say a filled in spinning top. Then we can be more confident of predicting a downward reversal. In this scenario I would personally like to see one more bearish candlestick before I entered a ‘sell’ A case in point - see below



In our example from the chart above, we see a bullish shooting star followed by a spinning top and bearish shooting star - Which also falls through our simple moving average (red wavy line). Ordinarily we would see this as a clear reversal, but if we wait for another sign of confirmation we see an additional spinning top - advising us to wait. And indeed the chart does go into a series of spinning tops - indicating no clear direction. It's just as important to know when NOT to trade.

That's all folks happy trading
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Forex Reversal Signs - Bullish Candlestick Formation

Japanese Candlesticks - The Morning Star

Continuing our look at Japanese candlesticks, and with an emphasis on real life examples, today we will look at a “Morning Star” formation.
A “Morning Star” is found at the bottom of a downward movement and is similar in appearance to our “Shooting Star” previously mentioned – So it is a BULLISH reversal sign. The main difference is that our Morning Star is HOLLOW.

We are looking for a three candlestick pattern. The first candlestick should be bearish (filled in) and be part of a previous or current downward move. Our “Morning Star” appears next and is “hollow” - Preferably it should gap below the close of the first candlestick. That is the CLOSE of the Morning star should be below the close of the first candlestick. The third candlestick in our formation should be bullish – hollow - and close halfway into our first candlestick.
The scenario written above is the IDEAL. However as you see from our screenshots you have to adapt the theory to the real world - As, in forex charts, perfect gapping is a fairly rare occurrence.



That's all for today, have fun!
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Forex risk management

Basic, but important steps to control risk and limit losses.

"Cut your losses and let your profits run"

This is a cliche you will hear time and time again. But, how do we adhere to this maxim.

Our first defence, is limiting the size of the trade we are doing relative to our account level. We should not be risking more than 1-2% of our account capital per trade.

Second in our toolbox is using our stop loss (SL). Our SL sets a limit to our potential loss. That is, if a trade goes against us by a margin determined by us we would close the trade and take the loss. This is a totally automatic process in most trading platforms - providing you set it! I would suggest a SL of between 25 - 35 Pips. Again this depends on your risk tollerance. Losses in Forex trading are inevitable, and should be viewed dispassionately as part of the learning process. Never trade without a SL.

Thirdly we can also use a trailing stop loss (TSL)to lock in profits.
A TSL works like this. After entering a trade, instead of entering a take profit (MT4 Platform) - although you can still do this if you wish, I set a TSL of 15 – 25 Pips. After the trade has risen in profit by 15 Pips my TSL is activated. This means that my worst scenario from this point is break even, as my TSL will activate a close out once the trade retreats by 15 Pips. The beauty of it is, that as the price continues to rise – so does the TSL. If we eventually end up 30 pips in profit, and the trade subsequently drops to a negative, our TSL will cash us out at a profit of 15 Pips. TSL is usually used by currency and stock traders as a long term strategy, but I like to use them to lock in profits and in choppy markets where you can get bounced from profit to loss in an instant. It also follows our rule of letting our profits run, which hopefully they will!

Trailing stopp losses are also useful tools for watching a trade when you can't. If a profitable trade reverses on you while you sleep, a TSL can save your blushes - and still fill your pockets :-)
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