Trading under the microscope

Greetings.

I am here to post one of my systems for trading.

Those who would like to chime in on this strategy are welcome to, as this system is VERY flexible. There are (no hard rules) and this is meant to be more of a guide that you can use in addition to whatever trading method you may already have.

I have tested many complex trading systems, coded profitable EA's that turned out to have huge draw-downs or that only worked in certain market conditions e.g trending/ranging markets, and I have concluded that there are many different ways to trade and make a profit.

The key (I believe) to successful trading is finding a system that fits your personality, lifestyle, risk tolerance, and equity. Those things are extremely important to consider before you start trading imho.

Anyways, so here it is.

UNDER THE MICROSCOPE

The first thing you must do is decide what pairs you want to trade. For me, I look at all 28 major FX pairs. Though, I am sure this can work on ANY instrument as this strategy is based mainly around simple supply and demand, volume, and market structure entries.

The second thing to do after deciding what pairs you wish to trade is to go to start with the DAILY TF. You may be able to go as low as the H4 or as high as the Weekly but for my life I like using the Daily TF as I only need to check the charts once per day. So for me, the first thing I do every day is analyze all 28 pairs and see if any of them qualify as possible trade opportunities.

Some things to look out for on your higher TF is VOLUME, or lack there of if looking for reversals. It is a bit hard to explain so I will post some examples of my trades. An easy way to do this is to look at SR zones on the daily chart and identify areas where the market may reverse, or continue a current trend. An easy pattern to remember is when you see one daily bar engulf the previous days high/low especially after a large move, continuation of a move, or at a SR zone.

Here is an example on USD/CHF that I had on my watch list yesterday which I did take.
DAILY CHART USDCHF


As you can see in the photo above the price here is clearly bouncing off of a support level inside of a range. This pair has been trending down for quite sometime and now is ranging on the Daily TF. I look at many things before choosing a pair to trade but the clear things here are:

Bouncing off the support area, bullish engulfing bar indicating VOLUME, and also the interest rate decision by the FED came out as neutral (1.75%) this indicates
to me the reason behind this move is due to the fact that the price does not want to go any lower. I use many confluences to my analysis however you can be just as simple as technical but I do like to incorporate big news events such as interest rates in my decision making for even more confluence when I can.

Now you may be wondering why I call this strategy the microscope, well this is because we start on higher TF and slowly go lower to examine all lower time frames in order to gain even more confluence for our trades. I will not go into too much detail but for this trade the H4 H1 both also looked good for a buy e.g breaking structures to the upside, more engulfing candles etc. Hopefully you get the point.

I then use either the H1 or the 15 minute chart for my entry and my stop. Here is an example for this trade on where I put my stop and entry based on the lowest time frame I look at.
15M CHART USDCHF



Now here you can see the microscope approach in action. Once in the lower TF this is where the fun begins. You can now incorporate whatever entry rules you like. Because I had a bias already to buy from my higher TF analysis. All I had to do now is look for an entry point. I like to enter with the volume, this is a skill that may take some time for some people to develop and maybe you might want to use a different entry style but for me I like entering this way since it usually ends up in my trade going into profit faster. I entered here due to the small uptrend on the 15 minute chart to the upside. Price was slowly creeping higher and I anticipated a break even higher after it broke the daily highs. I placed my stop reasonably below the low for that day at about 30 pips. I don't look for any specific RR but once the trade reaches a 1:1 I start to manage it. If I feel like moving to BE I will, If I feel like taking 50% off the position and letting it run I will. If I want to simply take profits I will. This all depends highly on price action and what the market is telling me, also I may take profits just because I see better opportunities and feel they are a better use for my equity.

The key at the end of the day is to achieve the HIGHEST win rate possible. If you are very careful and use as much confluence as possible and then enter ONLY when you feel it is 100% the best entry possible you should be able to win much more often than not. The key is to try and win every trade. Many people say that its all about your win rate and win % and that's true positive expectancy is important. However, the problem with thinking this way is that some traders may take a trade knowing that it may lose blindly following a strategies rules without forming a good case for trading. Focus on winning EVERY single trade you take and when you lose try and understand WHY you lost the trade. There is always a reason. The market is not random. You may lose a trade because:

1. Your stop is too tight, didn't give enough room for your trade to breathe.
2. Your stop was too big and you didn't take profits early enough.
3. Your analysis was flawed, maybe you got in a trade to early or didn't follow the rules correctly.

