The Consistent Trader

Last Post

2009-05-02T07:48:00.000-07:00

Guys,

It's been about 3 months since I started blogging here and the discipline has given my trading the edge that it needed. After 3 months I'm 30% up, the equity curve is steady and risk per trade has been minimal... and I'm really enjoying it.

Fundamental in this process has been Tom, my good friend and trading partner, who has agreed to come onboard and blog in his own right.

So, from now on we can be found at www.the-consistent-traders.blogspot.com

The aim, here, will be to inrease the tempo and - hopefully (... Tom) - enrich the content.

Hope to see you all there... Rob W.

Get Your Skates On !

2009-04-29T12:43:00.001-07:00

Guys, I hope you got your pips out of Cable's move. I took profit just below my 1.4800 target - after a nasty reversal - but the trade netted 3% account so more than happy.

The reason I write is an over-extension on AUDUSD which I entered short a pair of hours back and it has dropped significantly since.

I haven't got the connection to go into detail right now but look at the 1H chart and you will see that it's daily pivot has been missed and earlier it soared right through R3. My stop loss is above the last recent high (50 pips or so at the time of entry) and it may well still test this before a concerted effort back South but I think it's worth a look.

I will post charts later.

Sorry for falling behind the curve on this one. R.

Loving the Cable

2009-04-28T12:23:00.000-07:00

I've just gone long the Cable, which given it's tightening range probably strikes you as pretty strange behaviour. Allow me to explain...

You can see from this chart that having returned to its spiritual home of the 1h 800 sma, the pair has ranged and the moving averages are squeezing together nicely. On the face of it the pair could break either way.

However, I note that the 800 sma has twice repelled Cable to the upside and it looks like it wants another go at downward sloping resistance. I think that there may be a reason for this, and the clue was passed to me by a very sharp individual called Rob Booker...

You can see from this that last week it never managed to tag its Weekly Pivot point. Now that's rare.

...Also, on last monday, not only did it fail to tag its Daily Pivot, but it blew right through its S3 support. This is also very rare.

These 2 levels are co-incident at 1.4830 and that's where I am hoping the pair want to re-visit.

A safer trade would be to wait until the pair closes on the 1H time-frame above sloping resistance, but if it achieves this, I want to be leveraging the trade up.

Rebound

2009-04-21T11:09:00.000-07:00

Okay so Yippon broke to the upside.

As I posted earlier, I took the trade as I had planned on a convicted 5min close and targetted the 5minute 800 sma.

Here's how the trade looked...

This quick trade netted another 2% for the account.

As you can see the pair is currently ranging around the 5min 800, between the 2 red horizontal lines. For those of you with the time to watch closely, a break to the upside might make the 1H 200 sma, but for me a break down is a litttle more likely in the first instance, so the risk to reward doesn't quite stack up and I don't want to sully such an outstandingly profitable week.

Pivotal

2009-04-21T00:57:00.000-07:00

'Yippon' is currently trading at a pivotal level...

Overnight and again this morning it tested its rising support line and the horizontal significance of its current range can also be seen on this 4H chart.

The range is 141.51 to 143.42.

A 5 minute break above this level would trigger a short term trade back up to the 5minute 800 sma although based on Fibonacci and previous horizontal resistance, 145 dead would be a safer target.

A break below 141.50 on a 1H basis would have greater medium term significance, with 140 dead as a realistic immediate target and 135.60 achievable.

Bingo !

2009-04-20T11:35:00.000-07:00

Those who took the Yippon short with me ought, by now, to be settling back with a G+T, for it was a cracking trade that netted 375 pips and 7.5% account.

This is how it looked...

The grey rectangle represents the portion of the move that I traded.

You can see that the pair initially broke out overnight (UK) but I woke to see it re-testing previous support as resistance.

I then doubled my trade size on the first significant pull-back on the 1 minute chart...

Then I sat back and held my breath...

Profits were taken at the 161 Fib level, which in the light of where the pair are now seems very conservative - particularly since I had predicted a move back to the 1H 800 sma - which has since been hit...

So, why did I target the 161 Fib ? Well, my last slug of backtesting indicates a probability superior to 95% that a breakout on this pair will make the 161.

Which means that I took the quick, 'stress free' pips.

Lessons ? Just One. I did attempt a re-entry later on but closed it out for a small profit, even though it was starting to move my way. Why ? Well for me, once I have taken profit it feels like the psychological bond with the trade has been broken. The new entry feels like I am chasing it; it feels greedy, I fret about giving the pips back and it just doesn't work for me.

Solution... Either leave a small position running or be happy with the quick pips.

Still, I'm not going to thrash myself too much over what was a very successful trade. I hope it worked out for you too.

Back In The Saddle

2009-04-19T09:46:00.000-07:00

Those of you who follow the Sterling pairs will know that they have been somewhat tricky over the last couple of weeks. As a result my account has basically stood still...

...However, back-testing progress has been significant and as a direct result of this graft, I am focussing on this trade idea for the coming week.

GBPJPY

As can be seen from this simple chart 'Yippon' has been range-bound for 9 trading days...

Further, I note that it tried to break out to the upside early on Thursday morning but was quickly turned back.

On this Daily chart we see that having risen back above the 62 ema, the pair has, thus far, been resisted by the 144 ema.

... I also note that it is 0verbought, and on both MACD and Stochastic Oscillator - it is becoming divergent.

So I am thinking that it might well be due for a trip back down to its rising support line - which you can see is co-incident with the Daily 62 ema.

Let's come down in range to the 4 Hourly chart...

Here, I like the fact that it closed the week below the 4H 62 ema. I also like the fact that the 200 sma (It's next dynamic support) is co-incident with technical rising support.

... And on the 1Hour chart...

