Welcome to my 2010 trade journal!
This is just to keep a record of the trades that I have taken, based on this trend trading method: http://www.forexfactory.com/showthread.php?t=187619
* * March 2010 Update * *
As from March 2010 I will only be trading daily charts due to the simple fact that I no longer have the time to trade H4 charts. My method must be ammended very slightly to reflect this change - here is a brief summary:
Step 1 – Key Support & Resistance Levels
In my opinion horizontal support and resistance levels are the key to the market. These are the levels where the big boys are buying and selling and that should interest us, the retail trader.
The first step is to identify the nearby key levels of support and resistance that may be of use to us. We are not looking to map every single level but we want to highlight the important levels that could be a useful place to enter or a barrier to a trade.
These levels are not always to the pip levels – they will often show as a range.
For an example of what I consider a key level, plot 1.3850 on a EUR/USD chart.
Step 2 – Defining The Trend
I am only interested in trading support and resistance levels in the direction of the prevailing trend.
In order to define the trend we must first zoom out as far as possible. It should be clear which way price is going. If it isn’t then it is probably not worth trading!
In an uptrend, each major swing should make a higher high followed by a retracement making a higher low. In a downtrend, each major swing should make a lower low followed by a retracement making a lower high.
By drawing a trendline (or sometimes more than one) across the highs and the lows of our chart we should also get some idea about the trend.
It is also important to zoom out to weekly and monthly charts to get a better understanding of where we are in the big picture.
Step 3 – Placing A Trade
So we know the trend and we know where we are going to trade from (i.e. the key levels) – all we need to do now is wait for price to retrace to one of the key levels.
Let’s assume we are in a downtrend. On most occasions I will place a sell limit order at the level. If however I am uncertain about the trade for some reason (perhaps we have moved a long way from our trendline and anticipate a deeper correction) then I will watch price action at the level. If price blows through the level I will let it go and wait for price to move up to the next level or wait for price to get back below the level. Alternatively if price struggles to get through the level, or forms some kind of candlestick pattern (shooting star, engulfing bars etc) I will look to trade below the level. Vice versa in an uptrend.
Step 4 – Trade Management
This is where my style has changed somewhat and is the most subjective part of the method.
When I place an order, I will not put a default stop loss of “X” number of pips. Again, let’s assume we are in a downtrend. My hard stop will be placed above the trendline and above a recent swing high. It will be placed somewhere I don’t expect it to get hit unless something terrible happens (global disaster!). This is my emergency stop loss… it’s just good practice in the event that I can’t get to my trade station or broker for some reason.
If a trade moves against me I will likely stop the trade before my emergency stop loss gets hit. I will be watching price and how it reacts to the trendline and support and resistance levels. If it is blowing through them against my perceived trend direction I will close the trade.
If the trade moves in profit I will simply let it run. Then when we get to another level I will be looking to add another position and so on.
I will eventually move my emergency stop loss but again it will be a “worst case scenario”. I will look to close my trades if the trend appears to be changing or if we have moved sharply away from the trendline and a deep correction would eat up a lot of profit – in this case I will look to close my trades and the point that maximises profit from open positive positions and minimises loss from open negative positions.
My 2009 journal can be found here: http://www.forexfactory.com/showthread.php?t=143593
Questions always welcome!
Regards,
Dan
This is just to keep a record of the trades that I have taken, based on this trend trading method: http://www.forexfactory.com/showthread.php?t=187619
* * March 2010 Update * *
As from March 2010 I will only be trading daily charts due to the simple fact that I no longer have the time to trade H4 charts. My method must be ammended very slightly to reflect this change - here is a brief summary:
Step 1 – Key Support & Resistance Levels
In my opinion horizontal support and resistance levels are the key to the market. These are the levels where the big boys are buying and selling and that should interest us, the retail trader.
The first step is to identify the nearby key levels of support and resistance that may be of use to us. We are not looking to map every single level but we want to highlight the important levels that could be a useful place to enter or a barrier to a trade.
These levels are not always to the pip levels – they will often show as a range.
For an example of what I consider a key level, plot 1.3850 on a EUR/USD chart.
Step 2 – Defining The Trend
I am only interested in trading support and resistance levels in the direction of the prevailing trend.
In order to define the trend we must first zoom out as far as possible. It should be clear which way price is going. If it isn’t then it is probably not worth trading!
In an uptrend, each major swing should make a higher high followed by a retracement making a higher low. In a downtrend, each major swing should make a lower low followed by a retracement making a lower high.
By drawing a trendline (or sometimes more than one) across the highs and the lows of our chart we should also get some idea about the trend.
It is also important to zoom out to weekly and monthly charts to get a better understanding of where we are in the big picture.
Step 3 – Placing A Trade
So we know the trend and we know where we are going to trade from (i.e. the key levels) – all we need to do now is wait for price to retrace to one of the key levels.
Let’s assume we are in a downtrend. On most occasions I will place a sell limit order at the level. If however I am uncertain about the trade for some reason (perhaps we have moved a long way from our trendline and anticipate a deeper correction) then I will watch price action at the level. If price blows through the level I will let it go and wait for price to move up to the next level or wait for price to get back below the level. Alternatively if price struggles to get through the level, or forms some kind of candlestick pattern (shooting star, engulfing bars etc) I will look to trade below the level. Vice versa in an uptrend.
Step 4 – Trade Management
This is where my style has changed somewhat and is the most subjective part of the method.
When I place an order, I will not put a default stop loss of “X” number of pips. Again, let’s assume we are in a downtrend. My hard stop will be placed above the trendline and above a recent swing high. It will be placed somewhere I don’t expect it to get hit unless something terrible happens (global disaster!). This is my emergency stop loss… it’s just good practice in the event that I can’t get to my trade station or broker for some reason.
If a trade moves against me I will likely stop the trade before my emergency stop loss gets hit. I will be watching price and how it reacts to the trendline and support and resistance levels. If it is blowing through them against my perceived trend direction I will close the trade.
If the trade moves in profit I will simply let it run. Then when we get to another level I will be looking to add another position and so on.
I will eventually move my emergency stop loss but again it will be a “worst case scenario”. I will look to close my trades if the trend appears to be changing or if we have moved sharply away from the trendline and a deep correction would eat up a lot of profit – in this case I will look to close my trades and the point that maximises profit from open positive positions and minimises loss from open negative positions.
My 2009 journal can be found here: http://www.forexfactory.com/showthread.php?t=143593
Questions always welcome!
Regards,
Dan
Not a very positive first response to this year's journal!
Part of the problem being different views being floated around on the forum. There are those who believe in horizontal S/R and there are those who talk abt MA's being the floating S/R. Well, let me do some simulation on back data so that we can have some discussions on this topic.