Try and identify why you lose and why you win in order to increase your win rate. Pick the best trades. Don't be greedy and take every single set up just because it looks good on the Daily TF. Out of all the potential trades I had on Monday I only took 2. This USDCHF buy and a buy on CHFJPY. Notice how I took those trades specifically also to hedge my risk. They both were great setups and also both included CHF one on the buy side and one on the sell side. I did this purposely. Don't take 5 different EUR sells on different pairs. Be smart, be patient, and choose the best setups each day.

Here were some potential setups for today.

AUDCAD POTENTIAL BUY
AUDCHF POTENTIAL BUY
AUDJPY POTENTIAL BUY
AUDNZD POTENTAL BUY
AUDUSD POTENTIAL BUY
CADCHF POTENTIAL BUY
CADJPY POTENTIAL BUY
EURAUD POTENTIAL SELL
EURCAD POTENTIAL SELL
EURJPY POTENTIAL BUY
GBPAUD POTENTIAL SELL
NZDCHF POTENTIAL BUY
NZDJPY POTENTIAL BUY
NZDUSD POTENTIAL BUY
USDJPY POTENTIAL BUY

Remember these have not gone through the microscope. That is up to you to decide. For me I selected NZDUSD and AUDNZD for today out of the bunch. I like to have hedged positions to limit my risk though I'm sure many of these others would be good if you analyze on lower time frames and fine your entries. For me, I like to make sure I'm entering a good spot that gives the trade some room to run, I do not want to buy at the high or sell at the low. I wait for a pullback and then breakout to enter. Etc etc.

Hello! Sounds like a promising thread! Congratulations on your system.
I have some question about it...
-How much do you usually keep open your trades?
-Risk appetite %?
-what's your sweet time for trading this way? At the start of daily Candle?
-How much time and how many times you look or control your trade (if your time for opening trade is daily open and them it gets to same distance as SL how do you manage that trade? Every 4 hours?) so for example maybe you look at charts 3 times a day and 15 nuns each opportunity overall?
Sorry for so many questions! But I am curious about it, good luck!

Thank you, Catherinex. I will try to answer all of your questions to my best ability.


It really honestly depends on the market. As I stated in the original post there are no hard rules for this strategy and it is more of a guide. Each trade is different but on average the trades last a few days, some can be for much longer if you decide it's a good idea to hold them. If there are big spikes you can be out in 15 minutes some trades. It all depends.


For this, again it depends on YOU. Also your account size is important. Everyone is different but I personally use the following guide for risk.
Account size Risk
Under $500 No more than 10% per open trade(s)
Over $1000 but under 10k No more than 5% risk per open trade(s)
Over 10k but under 100k No more than 2.5% risk per open trade(s)
Over 100k No more than 1% risk per open trade(s)

etc....

Remember that's just my personal preference but I really do not think going over 10% at a time is a good idea. Also these figures are all relative, you may use 7.5% or whatever arbitrary number you decide.

Risk is a VERY important tool for trading and should be taken very seriously. Even though this strategy does not have hard rules I do follow hard rules as far as my risk. For position sizing I use an indicator called position size calculator that is very handy and allows me to risk the exact $ amount I want without having to do to much calculation. It calculates the pips for your stop and spits out the correct position size according to your risk. I will add that indicator here for whoever is interested.

Also something that can be EXTREMELY powerful is COMPOUNDING. But it is important to compound both UP and DOWN. Let me explain. Say, for example you have an account size of $200 and you wish to risk 10% per trade. Some may say that this is too much risk as you may blow your account in 10 losing trades. While they may be correct this is only true if you use the same amount regardless of a win or a loss. Compounding DOWN makes it almost impossible to blow your account. See below some figures.

200$ account risking 10% per trade. (or baskets if you take multiple positions at once.)
After 10 straight winning trades COMPOUNDED UP = $520
After 10 straight losses COMPOUNDED DOWN = $70.