... I like the way 62, 144 and 200 moving averages are intertwined, I like the descending price action over the last trading day and the fact that the 1H 800 sma is also co-incident with rising support.

Now, don't get me wrong, this pair is ranging because no-body wants to commit in either direction and I certainly don't have a crystal ball. But for me, at least, evidence of a short term thrust to the downside is mounting.

So, assuming my analtsis is correct, how am I going to trade it ?

Well, even if my hunch is right I suspect it is due one more test of that steep descending resistance line before it tanks. If so I will open a small pilot sell on a convicted 15 min reversal against at this resistance.

It may of course just tank, in which case my intention is to sell it on a 1H close below 145.70, and keep shorting it all the way down to the 1H 800 sma, which by this stage should be co-incident with the 161 Fib level.

But what if I am wrong ?

For me the first indication would be a convicted break of descending resistance. At which point I will enter a break away from the 5minute 800 sma long and target a re-test of the high at 151.50.

Whatever happens, the eventual break of this range is going to be explosive. And when it does I am determined to be on the right side of the market... and to squeeze as many pips out of it as I can !

Tightening

2009-03-29T03:14:00.000-07:00

As we look forward to the G20, this coming Thursday, everything seems to be tightening up...

Cable was turned back last week by major sloping resistance.

Having almost got back to the 4H 800 sma, GBPJPY is sitting back in its tight range around 140...And GBPCHF speaks for itself !

But are any of them tradeable ?...

My answer is, not just yet; but here is what I am looking at...

Cable

After the slapping the Dollar took in the wake of the Fed's recent decision to 'print money', it has started clawing back its losses against pretty much everything.

Right now Cable is hovering around the 1H 800sma. Whilst it is long overdue a return to it's 4H 800,which is just off the top of the chart, the Head and Shoulders pattern it formed last week makes - in my opinion - further downward movement more likely in the short term.

And if it can break away from the 1H 800 to the downside it will likely close below 2 sloping support lines.

At which point next major support is a long way South.

This isn't to say it won't head back North - hey, what do I know ! - It's just that I don't see a viable trade there for me.

Not so GBPCHF...

I think the boundaries of this tightening wedge are tradeable in either direction, depending on what the pair does when it reaches them.

In particular,I'd love to see it regain the 1H 800 sma (blue line), where a subsequent breakout would either constitute a break or bounce of sloping resistance that has turned it back since the old king died (...!)

Bottom line, nothing on just yet but it could be a big week.

The Story So Far...

2009-03-29T02:54:00.000-07:00

Last week did little to excite. I lost on a couple of early trades but pulled the week out of the bag with a nice short term divergence trade on GBPJPY. With 1% account in the bag by Wednesday I didn't see anything sufficiently interesting to tempt me back into another trade for the rest of the week.

This in itself is progress over where I was with my trading in the bad old days and whilst the week's gains have been modest, they are gains none the less.

At the conclusion of my 9th live trading week, 8 have been profitable and the account is 15% up, which is a better start than I might have dreamed was possible just 2 months back.

What am I learning ?

1. Modest, consistent gains are better for my mind-set (confidence) and my bottom line... over time.

2. Time spent analysing is infinitely more productive than market watching, since...

...Conviction is everything. If I really believe in a trade, I am prepared to load it up and stay with it... and it generally comes in.

This all rhymes with trading less, not more. If I only traded those set-ups I had high confidence in my profitability would jump again.

Crazy ?

2009-03-19T14:55:00.000-07:00

Who would think of shorting EURUSD in the light of the last 2 days ? You'd have to be crazy, right ?

Well, maybe not.

This pair is 2 days and (a massive) 430 pips from the 5m 800 sma, which is a long time (statistically) and nearly 5 times the average distance it moves before returning; that's nearly 3 standard deviations !

...Also, the pair has come up against strong historical resistance at 1.3680 and the Daily 800 sma.

...The 1H MACD is divergent...

...The 5 minute chart is forming a 'Head and Shoulders'...

And tomorrow is Friday... the day of reversals.

I wouldn't mind betting it will re-test that resistance at the Asian open. But, whatever, I'm going to be ready to short it on a strong 5min close below that neck-line.

With respect to profit target, I don't think the 5min 800 sma is realistic, but the measured potential of a reversal against the neckline coincides with recent support at 1.3518

... which is still 130 pips from where it is now and presenting of a very juicy risk to reward ratio.

I might just have to stay up for this one !

Not Bad...

2009-03-19T13:59:00.000-07:00

At the back end of last week, I wrote that I felt Sterling was due for a bounce - but that GBPJPY might complete its cycle back to the 800 sma beforehand. I also said that USDCHF's lack of 'follow-through' might be the prelude to a fall.

So, how did I do ?

Well, by Tuesday evening I was 150 pips and 1% account down having entered, then wimped out of, both the GBPJPY and USDCHF trade plans. Had I stayed with the latter I might have made an awful lot of pips. Bugger.

However, having watched a head and shoulders forming on GBPCHF throughout Tuesday, I resolved to enter short if it broke the neckline and 1H 62 ema, targetting the 200 sma, as my back-testing has taught me that this is a very high probability set-up; particularly on this pair.

Here is the set-up...

...And here is how the trade went.

I actually entered 2 positions, a 'pilot' position as it started to break on the 5min chart and then a second, 2 times standard lot size on the 5min close below the neckline.

This was such a sweet set-up that I felt very confident throughout and exited 4 hours later with a profit of 200+ pips and 4% account.

Incidentally, if you look back at the first chart you will see that the pair went on to touch its theoretical profit target of 330 pips, based on the measured distance of neckline to the peak.

My second prediction that Sterling would rise, was assisted to fruition by the Fed, yesterday afternoon. I don't know about the rest of you but I found it very hard to sit on my hands as the Dollar tanked against everything - especially CHF, given my earlier prediction.

