As FX trading has increased in popularity, many traders have taken an interest in not only swing trading, but the automated way of trading as well.
There are many ways to skin a cat and generally, there are four methods trades can use to benefit from trading opportunities. While each individual trader will find different benefits from these and may use a combination, the choice boil down to:
1. Fully automatic trading programs
2. Having someone manage your trades
3. Following trading signals from a trading room
4. Trading using your own pure skill.
Fully automated trading, as in expert advisors, have many positive benefits that the others means do not share.
When you trade your own account, it is very easy to fall victim to common issues such as uneducated money management practices and the psychological aspect of fear and greed.
Without question, most traders fail due to the psychological issues which are truly difficult to get a handle on. Greed will make a trader stay married to a position too long and the fear factor with take them out at the first sign of trouble or of losing any paper profits. Automated systems take all of these challenges out of the traders hands and places them squarely on the back of the system. These systems trigger off with automated enter and exit prices that follow the programming of the strategy.
Since trading is global, you may be in a country that is in the opposite time zone of the majority of trading action. Automated strategies can take advantage of these times. The currency markets are a 24/5 market and opportunities can present themselves at any time.
Automated trading can be described as a passive way of trading making it a passive means of income as the expert advisor does all the work behind the scenes.
While many traders rely on their own skill, there are others that prefer a more automated way of trading. The jury is still out on most of the automated strategies out there but that won’t stop many from trying to succeed with them.
Candlesticks: Possibly the most Commonly used Trading Chart
Candlestick chart analysis is regarded as the simplest and most effective methods of technical analysis for currency trading as well as stock trading. There exists a number of types of charts such as line and bar however candlestick is popular for traders
History Of Candlestick Charts
Just like the name says, Japanese candlestick charts got its start in Japan in the 18th century. That should have been a clue as soon as you notice some of the names attributed to candlesticks like the doji and marubozu
It is commonly accepted that candlestick charts were developed by a commodity trader in Japan named Mr. Homma who was actually a rice trader. Earlier, simple line charts where used to track commodity closing prices. A candlestick chart gave traders an easy way of plotting more variables while remaining inside a 2 dimensional chart.
Although it is true bar charts show the high, low, open and closing prices, candlestick charts, due to their appearance, candlesticks really are far easier to use. A quick view of the chart will tell you if it was a bullish session (green candle) or bearish session (red candle).
Mr. Homma’s outstanding success as a trader inspired other Japanese commodity traders to embrace his analysis tool and in the early 20th century, it was introduced to the American stock market by Charles Dow, the founder of the Wall Street Journal and co-founder of the Dow Jones company.
What Is A Candlestick
A standard candlestick possess a block which is the body of the candle, plus vertical lines known as shadows or wicks that stick up and down from the body of the candle. The extreme high price of the day is shown by the upper shadow and the lowest price traded is revealed by the bottom shadow.
The bottom and top of the candle body marks the opening and closing prices in either order. Interesting enough, these candlesticks originally showed white on a positive day and black on a down day. You are likely now see other colors used, e.g. green or blue for a postitve session and red for a down session.
In a case where there is some coinciding of prices and the open, close, high and low are not all different, the candle may look slightly different.
Here are some examples:
Doji – period with an equal opening and closing price, looks like a cross.
Marubozu – period when the opening price was the low and the closing price was the high (white marubozu) or vice versa (black marubozu). Has a candle body block only, with no shadow sticks top or bottom.
Candlestick Chart Analysis In Real Time Trading
Any period of time can be displayed by candlesticks. Generally, day traders make use of the five or fifteen minute chart while swing trading and position traders use a lot longer time periods. Candlestick patters are often utilized to show prospective trends, breakouts and reversals in the market. Traders usually use other technical indicators such as a moving average alongside candlesticks when coming up with trading decisions.
Trading decisions in the live market usually have to be made extremely fast. The colored blocks of candlestick analysis help traders to view movements and reversals at a glance avoiding mistakes.