So clearly the reward is much higher than the risk. I know that you most likely wont have 10 in a row either win or loss, but those figures are for example only. Remember we aim to win every trade so it is important to try and get those runs of 3-4 wins in a row or more as that will help to increase the account so be careful with your positions and do not be greedy. Being patient will pay off. Also remember that I usually aim for 1:2 risk to reward MINIMUM on each trade so that improves the odds even further. Some trades may even reach 10R it happens a lot more than you think but its hard to stay in those ones without taking the profits early.

IMPORTANT if you are risking 10% per trade only take ONE trade at a time. If you want to open another trade you should move your stop to break even which will take your risk off that trade and allow you to open another. Alternatively if you see multiple opportunities you may split the risk among the trades evenly.


For me I look at the charts between 12-4PM est. Right before the new day begins. This allows me to possibly get in early before the next day If I see a good setup. If not then I might look at the charts periodically throughout the Asian session for entries. However you may find entries during London, or US session. The time of day is not important as I am not one who believes there is a best time to trade. There are always opportunities so its up to you to find them depending on the time you want to trade. It's important that you have patience and do not take trades that have already moved to much due to FOMO (fear of missing out).


This is an interesting question. I feel like I sound like a broken record but there really is no right or wrong way to do this. I usually only enter a few trades per day so it isn't to hard to manage. Once I reach 1:1 I usually move my stop to break even and manage it up based on SR areas. I do not like using trailing stop since it does not understand market structure. When I am sleeping I may use it but that's the only time. If you do not have to much screen time one thing you can do is just use the mt4 app on your phone which will allow you to check how your positions are doing and adjust your stops accordingly. I'm sure you could also just use a robotic RR approach for example 1:2 on all trades or 1:4 on all trades, or even using a target. But, personally I do not like this. I like to react to the market as it is never the same. I honestly believe that exiting a trade is harder than entering it! So this question is a bit difficult for me to answer since it is something I am always working on improving.


No worries! I am glad you find my post interesting, and am happy to answer any questions.

UPDATE ON MONDAYS ENTRIES

USDCHF
I closed USDCHF buy at 1R profit level manually in 2 parts on my main account, other account it ran to 3.5R with only 1 position and no scaling. It ended up moving up to the previous high within the range as expected. This is something I need to improve on sometimes I close my trades too early or set my stops to tight but better a profit than a loss. This is why I trade two separate accounts to see what works better.
DAILY CHART USDCHF


CHFJPY
My exit on this was much better on my main account. I exited the first part at 1R and then the second part at 2R for a total of 1.5R on this trade, not bad. On my other account I did not take this one.
DAILY CHART CHFJPY


I only took those two on my main account from Monday For a total of +2.5R. On my second account I also took the following trades.

NZDCHF BUY +2.5R
CADCHF BUY -1R
CADJPY BUY -1R


Total +4R Including USDCHF.

UPDATE ON TUESDAYS TRADES

AUDNZD
I got taken out of this while asleep I set a trailing stop which took me out at +1R. On my second account it also ran for about the same a bit over 1R. I still have this one on my watch list as it continues to trend higher but need to be very precise with entries.
DAILY CHART AUDNZD


NZDUSD
This one was a decision I made to exit the trade early in a small loss. Sometimes I do that If I am happy with the profit for the day. Seeing as I was hedged with AUDNZD and it closed automatically. I chose to also close this one to limit my possible risk. I'm sure it may go higher but it also may hit SL since we had a small move lower. I still have this one open in my second account risking 1R but closed it here for less than .5R.
DAILY CHART NZDUSD

Attached Image

I only took those two on my main account entered on Tuesday for a total of a little under +1R. On the other account I also took the following trades.

AUDCAD BUY +1R

Total of +2.5R Including AUDZND (pending NZDUSD) on this account for Tuesday.

Here are some potential pairs to look at for today based on my first stage of analysis.