Personally, I responded by shutting my laptop down and walking the dog. Despite my earlier success I was gutted not to have capitalised on my instincts and didn't trust myself to trade.

However, the sun came up this morning and seeing a consolidation box forming around the 1H 800 sma I resloved to buy a 1H break-out of this zone.

Here is how the set-up looked...

And here is how the trade went...

This was another belter,with 160 pips banked, but since I had already made my profit target for the week I was trading the 'beer money' rules and so came away with just under 1% account from the trade.

I can't justify my reason for exiting when I did beyond the fact that I saw momentum starting to wane on 5 and 15 min charts, and that I felt the pair had probably risen enough for one day (!).

Now I am looking to re-enter long, particularly if we get a decent bounce off the (pink) descending support line. However, whether I will have the bottle to carry this through - especially on a Friday - remains to be seen.

Here's a Thought...

2009-03-15T15:48:00.000-07:00

Last Thursday the BoS dropped their base rate to 0.25% and within an hour Sterling and the Dollar spiked massively against it.

Here's the USDCHF 1H chart; which roared up 315 pips.

But what has surprised me since is the lack of follow through, which given the strength and pace of the initial reaction strikes me as strange.

So I pulled up a Daily chart on which I was planning a short trade some weeks back. Here it is unadulterated...

As you can see, its rise has been halted by that old rising support now resistance...

... and I just wonder if this pair is finally running out of steam.

So, turning our attention back to the 1H chart...

...I've drawn a horizontal support line beneath the latest consolidation zone at 1.1833. I note that
this level has been a significant support before.

From here it's either going to gather its skirts and burst through that sloping resistance line. Or, it's going to fall and close back through support.

And if it does, I'm going to short it.

Sterling Bullish ?

2009-03-15T11:14:00.000-07:00

At the conclusion of my last post I offered the opinion that downside potential on all of the Sterling crosses looked to be dwindling and the back of the week saw the 3 that I follow reverse.

...which is encouraging.

As planned I did have a couple of cracks at shorting GBPJPY back to the 800 below 155.50 - which it made - but it was a choppy old descent and I was not sufficiently convinced / too nervous to stay with either trade. Net result; 120 pips lost.

If I don't really believe in a trade, I can't seem to make it work and am better off staying clear. This is a Lesson I could do with hoisting in.

Once the reversals happened I traded much more positively, scooping another 200 pips on Cable and GBPJPY before the trading week closed.

I ended the week with the Account 3% up, which - unsrprisingly - I'm pretty pleased with.

Looking forward, the technicals for Sterling remain bullish. Here are my tactics...

GBPUSD

Having already taken 100 pips out of Cable's return to the 1H 800, I am a buyer on a 'strong' 1H close above 1.4067 and will add a position on a close above descending resistance. Profit Target will be he 1H 800 sma.

GBPCHF

After last week's massive reversal spike following the BoS Interest rate cut, I am very bullish this pair...

Having said this, I'm happy to go with a strong 1H breakout from it's current consolidation around the 1H 800 sma in either direction.

GBPJPY

Having taken 100 pips out of this pair's recent reversal I'm going to stay on the side-lines until next week's price development generates a more emphatic trigger, either way.

In fact, I'm hoping that nothing triggers too early in the week (and forces my hand) as my instinct tells me that the first couple of trading days could be choppy.

Of the two trades I am currently looking at, Cable is my favourite as it is completing a cycle.

Sterling Triggers ... Again

2009-03-09T13:02:00.000-07:00

After last Monday's dissappointment it was perhaps for the best that I spent the rest of the week out of the country and unable to to trade.

However I returned home early this morning to see Cable, GBPCHF and GBPJPY all shaping to re-trigger the short trades I had first anticipated last week.

Between 0900 and 1000 I entered small shorts in each of these pairs and at around lunchtime profits of 550 pips and a shade under 3% of account were taken off the table. Hurrah !

This emphasises, again, the virtues of patience (albeit forced in my case) and tennacity if a sound strategy doesn't at first succeed.

So, where from here ?

Well each of these pairs still has downside potential before support targets are met.

GBPUSD

Whilst the current continuation pattern may dissipate overnight, I wouldn't enter short until support at 1.3737 can be broken with conviction. I would be targetting the all time low at 1.35 initially.

GBPJPY

This pair looks to be forming a downward sloping channel but for me the key support level is 135.50. A convicted break of this level early - and on volume - might result in a return to the 1H 800 sma as it converges with older support levels around 133.50.

GBPCHF

This pair appears to have the most downside potential of the 3 with the lowest lows way off at around 1.52

However...

With big moves complete, pips banked, significant 'white space' between price and 1H moving averages and dwindling MACD momentum on the shorter term (5-15 min) charts, my personal appetite to the downside on all of these pairs is not what it was.

If I go short again it will be on one pair only, for beer money, and only then if all 3 are falling together.

... And of the 3 I favour GBPJPY, simply because it will be completing a divergence 'cycle' on the 1H chart.

With respect to Cable and GBPCHF, I am more interested in waiting for a short term (5m) divergence opportunity - later in the week - if continued downside is not reflected in MACD momentum on the 1H charts.

Strewth !

2009-03-02T12:00:00.000-08:00

When I posted this morning I genuinely didn't expect Sterling to bomb so quickly.

When it did I my Cable and GBPCHF shorts triggered.

When it reversed, re-tested support - now resistance - and didn't reverse back to the downside, I got out.

... 130 pips and 0.75% account to the worse.

This isn't supposed to happen and I need to understand why before I make my next move.

Short Sterling Tactics

2009-03-02T02:17:00.000-08:00

Okay, so just in case my short Sterling bias is right, let's start commiting some tactics to paper.