Since I started putting out videos featuring pure price action, I have received questions on candlestick patterns such as the harami and patterns such as wedges. I personally do not ever look at wedges or anything like that but I do take a look at price action via candlesticks. As a matter of fact, I know a pretty successful swing trader who factors in dojis, reversal candles, Marubozu types and even “abandoned baby” candles. All candlesticks have meaning but only taken in context of where they appear on the chart. For example, a harami at a support line tells a story about the buyers and sellers at that area. When you can “get the story”, you can decide on a trading play.
As you know, I don’t promote many things. Much out there is junk. You can find candlestick information all over the internet but it is much better when you can find it in one place. There is a website called “Candlestick Mastery” that Netpicks picked up. I took a look through the members section and I thought there was some solid information in there. 8 modules with videos. Downloads in pdf. Pretty much a kick start to get you on your way to having a deep understanding of candles and how to trade them.
Here’s a shortlist of powerful features you can get with Candlestick Trading for Maximum Profits:
Simple, straight forward approach that will produce valid signals
Combined power of in depth candlestick trading with proven price-action method
Spend less than 20 minutes a night finding candlestick trades that are at the point of making a move
Find profitable swing trades no matter what the market conditions
Learn what stocks are poised to make a move and move quickly
Good, profitable and frequent swing trading stock candidates
Learn the support and resistance levels at which you can set very safe stop losses and pinpoint profit targets
Full screen, high quality video training
New Member area with updates
The Candle Course Forum to discuss current market conditions
And a whole lot more…
Take a peak and see if it fits your trading profile
No sooner did I send out the last email when I was hit with some feedback about my trading as well as the SST.
There is really far too much to cover in regards to the style of trading that requires only price and sentiment. I hope that over the coming updates, that you are able to piece together a few things that may help you. Just know that the probability of making money on those trades is extremely high which does allow you to be more liberal with your risk % IF it suits you.
As for the SST. Nope, I didn’t cherry pick that trading day…I just pulled up the chart. So, I also decided to use the same chart (it is the trade plan that comes with the SST), to show how it did this morning during the trading times as indicated by the available trade plan. On that note, many strategies that are out there ask you to backtest to get the results. For my money, I’d rather forward test after getting the details of the strategy. I think it has more worth seeing how you do with it in live market action…even if you trading a demo account. For FX traders though, there is no reason you can’t use some “test funds” since you can trade micro units and with Oanda, any size at all.
Let’s wrap it up. The details for the EU:
Trading 2 positions
1 loss of 14 pips (x2 positions) = – 28 pips
1 winner of 20 pips (1 position) PLUS trailed position for + 92
Total = +84 pips
The chart:
Thanks to all who dropped me a line with some words on how the trading is going. I have responded to many and there are a few more to take care of. Hey, I asked for it, right? This is a long video and I hope that you pick up some useful information from it. I cover 4 trades I set up last night in the Asian session. After checking out the headlines last night, I was looking for some risk off type of moves. I wanted quick wins because in this environment, sentiment for the day can change very quickly.
The areas I was looking at taking entries and profits were taken to take advantage of the plays by the big money. They want your stops and have no problem driving price into them when they are close. Getting on that train si where I wanted to be. Note in the video that when price broke, it broke pretty hard. It is all about taking a bigger picture view and attempting to capitalize on the moves of the movers of this market. Great thing is that the probabilities of hitting in the money are very very high which allows a more liberal risk percentage than the average trade. Where most take 1-2% risk per trade, these types, for me, afford a 4-8% risk and at times, 12%.
This type of trading is not for most. Most would do better grabbing a strategy such as the SST and dedicating themselves to mastering that. The SST is something you have seen in many of my videos. If you don’t make the end of the video, make sure you sign up for the upcoming webinar that features the “entry level” SST. Check out their blog where you will see videos and many recaps of the trading days. While you are there, click the link for the webinar. Costs you nothing.
As the year of trading is coming to a close, I couldn’t help but wonder how my many subscribers made out this year. If the averages are correct, many of you are still struggling to find your way. A few of you are probably on the sidelines while, I am sure, a few of you are doing fairly well. If it didn’t happen for you this year, you can quit or buckle down and find out why.
I would love to hear how you did.
I was able to slow right down in my trading early this year. A low risk entry x2 on long AUDUSD as a position trade worked out very well. Add in the positive difference in the interest rates between the AUDUSD and it wasn’t only the pips that made the money. Near the end of the year, I just scaled back risk and only took positions on a day basis when there was some sort of news release. It certainly made for some slow weeks!
