River Theory Trades

Here another example of a difficult trade I would take. USDCAD is pushing down hard into Zone -2 at 1.0698. Wait for a push down through this level and take a long. Target would be up around 1.0797. Once long, adjust your target and stop based on tommorrow's River levels once you have them. A tough trade no doubt but one I would take every time. If it doesn't work out, no problem. I take my loss and move on to the next opportunity.
Risk guide can be below 1.0659.

http://rivertheory.squarespace.com/s...sdcadentry.PNG

If you read back a couple of posts, you will see I recommended keeping an eye on the USDCAD yesterday for a River Theory Long Entry at the demand Zone -2. This did set up as CAD pushed down through this level. I am long on a difficult trade at 1.0694. I recommended adjusting your trading plan once you had today's River Levels.

Focusing on my risk in the trade first, I see that the next demand level below my entry is at 1.0574. This is 120 ticks away from my entry and that is too much risk for me on this trade. Especially with CAD in such a trending strength mode so I will adjust my risk to about 20 ticks or so under the day's low. I will not set a hard stop in the market. I will watch price action and make my decision. I know that an hourly close under the 1.0698 level warns me of weakness. Particularly if it comes before 11:00 my time which is the European close. I know that most action after this is not as important so I may make an allowance if the move against me comes after this time and wait until the Asian Open or the next day's European session to make my exit.

Now that I have this plan, I can work on my profit targets as my last step. Looking up I see that 1.0722 is a minor supply level. I realize that we need to move through this area and trade above it in order to continue upward. The next supply level today is River at 1.0871. I remind myself that I should always exit or enter at River. This is my target. Ideally, a push through this area. I also realize that River is a dynamic level and it changes everyday. This means that if price does increase, then River will move up accordingly and I will need to adjust my targets most likely each day.

Now I am set on this trade and I can just monitor the market. If I am wrong, no worries. I am wrong often but I will just move on to the next trade.

Some work, some don't, so what, next.

http://rivertheory.squarespace.com/storage/cadtrade.PNG

UPDATE

So far the short in GBPJPY is working out. I am up around 100 ticks. I plan to cover on a move into River at 239.73 and I will go long just below River. I will likely just play a bounce out of this area and then look to reset longs based on price action afterward. If I am wrong on the long set up, I will cover quickly as I do not want to remain long while price action is sustained below River.





Let's take a look at how we could use River Theory to trade the GBPJPY cross based on today's chart. Here is how I would trade this pair. I see the Zone +1 supply level on the topside. I want to be short until this level is taken out and I will use it as my risk guide. I know that any sustained move above this level and I do not want to be short.

Ideally, I would like to be short closer to this level, but just for learning purposes let's assume I entered short today somewhere around the 241 level. I am going to stay short and look for a move down to the next demand level which is River at 239.73. If my short does move down, I would cover completely at this significant level and wait for the next setup or I could also set a long position up at River as soon as it is hit. I could set my risk up for the reversal long down around 239.00 which is under the demand level of 239.18.

I also would be watching River carefully as the month end approaches. If we move down to River, the next directional move will likely come from this level so I will try to position myself accordingly.

http://rivertheory.squarespace.com/s...y5-30-2007.PNG

As suspected the USDCAD trade has returned to test the 1.0698 demand level. I will remain long on this trade until the risk area below here is violated as described in the earlier posts. Again, this is why I do not believe in moving stops to breakeven. I still want to be in this trade and long until proven wrong.
If you missed the first entry opportunity, you have another opportunity to get long now at 1.0698.

Can someone tell me what happened to Downrivertrader's website? The one I used to visit isn't available any longer.

Southern--check out The Ebb and Flow River Theory. He has not posted in a couple of days though.

http://www.rivertheory.com/storage/e...r6-23-2008.PNG

http://www.rivertheory.com/storage/g...r6-23-2007.PNG

Updated 6-23-2007


http://www.rivertheory.com/storage/gyen6-23-2007.PNG

My Theme - I have waitied patiently to get short today on a move back up to the Zone +2 level. You can see from the daily candle, we headed down from this level and have now pulled back. This is a case where you could have played the bounces off the Zone+2 level very profitably as price bounced off this level over 50 ticks. I am going to try a Major Level Trade as an example. I know the black lines are fixed and won't adjust after today's close. I also check the longer term position charts and I see that 123.82 is a major resistance point in the Price Distribution. So even though this pair is very bullish, this helps me with my confidence in the trade. I also know that the FOMC announcement is later this week, JPY Retail Sales and CPI and other key data on both sides.

My Entry - I am short on the push into Zone +2 at 123.84.

My Risk - Intially I will set my risk above 124.00 which is a River Minor Supply level. I know that River levels are dynamic and will adjust each day, so I may adjust my risk after the new River levels are posted tonight. I can see from today's candle that there was almost no net price movement so I know River will not adjust much at all. This pair is very bullish and I will not allow a lot of wiggle room above 124.00 Mayge 20 tick or so.

My Target - My target is the fixed level at Zone +1 which is 122.76. I know that it is likely that River will move below this level if price does head down since it is adjusted each day.

If this trade is succesful, I will capture 100% of the zone for around 108 points. The time I am in the trade is not important. The only thing that is important is that I trade my plan and exit if I am wrong.

http://www.rivertheory.com/storage/u...d6-25-2007.PNG

The short position is still okay and we closed today at 123.66. Up around 18 ticks. As anticipated River did not move very much and my risk level is now above 123.89. The River Zones and the static zones have aligned further defining my zone. Nothing new to do here just monitor the trade and set my risk in a good spot. I will use the Friday swing high for a guide. There is some JPY data out tonight so I need to be aware. It is out at 23:50 GMT. Let's see how we fare tonight.