We'll take the 'Yippon' first as it looks to me like this pair might be the first to fall...

GBPJPY

The key signs for me here are the MACD divergence and the fact that the pair hasn't managed to re-challenge the highs of last week; it is currently hemmed in between 1H 62 and 144emas.

So what I am thinking is that if it can close a nice big bearish 1H candle below the 1H 200 and horizontal support at 136.36, I would be tempted to short it, targetting the 1H 800sma.

GBPCHF

As I said in last Thursday's post, I just don't see any more near-term upside potential in this pair, and because the recent retracement wasn't preceded by MACD divergence on the Daily charts, I can't help feeling that there is still plenty of appetite to the downside.

But, what a consolidation ! I've pasted a 4H chart because I couldn't show the size of the consolidation box on a 1H chart.

Here I would take a big, convicted 1H candle closing below the 200sma, rising support and - unless all the Sterling crosses were falling together - horizontal support at 1.6361.

My target would be next horizontal support at 1.57 for ... a lot of pips.

GBPUSD

Finally, let's look at the major...

What I note here is that whilst Cable has observed sloping resistance religeously, it's wandered through my shorter term rising support line as it's consolidation goes on .... and on.

So here it's the horizontal support at 1.4044 that must be taken out to provoke a short entry, which would target the lowest of lows at 1.35.

When ?

Since I may well be wrong on direction, timing is an even bigger ask to determine, but whilst GBPJPY could go at any time, it may be that some big news will be required to force the breakouts I'm hoping for in the other pairs. I also think it is most likely to occur when the maximum number of market participants are in the game - so early NY session is, for me, the most likely scenario. With the first observation in mind I note that the dreaded NFP Friday is hoving back into view...

... but I do hope that they trigger before then.

Week 9 Strategy

2009-03-01T14:29:00.000-08:00

No charts tonight because little has changed since last week. Cable and GBPCHF continue to consolidate and having made it back up to the Daily 62 ema, GBPJPY could be due a reversal.

The other pairs I follow, USDCHF and USDCAD, are rangebound.

So... Whilst my Sterling bias remains to downside (and I would certainly back a breakout from GBPCHF's current consolidation zone) I need to see how the markets develop before another clear trade opportunity sets up.

Yen Comes In

2009-03-01T05:53:00.000-08:00

Those of you who follow USDJPY - and, perhaps, who read my last post - will know that the 5 minute divergence trade I had been planning triggered when Asia opened late on Thursday evening.

Here's how it went for me...

Not shown here, Tom and Iactually entered a small pilot position as it crossed the minor support line but got out when it started to falter a bit. This wasn't particularly slick.

However, we stayed watching closely, having determined to re-enter on a break of horizontal support. When this happened shortly afterwards, I was confident enough to short the pair at twice my standard lot size.

I then exited at the first indication of a reversal, electing to take the quick pips...

... and since I was so leveraged relatively, I harvested a shade under 1% for the account.

In hindsight this may seem way too timid, especially since the pair eventually made it all the way back down to the 5m 800 sma (... and at my trade size this would have represented a massive gain) but you have to bear in mind that at the time, Tom and I didn't know this, and with the last Friday of the month looming, I wasn't prepared to sacrifice any more with a tidy profit ready to pick off the table.

My last reflection is that whilst a well structured 5m divergence trade makes it back to the 5m 800 sma well over 70% of the time - against all pairs - in my backtesting, those first 'quick' pips are as close to a certainty as one gets in FOREX. Further, the subsequent reversal (as was the case here) can be severe and hard to stomach - particaulary if one is well leveraged.

A smaller lot size would undoubtedly have kept me in the trade longer, but this would - to my estimation - have been a dangerous game to play on a Friday.

With Friday in mind...

2009-02-26T12:32:00.000-08:00

Fridays - particularly, last Fridays of the month - have a nasty habit for trend reversal as profit is taken and balance sheets squared the world over.

Well, what about this for a pair that is ripe for a reversal ...

Now, this is what I call divergent.

So, switching to a shorter timeframe...

What I am looking for is a convincing break of the pink support line to trigger a short entry.

And I'll be targetting the 5m 800 sma (Yellow), watching price movement around areas of support for opportunities to add positions or take pips off the table.

Quite Excited

2009-02-26T11:56:00.001-08:00

I'm getting quite excited about GBPCHF...

I'm getting more bearish by the day on the Sterling crossess. Whilst this pair and Cable continue their massive consolidation, Yippon is forming a double top on MACD divergence.

But GBPCHF is particularly interesting as it flirts with support in the lower quartile of its pennant.

Having said this, downside momentum is weakening on the 1H chart and it will have to get beyond the 800 sma before rising support can be challenged.

So, what are the options ?

Well, a downside move - sufficiently large - to supportprovoke a short is asking a lot of the last Friday of the month, so in the near term a 15min pivot play might generate a few pips but looking into next week ...

Whatever happens, the move is likely to be explosive, given the length of consolidation and the extent of the current squeeze.

But I do hope it's down !

Catching Up

2009-02-26T09:31:00.000-08:00

Sorry for dropping out of contact. I need to bring you up to date on a busy, and profitable trading week.

You will remember that I went into Week 8 with a pilot short position on USDCHF. Here is how it panned out...

The reversal against this pilot position was nasty and my stop loss at 1.1717 was a few pips from being taken out, but when the pair started to reverse off previous support (now resistance) I drew a trend line connecting the lows and sold a further (standard) lot size.

Then on witnessing the pair start to break down the following forenoon I entered a final (standard) short on the 1H close.

On Rob's advice I targeted 1.1550 and exited all positions at this point. As you can see from the chart Rob's exit level was spot on; the pair hasn't been this low since.

Because of position sizing this was a very profitable (200 pips / 3% of account) trade.