AUDCHF BUY
AUDJPY BUY
AUDNZD BUY
CADCHF BUY
CADJPY BUY
EURAUD SELL
EURCAD SELL
EURNZD SELL
EURUSD SELL
USDCHF BUY
USDJPY BUY

Remember, I do not take all of these trades. These trades simply qualify to be put under the microscope to be examined further. I still need to build more of a case on lower timeframes and any other possible confluences such as, news, volume, or market structure in order for me to take these trades. Also sometimes its just too late to enter on these trades with a good RR. A good example of this is EURAUD. I was not able to catch it at all this week and missed a good entry during London while I was asleep.
15 MIN CHART EURAUD


Here you can see there was a very good entry opportunity that I did not take. However, I did post this one on Monday as a potential trade. I just missed it due to already being in so many trades and also I am usually sleeping during London session.

Good Idea, Will Try. tHanks

No problem. Let me know if you have any questions. You can post some chart examples if you need help understanding the concept more etc.

Also I only trade the main 28 Forex pairs for the most part and sometimes exotics. But I will post here some other potential trade setups that could work for today across other markets for example.

FOREX EXOTICS
AUDSGD BUY
EURNOK SELL
EURSEK SELL
EURTRY SELL
NZDSGD BUY
USDHKD SELL

METALS/COMMODITIES
XPTUSD BUY
XTIUSD BUY
UKOIL BUY

INDICES
UK100 BUY
EUSTX50 BUY
GER30 BUY

CRYPTO
BTCUSD BUY
ETHUSD BUY
LTCUSD BUY

I understand that this style of trading may be difficult for some to grasp since there are no real hard rules. So I am open to answering any questions any of you may have.

You can post your charts and questions and I will tell you if you are doing it right/how to look for entries.

Cheers.

How come so many currencies without EA?

Hi kaixinjili. Thanks for your question.

The reason I have not made an EA for this system is because I personally do not believe it is so easy to make a long term profitable EA. It is much easier to trade manually. The reasons for this are many but it all mostly comes back to the fact that the market is a living breathing thing. It is hard to code in all the nuances needed into an EA in order to make it work. Though, there are disadvantages to trading manually also. For example, I miss many trades due to sleep, or not looking at the markets. But you only need a few good trades each day to hit your targets.

If anyone has any ideas on how to make this into an EA or to add some automation to make things easier I am all ears, but as I said before I am a firm believer that EA's sometimes can hinder a strategy more than help it.

Cheers.

This morning I noticed an opportunity on EURTRY. I normally do not like to trade exotic crosses since the spreads are usually not worth it and the moves can be more unpredictable. This trade however, was an exception since the weakness in EUR seems quite obvious across all other pairs and this was the best entry available. EURUSD also had a very nice entry but I missed it since it happened during London while I was sleeping. Keep in mind that there are also some fundamentals behind this move. GBP leaving the European Union due to Brexit seems to have caused some weakness across EUR in general. EURUSD to be honest is the safest short across all the crosses due to recent strength in USD though. The entry is very important though, so unfortunately trading EURUSD was not an option for me. Here is a screenshot of the trade with my entry and stop.
EURTRY 15 MIN CHART

Potential trade setups for today. (Remember these are only potential setups and need to be filtered on lower TF to find good entries.)
I am still in EURTRY sell from yesterdays analysis and also am in AUDJPY and AUDCHF for a small scalp buy very low risk. It seems like AUD may be changing direction now to the sell side.

FOREX MAJORS
AUDCAD SELL
AUDUSD SELL
CADCHF BUY
CADJPY BUY
EURCAD SELL
EURGBP BUY
EURUSD SELL
GBPAUD SELL
GBPCAD SELL
GBPCHF SELL
GBPJPY SELL
GBPNZD SELL
GBPUSD SELL
NZDCAD SELL
NZDUSD SELL
USDCHF BUY
USDJPY BUY

FOREX EXOTICS
EURSGD BUY
GBPNOK SELL
USDMZN BUY
USDSEK BUY
USDSGD BUY
USDTRY BUY
USDZAR BUY

METALS/COMMODITIES
AUS200 BUY
HK50 BUY
XAUUSD BUY
XAGUSD BUY
XPDUSD SELL

INDICES
EUSTX50 BUY
FRA40 BUY
JPN225 BUY
NAS100 BUY

CRYPTO
BTCUSD BUY
ETHUSD BUY

This is very similiar the way I trade. We are not discovering the wheel here, its just S/R lines and trade with volume or logic.