A little lax in updating the blog. When you are not trading on a daily basis you get out of the groove. If you followed the link in one of my last emails, you saw that many of my posts were ending up on a blog that is ran by a trading company called Netpicks. I don’t make money from my blog so when they offered to pay for some postings I thought “why not?”. If you missed the link to the blog, here it is: http://www.atradingplan.com/nptips
One thing that I talk about ALOT is tracking your trades. For those of you who didn’t do very well this year, you truly need to get on top of that. Even for those that did well, this can only make you better.
Netpicks is offering you a “Trade Analyzer” spreadsheet for no-charge.
Now, at a glance, you will know:
Important Trade Statistics like Profit Factor, Expectancy, Expectation, Avg Wins/Avg losses, Net Profit, Number of Trades, and more…
Various Summary Studies of your trade data so that you can see stats on specific elements of your trades
Set up Types where you can track statistical information for 5 different setup types depending on how you label your trades (Breakouts, Reversals, Trend, Against Trend, Reentries, for example)
Compare stats of Longs vs. Shorts; am session vs pm session
Wins vs. Losses; learn their characteristics so you can make subtle yet powerful changes to your trade approach
Can you see how this will help you zero in like a laser on things that can help increase you profit??
The GBP has been playing games with my trading setups this week. A short play that triggered in, stopped out and then dropped hard to my target. A long play that had the entry price missed by a mere handful of pips. When price came back again to the area, again, price hovered above my entry and then rallied. I removed the order and sure enough, price came back a third time, dropped 3 pips BELOW my entry and then rallied. Crazy huh? Sound hard to believe? Check out the last two blog posts.
Redemption was at hand. The last rally up was heading towards an area I identified as a low risk short opportunity. With an 18 pip risk and over 100 pip target, I set the pending order…and waited. About 3 hours later, my trade triggered in, dropped hard where it was closed for over 100 pips of profit. This certainly made up for the earlier short that stopped me out. Check out the video below.
That is the question. Well, not really. It is a no brainer to know that chasing price is a sure way to increase your risk, decrease your profit potential and, in time, probably blow your account. It can be tough to not pull the trigger when your initial price point was missed. Below, is an example.
This chart, the blue square, shows an order to go long in the GBPUSD. You can see by the placement that the order was placed before price was even thinking of going towards it. The red candles show that price was dropping pretty hard to the entry price and I was rubbing my hands as I noted the strength of the drop. I wanted to fade that move.
Price dropped within 5 pips of my order. That first yellow line was a risk reward area of 1-2 and I would have taken action, banked profit and breakeven stop, at that level. The market didn’t drop far enough. I kept the order in the market because there is clearly a lot more bulls in that area. Today, price came within 3 pips of meeting entry before rallying off for about +80 pips. Missed again.
Could I have just marketed in? Sure I could have and I still would have made profit. That is not a play I do though and doing it and then being rewarded by a winner is dangerous. It can lead you to think that breaking the rules is a good thing. Before you know it, your own trading has fallen from being rule based to simply “whim trading”. I could have altered my entry point and gotten in the second time. The setup I took called for a certain price. Clearly, I was in the right ballpark so changing the price would have been rewriting the plan.
In the end, I cancelled the order and will look further down for an entry. Price could again come to the area and fade a great distance. However, looking at the last rally tells me that the bulls are running out of steam at this point. This is only one trade in the line of many and I will stick to the probabilities. Price is telling a story and I will listen.
It has been awhile since I added some content to my blog. Nothing has changed except that it is summer and there is only so much time in the day.
I have put together a few videos over the last week covering some of the important news releases. Interesting enough, not many traders pay attention to these releases nor their affect on the markets. By no means am I an expert in these releases. Some general knowledge, their importance and the safest way to trade them is about it for me. I say safest and what I really mean is what makes sense for me in each circumstance. Context matters.
The last video covering the GDP release for Canada is also going to go beyond general information and will show how I traded it. Hope you pick up something from it.
As FX trading has increased in popularity, many traders have taken an interest in not only swing trading, but the automated way of trading as well.