.http://www.rivertheory.com/storage/usdjpy6-26-2007.PNG

a very professional trade method it seems.., but looks very different to me because i dont know how this system works... Is there a place where I can learn about this sophisticated method?

I have a blog here.

TRADE RESULT: +100 points

Well this trade worked out great. The holding time was short and I made money while I slept. I placed my take profit limit orderjust underthe River Level at 122.84 and awoke to 100 points of profit. They aren't all this easy.

http://www.rivertheory.com/storage/u...d6-26-2007.PNG

Here's a River update as we head into today's North American Session

Think about your daily dynamic. I would say it favors range trading unitl the FOMC. Ranges will be extended but the odds of an all out directional move are lower in my opinion. Just play your levels, one to the other.

GBPJPY -Bingo!. Hopefully you took the short trade discussed in the Asian Session Update. It was good for approximately 200 ticks!! Now you can look to play bounces off 245.14 or set long at this level. If we move below this level, look to set longs on a move through River at 244.18.

EURJPY - Right On! The shorts discussed in the Asian Session Update worked out great and you should have picked up well over 100 points in profit. Now look to longs on a move into and down through 165.00. Play bounces out of this level or hold for 166.24. If we go back to 166.24 get short again.
USDJPY - Bingo! Follow this trade in the "Live Trading Example" Section. Trade Result: +100 points

EURUSD - We have good supply ahead of River. The move down discussed in the Asian Session Update went to 3431 so far. Just above River. Same thoughts here. Look to stay long to 3508 or get long on a move down to River at 3425 area.

GBPUSD - This has not changed. In a shorting area in front of two key levels. This is a good setup with zone target of 1.9866. Risk above 2.0019

There seem to be a lot of cable traders here so let's do a cable trade.

My Theme: Sterling is pushing up into a shorting area where we have 2 supply levels overhead. Housing Data in the US is out today so this presents a significant risk to any short trade but I can not trade based on NEWS like many do because I enjoy making money and not losing it. I know range trading is favored and I see that the Zone+1 Static Level is a major level. I am not sure if we will get there although I think we will. I am going to enter now and set my risk accordingly. This will be an attempt at a Major Level trade to capture the Zone down to the River/Transition area. It offers around 123 ticks of opportunity. I realize the trade may take some time to develop since we may need to resolve the 1.9989/2.0019 area before moving down. I am expecting this.

My Entry: I am short at 1.9992

My Risk: I will set my risk above the static/fixed level at 2.0019. Understanding that we may push through this area by several ticks I will give it a little room. Maybe 20-30 ticks above. If the level holds on a daily basis, I will exit immediately, but intraday I am flexible. I do not need to worry about the levels changing because the black lines, the static lines are fixed. So I am set on my risk plan.

My Target: This is easy. Target is River at 1.9866.The math tells me the opportunity is 127 ticks.

All I need to do now is wait and see if I am correct. The challenge will be managing a push up through 2.0019 on an intraday basis.

http://www.rivertheory.com/storage/l...6-25-2007a.PNG

Update on Wednesday, June 27, 2007 at 07:48AM

My trade is now a day old. My short is still in progress and everything is okay here. I am up around 40 ticks and all that is left to do is monitor this. I am still expecting a test of of the 2.000 level and will not panic if it happens. My risk remains the same and my target is River or a push through here at 9874.

http://www.rivertheory.com/storage/l...d6-27-2007.PNG

with u on the short
aiming for 9850s

good luck

is this some kinda standard feature in tradestation or an addon indicator or something?

im always amazed by how much extras u can find on the ts forums from indicators to systems and all that. its deff a great platform for techies

Sterling is testing above Zone +1. Remember, we were anticipating this and it is in our plan. We will need to do a good job of judging when to close the trade should it move strongly. I will likely wait for a daily close above 2.0019, but of course if it moves 100 points up that is not a good plan so you have to adapt to your risk tolerances here. This is also a very good place to enter short. This is the most difficult part of trading this concept in my opinion. You must become good at accepting risk and having confidence in your ability to manage it. I am glad we are dealing with it on a big day. It should help you in understanding the risk side of the concept. Wish me luck.

http://www.rivertheory.com/storage/ltegbpusd6-28a.PNG

Daily Dynamic - Well, we are finally here. The FOMC rate decision is at 14:15 GMT today. The last week of the first half of the year. We also have the CPE, Jobless Claims and the final GDP numbers for Q1. CAD data ncludes the IPP and Raw Materials Pice Index. I may be wrong, but I do not expect range changes until either tommorrow or later this afternoon after the FOMC announcement. There will be nothing significant that is not already priced in the market in my opinion.

GBPJPY - Bingo!!! The long target was 246.71 and the high was 246.75. You should have made some very nice profits on this trade. I gets a little tougher now. I would be short at 247.23 or long out of 245.14 and on the side until we get to either of these

EURJPY - Our longs came within 12 ticks of the profit target. Hopefully, you exited your longs near here with some nice profits. This cross also is a little tougher to call now. I would be short at 166.24 or long out of 165 and flat until then.

USDJPY - Longs got within 12 ticks of the target. You may or may not have exited for profit. If you are still long, stay long to 123.48. New longs can be set or reset on a move down to 122.76.

EURUSD - Same comments again. You can see that River provided an excellent demand level to set longs as we bounced strongly out of this are. You should be long and playing bounces are hold to 3508. Look to set new longs on a move down to 3421.

GBPUSD - This trade is in progress in the "Live Trading Examples" section. You can review it there.