My second trade of the week was the short term reversal on the GBPJPY that I had strategized over at the weekend. This is how it looked...

It was hard work watching this pair soar away all Monday but when MACD momentum began to dissipate on the 1H chart I switched to the 5 minute chart and waited for a decisive break of rising support.

You can see from the chart that I was late with my initial short (1/3rd standard lot size), but I was watching the pair break down with my trading partner, Tom, and having made good money already this week, neither of us wanted to trade until we saw a really strong bearish candle and a decisive break of horizontal support at 1.40.

I took profit on the first touch of the 1H 62 ema (117 pips) and then, because the pair hadn't completed its return to the 5m 800 sma, I continued to trace the reaction rally closely.

I re-entered short (1/3 rd standard lot) on the first 5m break of short term rising support and within an hour I was able to exit at the 800 sma with another 75 pips.

Profit on this trade was a shade under 1% account.

I'm proud of both these trades...

- the first because I held my nerve and leveraged when I was sure the trade was moving my way.

- the second because of my short term execution (particularly) on the second leg.

So, overall, it's been a great week and end to my first trading month. The account is 6% up and whilst consistency is not yet where I would wish it to be, I can feel trade planning, discipline and execution all improving.

Looking forward, my focus beyond these areas will be on developing my ability to safely leverage successful trades. But already I see that the key is personal conviction, and this builds as a direct result of seeing a thoroughly back-tested and meticulously planned trade play out before one's eyes.

Week 8 Strategy

2009-02-21T10:44:00.000-08:00

Since I have already nailed my colours to the USDCHF mast (see last post) I've concentrated this weekend's analysis on Cable and my GBP risk pairs. I'm going to look at them from Daily Charts down the 1H.

GBPUSD

The sheer scale and pace of Cable's fall, together with clear divergence on the Daily chart at the bottom, makes me feel bullish. Surely it is due a meaningful snap back up ?...

This 4H chart is a little less convincing. The pair has been consolidating all week and whilst the sloping 4H support line has held, it has been tested twice. Whereas, the pair failed to make it up to sloping 4H resistance, instead being turned back by closer horizontal resistance.

The longer it consolidates, the larger the potential breakout (No s**t Sherlock !), but, my feeling is - increasingly - that the first big move will be back to the downside.

But, what I think is absolutely irrelevant, as the next breakout of the pair's current consolidation zone is likely to be significant enough to 'take-out' sloping support or resistance lines and tell-us which way it's headed.

Tactically, this leaves us with 2 options:

1. Either, trade a (significant) 1H breakout from the 1H 800 - particularly if it closes outside the closing S/R pennant.

2. Look for divergence and reversal candles at the limits of the pennant and trade back into the 1H 800.

GBPJPY

Whereas Cable remained rangebound last week, the 'Yippon' (our coloquialism) managed to break out to the upside, but was temporarily turned back by 4H sloping resistance; an earlier trade report details my trade of this move.

However, it hasn't fallen back far and looks like it wants to have another go...

However, even if it does break through it soon comes up against the Daily 62 ema and the previous high at 137.28.

So, for the meantime at least, there isn't a trade to the upside for me. I will be looking for reversals - on divergence - back to the 1H 800 sma.

GBPCHF

... Is different in that the recent up-swing on the Daily chart was not predeeded by MACD divergence - weakening the argument that zest for the downside is dwindling.

And look at all those 'indecsion' candles on the Daily...

On the 4H chart I note Upside MACD divergence and the fact that (unlike the Yippon), it hasn't managed even to challenge sloping resistance of late.

Finally, I note on the 1H chart that this pair (unlike the other Sterling crosses) still hasn't made it back to the 800 sma.

As you can see, I am bearish on this baby. I think she wants to tank and I wouldn't be at all surprised if she gaps down the 1H 800 at the re-open.

Whatever, I'm going to be watching that (very) near support line like a hawk.

Swissy Finally Breaks...

2009-02-21T10:06:00.000-08:00

Having strategised last weekend about a possible short on USDCHF I had been getting frustrated as my rising support line repestedly turned the pair back to the upside.

Well, on Friday it finally got well and truly breached.

Given this pair's stubborness to comply (!) I sat on my hands and entered on the 4H close, and as it stands I am currenlty carrying a small loss.

Now from here, it could easily be turned back by either the 200 sma or 800 sma just below it, then retest old support as resistance... in which case I would be sweating if carrying a big position, so I've kept it small initially (1% account).

Or it could just tank, in which case I'll be looking to add positions on 4H closes below the support lines shown on this chart (to see clearer just double click).

My final, aleit heady target, would be the support line at 1.08677.

We shall see...

Pivot Friday !

2009-02-21T09:46:00.000-08:00

Friday, for reasons often explained but never really grasped, by this fledgling trader, is particularly volatile. It doesn't support my usual trading methodology and having previously had my fingers burned, I have endeavoured to stay away ...

However, it had occurred to me that Daily Pivots might be useful in identifying reversal points on shorter time-scale charts so I decided to have a go today on Cable; but, in accordance with an earlier rule, I only staked 'beer money'.

The chart below shows my results...

Having witnessed a fairly meaningful reversal at R1 I entered short with the intention of adding further positions as short term support barriers were broken. My target was the Daily pivot.

A total of 3 positions were taken and the trade was closed in toto, when the pair reversed off the third support, for a total of 111 pips.

This turned out to be a good time to get out as the pair never went lower and ended the day at R2.

On reflection there were potentially 3 successful pivot trades on offer during the day; a better one both before and after the one I took...

... which might be another string to one's bow on a trading day which had only served to damage my bottom line thus far.

Just a thought...

Saved by the Yen

2009-02-19T17:02:00.000-08:00

I cannot tell you how hard it was to get back on the horse today, but when GBPJPY reversed off 4H overead support it seemed like the perfect opportunity.