The most important aspect is the lack of indicators or rules. Less is more nowadays, and made my journey like you, tested all indicators, arrows, sounds, EAs, to find that they distract and dont help.

Usually I check daily charts, look for a trend/mini trend and go for H4 and H1 checking for divergences to correlate my opinion.

Based on that, and looking your list, jumped into audcad and audusd to sell both and make profit.

100% agree. This is why I do not use any indicators except for maybe stochastic from time to time. I also have a custom trend-line indicator but honestly I do not need any of them. It over-complicates things and makes it harder to "read" the market. While I do believe that it is possible to build profitable EA's they eventually stop working or need to be tweaked. There is still a part of me that wants to test more one day with EA's as I have profited from my own ideas in the past, but for now I simply make more of a return trading manually.


I'm upset I missed out on AUDUSD. It was really a great one and had good fundamentals backing it.
Thanks for the comment psynapse. I'm glad you were able to use my daily pairs as confluence for your trades, that's what this thread is all about!.

Cheers

UPDATE ON YESTERDAYS TRADES

Today was a bit frustrating for me since I broke some rules. I went against my analysis and made some rather foolish plays.

GBPJPY
Took a buy on GBPJPY for whatever reason. It can be really hard to stay composed at times and be patient. I ended up reversing it and taking a sell after getting stopped out so now I'm in a sell, but I got in late so will have to take short profits on it. -1R

AUDJPY and AUDCHF
I also foolishly stayed in my AUD buys from the previous days even though I posted the direction is changing to downward. Sometimes its better off to cut your loss short instead of waiting for it to hit your stop. I even had moments they came to break even but unfortunately I stayed in till I got stopped out on both. -2R

EURTRY
This one was a real heart-breaker. I was up about +2R. I went to sleep and set a trailing stop pretty high up telling myself. "Surely it should not hit the trailing stop I gave it enough room". Well, take a look for yourselves. Total +1R
EURTRY 30 MIN CHART

Attached Image (click to enlarge)

Between all these trades running at the same time the whole day I was at about break-even. The only trade I was really confident in was EURTRY. I should not have held on to the others and best case scenario I could have made a small profit. However I ended up incurring a small loss so far for the day. I am still in this GBPJPY sell and i'm almost at +1R which would get me to a small profit for the day but, we'll see how it plays out.

POTENTIAL TRADES OUTLOOK FOR NEXT TRADING DAY (SUNDAY)
(Remember these are only potential setups and need to be filtered on lower TF to find good entries.)

I ended up getting closed on GBPJPY for a profit of about 1R. It ended up running for another 25 pips so I missed out a bit, but that happens. I'm looking forward for next week as there is a lot of volatility going on so a lot of potential good trades.

FOREX MAJORS
AUDCAD SELL
AUDJPY SELL
AUDUSD SELL
CADCHF BUY
CHFJPY SELL
EURAUD BUY
EURCAD SELL
EURJPY SELL
EURUSD SELL
GBPAUD BUY
GBPCAD SELL
GBPUSD SELL
NZDCAD SELL
NZDCHF SELL
NZDUSD SELL
USDCHF BUY

FOREX EXOTICS
AUDSGD SELL
EURSGD SELL
NZDSGD SELL
SGDJPY SELL
USDCNH BUY
USDMXN BUY
USDNOK BUY
USDSEK BUY
USDSGD BUY
USDTHB BUY
USDTRY BUY
USDZAR BUY

METALS/COMMODITIES
XAUUSD BUY
XTIUSD SELL
UKOIL SELL
XPDUSD SELL

INDICES
AUS200 SELL
HK50 SELL
GER30 SELL
UK100 SELL
US30 SELL
US500 SELL

CRYPTO
ETHUSD BUY

I'm still in USDCHF +23 pips

Nice. I got in at the beginning of the week at 0.9660 and got trailed out at 0.96890 For around 30 pips..If only I stayed in Id be up over 100 pips, but hey that's how it goes sometimes. Gotta learn how to hold on to the good ones longer.