I shorted this pair when it broke the steepest support trend line and then sweated (profusely) as it see-sawed about my entry, for the next few hours.

When it eventually came around to my way of thinking I entered a second position, when the 5m closed below the 144 ema, and then held my breath ( and hosted friends for dinner) ...

As you can see (... well, actually, you would need to see this chart on a larger time frame to be able to see) I cashed out when the Pair fell to its next support level.

This may seem a little timid (in that the pair ought to fall to at least the 1H 62 ema), but given my earlier f**k up, and mindful that tomorrow is Friday (see earlier rules), I will enjoy my sleep tonight, safe in the knowledge that I have unwound the damage done to my bottom line; the account ends the week as it started...

... and I've achieved this with a big, big lesson learned.

In sum, I am well happy.

Goodnight.

Idiot

2009-02-19T01:19:00.000-08:00

I just cannot believe I'm writing this - particularly on a week when 'impulsive trading' has been a topic of debate- but I promised myself I'd be absolutely honest so here goes...

Last night, over a few glasses of wine, my mind wandered onto the subject of leverage. The gist of my musing was when and how best to leverage a winning position; early, uniformly or as it's about to cross the finishing line.

Park this thought for a moment...

This morning I oversleep, missing my 'buy' trigger on the Cable. Dithering over what best to do, I decide to allow my confidence in it (the trade) to build for a bit, then go in later but harder - when I'm sure it's going to come in...

And this what I do.

15 minutes, -30 pips and 1.5% of my account later, I bottle it and close the trade.

20 minutes after that, Cable reaches the profit stop I had originally set.

There are so many lessons to learn here that this craziness could form the central case study of psychology thesis !

And I can't kid myself that this sort stupidity is without precedent; it's the character flaw this blog is trying to eradicate.

...but for pity's sake, Rob, just learn your bloody lesson, and let's move on.

No Fish

2009-02-18T07:30:00.000-08:00

Well, it's wednesday afternoon, and apart from a few 'pilot' trades - none of which have come to anything - we are, essentially, where we were on Friday.

This is particularly frustrating during a week that I had set aside, 'to trade', and I'd been starting to look for trades that just weren't there and generally, feeling edgy.

A minor breakout has just triggered on GBPJPY but for reasons I don't understand I'm not willing to take it.

... But perhaps this is teaching me something about myself.

Because the bottom line is that I am, essentially, a divergence trader. Although I have back-tested and demo traded break-out, my favourite triggers occur when pairs have over extended themselves from the median, and with everything consolidating at or near that median this week, there just aren't any 'fish' to catch.

I need to learn to enjoy the view from the riverbank ...

Week 7 Strategy

2009-02-16T13:32:00.000-08:00

In analysing the charts this weekend, everything seems to be at a tipping point. The trick for the coming week will be to watch closely and fight the temptation to jump too soon...

GBPUSD

Srategy...

This pair continues to consolidate in a pennant. Overhead is the previous all-time low.

Tactics...

Whilst the pair is closer to rising support it has made a double bottom on dwindling MACD momentum.

1. A close above the 62 would be a cautious buy, targetting the 800 sma.

2. A 1H close below that rising support would be a sell, targetting the all time low.

USDCHF

This pair has had 6 attempts at overhead resistance !

On a 1H close below that rising support - and, preferably the nearest horizontal support - I'm going to short it, targetting the 1H 800 sma.

EURGBP

... another pair being hemmed in, but signiicant resistance overhead...

...Simple. It's a buy on a 1H close above sloping resistance, tagettign the 1H 800 sma.

... and a sell below rising support, Targetting the recent low.

GBPJPY
This chart looks similar to the other sterling crosses...

... But it is currently consolidating at the 1H 800 sma.

I'm going to put on a small pilot position on a 1H breakout of the consolidation zone, and add to it if the pair can break sloping support or resistance.

GBPCHF

... struck by the similarities ???

This pair isn't tradable until it makes it back to the 1H 800 sma...

... or it closes above the 62 ema AND sloping resistance.

Week 6 Review

2009-02-13T11:40:00.000-08:00

Since this bog is all about honesty and discipline, I have decided to post statements at the week-end, so that I know, that you know, that any bad trades cannot be secreted away.

Unfortunately my attempts to achieve this have, thus far, failed... but there must be a way.

If I had succeeded, you would have been able to see how grim Monday was, and you would also have seen the recovery.

You would have seen that the bad results were followed by more conservative trade sizes, indicating - to me at least - that I am finally countering the instinct to 'get even' with the Market. This has taken a while to master...

Overall, I'm proud about how things have turned out and it wouldn't have happened without my trading partner, Tom.

I am quickly learning that when it comes to live trading, accountability to a trading partner - together with that 'on the spot' second opinion, is worth much. Thanks mate - I owe you.

Bottom line; this week the account has grown by a shade over 2%. It's very early days but we're on the tram.

Good Friday

2009-02-13T11:14:00.000-08:00

It has been hard staying out of the market since Tuesday but that is what I had said I would do so I have...

... until a peach of a trade started building on GBPCHF yesterday afternoon.

My backtesting on this pair has shown that having set out to regain par (1H 800 sma) fails, a 1H close back above the 62ema almost always (superior to 85% probability) results in a re-test of the 200 sma.

So, when I sawMACD starting to diverge from the price action, I focussed.

I took this trade on the 1H close, above the 62. Based on my testing I'd ordinarily have been happy to stake 2% of account, but it's a Friday (see earlier rules) and I've already had a good week.

As you can see, having closed above the 62, it didn't hang around long and inside 2 hours later I closed the trade when it hit the 200 sma for 79 pips profit.

Initially I was frustrated with myself for not having allowed the 1H candle to complete before exiting the trade (as I have in testing), but as you can see from the chart, it quickly reversed. It is, after-all, a Friday.

Bottom line, as Rob would say, is to take the easy pips. I have. I'm happy.

Getting Better

2009-02-10T11:29:00.000-08:00

Yesterday didn't start well. Basically, I traded the plan ... and got wacked on 3 separate trades; GBPCHF, GBPJPY and USDCHF.

These 3 trades cost a total of 615 pips and 2% of the account.

However - and this may seem crazy - I was as happy as one can be with such a catastrophe as I had executed a legitimate plan and managed my money sensibly.

The one lesson I would draw is that Monday is early in the trading week and, experience has shown, prone to giving these false signals.

This doesn't mean that they shouldn't be taken, but in future I am going to scale back risk to 0.25% account per trade on a Monday.

What happened next I will not quickly forget.

Feeling a bit shaken as I watched GBPJPY start to form a double top at Resistance I entered a very small (0.1% account) short position and discussed the potential for the pair to return to par (1H 800 sma) during my weekly trading session with Tom, my trading partner.

As a result of our discussions I opted to enter a further short (standard lot size) on a 5 minute break of the 5 min 200 sma and see what happened.

I entered a third short on the 1H close below the 1H 62ema.

I began scaling out at the 1H 144ema and took the second position out at 4H rising support.

I re-entered on a 5 minute close below the consolidation pattern around rising support and closed the trade completely at the 1H 800 sma.

Since Cable was mirroring GBPJPY I shorted it simultaneously but to avoid over-exposure, avoided the temptation to lever up the position and closed it out on the first touch of the 144ema, since they seemed to be 'the easiest pips'.

So what was the bottom line ? Well, these 2 trades netted 1272 pips and a shade under 4% account growth.

More importantly, I traded my plan and execution was as good as I have ever achieved, with total account risk less than 1% at entry. When viewed against the return, I am well pleased.

As a result the account is up 2% on the week. The challenge from here will be to take a step back for the rest of the week, preserve theose pips and use the time to focus on my backtesting.

Key Lessons from this trade are...

1. The power of a very small first entry in helping focus and psychological commitment to a trade.

2. The power of scaling in and out.

3. The utility of a short timeframe trigger (risk minimised), moving to a longer timeframe as momentum and profits build.

4. But perhaps most importantly, the inestimable value of a close friend and trading partner.

Week 6 Strategy

2009-02-07T10:00:00.000-08:00

GBPUSD

Strategy.

Cable cleared a key resistance level last week and regained the 1H 800 sma, endind the week hard up against 4H downward sloping resistance. Overall, the pair still looks pretty strong BUT a pull-back to rising support may be necessary before it has the oomf to power through the resistance overhead.

As can be seen from the Tactical chart, Cable is both overbought and divergent.

A lot will depend on how it opens but ...

1. A strong 4H close above downward sloping resistance would provoke a long entry; Tgt 4H 800 (currently at 1.63...!).

2. Alternatively, a bearish 1H candle, below downward sloping resistance, as the 1H stochastic comes out of overbought would provoke a short entry; Tgt rising support / 1H 800sma.

GBPCHF

Strategy...

This pair overcame major horizontal and downward sloping resistance this week and is trending steeply (60 degrees !) upwards. It is starting to look over extended and may be due for a pullback to horizontal and longer term upward sloping support.

Tactics...
Overbought on the 1H chart and with MACD momentum quickly evaporating, I will emter a short trade on a 5 minute close below short term support, leverage the position on a 5 minute close below longer term rising support. Initial target will be the 5 minute 800, but depending on momentum here I will let a position run to the shallower rising support.

Or I am wrong, in which case a 1H close above 1.7286 would trigger a long entry.

GBPJPY

Strategy...

Again, this pair has made great strides over the last week, climbing back up to some pretty strong resistance, but it's hanging on by its teeth and for the next 500 pips above it's got some major congestion to deal with.

Tactics...

Absolutely not interested in any buy trades while the 1H 800 sma splits the 62ema and 200sma and there's enough divergence to provoke a sell on a strong bearish candle coming out of overbought... so long as it closes below rising support. Target would be gentler rising support.

EURGBP

Strategy...

This pair looks like it may be trying to bounce...

There's a few nice reversal candles on the 4H and MACD divergence on 4H and 1H charts.

Tactics...

... But it's going to have to close above horizontal and downward sloping resistance before it's a buy, targetting the 1H 800sma.

... Or it will bounce off resistance and bomb. In which case it's a sell below 0.8665 on a 1H close.

And finally....

USDCHF

Strategy.

This go has also bounced nicely, regaining and blasting through the 4H 800 sma. BUT, it's had 3 failed attempts at the resistance at 1.17047 and it's very MACD divergent on the 4H chart. It currently looks headed for another test of upward sloping support (at least) before it has a 4th attempt.

Tactics...

As can be seen onthe 1H chart, this pair has already broken 1H rising support, regained it and then failed again. A fall below the next layer of rising support may trigger a return to the 1H 800 sma.

Sell below that and horizontal support at 1.15740, Tgt 1H 800 sma.

Friday 6th February - Forgetting Basics

2009-02-07T09:23:00.000-08:00

An unstructured and poorly executed end to the week, where 3 unplanned divergence set-ups (2 of them on NFP Friday) all cost pips.

Result for week; 76 pips and 0.5% growth in the account...

...which could be worse (i.e I'm still up on the week) but had potential to be so much better had planning been more rigorous and execution more considered.

So, how to progress ? Well, from now on...

1. Only planned (articulated here) trades, based on known (backtested) probability will be attempted.

2. 1% account growth will curtail 'live' trading for remainder of week.

3. I will be extremely cautious about entering trades on a Friday.

Tuesday 3rd February - Failed Trade

2009-02-03T11:22:00.000-08:00

Well, The GBPCHF Head and Shoulders didn't trigger today but based on my strategy for the week, I did take a Short entry on USDCHF, based on a solid break of rising support and a 1H close below the 1H 200 sma... signalling the potential for a return to the 1H 800 sma many pips below.

As you can see from the Chart above this was a good entry with much confirmatory evidence supporting my decision, including clear MACD divergence.

...But my trade management was poor. As it raced South I moved my stop loss to break even and was subsequently taken out during the reactory rally - below the Support line (...!).

You can also see that the pair has since reversed back to the downside, leaving me chasing the trade with a far less favourable risk / reward ratio.

Whilst I didn't lose any money, the seeds of this poor result can be found in my post of last night.

LESSON: Unless I am prepared to commit to a trade, my stategy won't deliver !

Tuesday 3rd February - Head and Shoulders

2009-02-02T22:52:00.000-08:00

'Don't see much on for my pairs, but one possibility is a classic Support/Resistance entry on Cable...

With Pip Target for the week achieved, this trade would only be entered for 'BeerMoney' (1/10th normal risk).

Monday 2nd Feb - Early Triggers...

2009-02-02T09:17:00.000-08:00

Overnight all the GBP pairs had gapped down and by 0600 short trades were building on all of them...

GBPCHF

Sold short on 5 minute close below 200 sma AND horizontal support. Based on backtesting, risked 0.5 % of the account, targetting 5 minute 800 sma.

Stayed with it through one nasty reversal at London open and finally got cold feet as pair rose to re-test resistance at 1.6586 for the 3rd time.

Closed trade for 111 pips profit.

Looking at chart now I would have done better to shut down the lap-top and trust to my back-testing as the pair regathered momentum and made it, not only to the 5 min 800, but right the way down to the 1H 800 - a further 250 pips away ! ...

... and exactly what I had strategised at the weekend. Hmm.

Against that, there was a risk (in my mind) that the trade was turning bad so it wasn't wrong to have taken the pips. QED.

GBPUSD

Ordinarily I wouldn't risk a second, concurrent, trade on a pair containing the same base currency but my backtesting has indicated that a breech of the 62 ema, following a failed attempt to regroup at the 1H 800 sma, results in a very high probability of a move back down to the 1H 200 sma...

...So I was happy to enter short on the 1H close, again risking 0.5% of the account.

I'm particularly happy with my tactics on this trade as I pre-set a profit target at a support level just above the 200 sma, aiming to take the easy pips.

You can see from the chart that this tactic was spot on as the pair never made the 200 sma on this occasion, but my trade was closed for a profit of 196 pips.

What next ? Well, clearly I want to see how my pairs move from here, but I also need a pause to clear my thoughts as I am determined not to give these hard won pips back cheaply.

Week Five Strategy

2009-01-31T08:26:00.000-08:00

GBPUSD

Following clear MACD divergence on Daily charts, pair is returning to the 800 sma, which is converging with strong downward sloping resistance and horizontal resistance.

MACD momentum on 1Hr Chart is currently weakning.

Over next week, expect pair to make it back to 800 sma and either soar away to upside or reverse to retest recent lows.

Trading Tactics...

1. If quick and decisive 1H reversal off the 800; sell on close below horizontal support and sloping support. Near Profit Tgt 1.4026; Far Profit Tgt 1.3550.

2. If pair consolidates at 800, go with break in either direction. Near Upside Resistance 1.4979. Far Upside Resistance 1.5378.

GBPCHF

This pair has re-crossed and broken decisively away from 800 sma and looks like it's going to have a go at Daily downward sloping resistance. Overhead horizontal resistance at 1.7561 is the previous all-time low.

Trading Tactics...

Having missed the break away from the 1H 800 sma am now looking to trade back towards it.

1. If 1H MACD weakens (becomes divergent) as pair closes in on overhead sloping resistance, will look to Short pair back to 800; trigger on 5 min close below 200 sma - target 5 min 800 sma initially.

2. If pair breaks back through 5 min 800 sma with conviction, will target 1H 800 sma.

3. Alternatively, will Buy a decisive 1H break above near horizontal resistance at 1.6942 AND downward sloping resistance. Profit Tgt overhead (All Time) resistance at 1.7537.

GBPJPY

This pair has managed to close the Week back above it's previous all-time low and Daily downward sloping resistance. However it hasn't made it back to the 1H 800 sma yet.

Trading Tactics...

Gotta wait to see what happens at the 1H 800 sma but note that it is converging with recent strong horizontal resistance at 132.04.

1. Trade reversals away from 1H 800 sma on 5min trigger, tagretting 5min 800 sma initially.

2. A decisive close below 5min 800 AND downward sloping support AND horizontal support at 127.59 should lead to a re-test of 1H 200 sma, converging with horizontal support at 125.29.

3. If pair breaks above 1H 800 sma to upside, Target135.70.

USDCHF

Hmmm...

This 4H chart shows the pair sitting just above upward sloping Support, with downward sloping Weekly resistance overhead. It's also climbed back above previous all-time low at 1.1294. However, 4H MACD is divergent, as is 1H MACD...
... It's also rejecting 1H resistance at 1.1610.

Trading Tactics.

1. Next move should be a move back down to at least the 1H 62 ema. Trigger on 5m close below 200 sma, target 5 min 800sma.

...after that we'll have to wait and see.

USDCAD.
Having back above Weekly sloping resistance this pair has set up a wide pennant and looks like it could go either way...

... it tried but failed to break away from the 1H 800 in both directions, last wee, but failed.

Trading Tactics.

1. Only counter trend trades from pennant boundaries make any sense at the moment.