Predicting Short-Term Direction and S/R Using Indicators

Here is a little bit about how I trade, which I'm sure breaks just about every "rule" you can find on this forum:

1) I don't like to force a trade. I've found that's the easiest way to lose money. If there is nothing that matches my setups available, I just don't trade. I used to feel I always needed to be in a trade; to always be doing something. Then I realized just periodically watching the charts is fine. The best time, for my way of trading< to get into a trade is to do so at the very end of a candle or the beginning of the next. So if i am trading off the 1hr chart, no need to spend the entire hour watching it, just long enough to see if it was going to match my setup or not.
2) I only use "emergency stops" set at 50-100 pips in case I lose power or internet. If a trade moves against me and I still feel it will turn around ad do what is predicted, I just get out of the trade and when it reverses, get back in where I got out. That way there is no drawdown and the only loss incurred is the normal spread.
3) When I believe the price will go down to say, the 10EMA (call it 130.2345), I set my take profit order a few pips above that to account for charting inaccuracies and the spread, as the chart can either show Bid or Ask price, depending on how it is set up. I have no problem leaving some money on the table. My motto is "You won't go broke taking a profit!". I have found trying to get a specific goal can cost you...I was trading with a guy and we both shorted EUR/JPY at the same price and he wanted to make $1500 on the trade. I got out like normal with a profit of about $1400, but he held on just to be able to say he made $1500....and he held on until when he sold it he only made a $900 profit. Because his ego got in between his trade and his bank account!
4) I only trade high confidence, safe trades aiming for 10+ pips rather than 100+ pips.
5) I traded 200:1 or 400:1 leverage, whichever was available. I figured the pair was going to do what it was going to do regardless if I had 0.01 or 10 lots> I also figured if I was confident in the trade, I might as well try to make the most money in the fastest way possible.
6) I paid no attention to R:R or only trading a small percentage of my account. If I was confident in the trade, I would trade it to make the most out of it. But the key was the short term, high confidence trades for 10+ pips. Much easier and safer to make than 50-500 pips. Bragging rights do not buy things!
7) I am a visual trader and have no problem using any and every tool that makes trading easier, hence my indicators. I don't talk about "price action" or volume or any of the normal buzz words associated with forex, because that matters not to my charts and what I see when I look at them. I just see patterns that occur over and over on different time frames and use those to my advantage.
8) I seldom trade 15min and shorter time frames, because most pairs just don't move enough to make 10+ pips safely on them.
9) One thing that has really helped over the years, periodically take money OUT of your account and buy something with it. It really helps keep things in perspective since all of the trading is done electronically. Having something tangible for your efforts makes it real, if that makes sense.
10) This really isn't about how I trade but more of a tip/encouragement: Trading is as full of egos as football is full of testosterone. Don't let anyone tell you you don't know what you're doing because some traders just don't like to admit someone can do something successfully that they can't. That's just how it is, I guess, because it's been that way at least for the last 4 decades. So, don't get discouraged by people that aren't successful telling you why YOU aren't successful.

Here is an option concerning the EUR/AUD Daily chart trade.

The original Daily chart reposted for reference.

Butting up on a support level of the EUR/AUD 4hr chart, so a good place to end a trade.

A safe, high confidence trade for around 50 pips.

Here is a pretty safe, high confidence trade on the EUR/YEN 1hr chart with another setup I like to use.

I didn't even have time to annotate the charts, take a shower and grab something to eat before it finished, so I'll just post the results, too. Not a killer trade, but an easy roughly 20 pips profit.

Not much feedback on this stuff. Let me know if any of this is useful, because it is pretty time consuming to find, annotate and post the trades, so if no one is getting anything out of it, I think I'm gonna go back to the options thread and maybe just post here periodically.

But if people get something out of it, that's great. Post your charts on your setups, too. This isn't just a thread where I post, so add your two pips worth and let's get some discussions going.

MM2, thanks for starting the thread. There hasn't been not much feedback. could be because it is still new (?). I read all your posts with interest. I find the information very useful. The charts showing the divergence trading technique is not new, but its "narrow" application and entry selection technique is very interesting and unique. Looks like it can provide high confidence, accurate and consistent trades. What I like the most is your post # 21 (about how you trade). The points make very good sense, definitely shows your years of experience in trading. There is a lot of gold in some of those points; so I am going to make some adjustment to my thinking and approach to my trading concepts. Thanks.

Bill

MM2, you said you also post to an Options thread periodically. I have not visited that thread though I also trade options. So I will visit that options thread too. For now, mind if I ask you if you use different techniques in analyzing entry setups in this thread vs entries for options? If so, why? Thanks.

(One reason could be that options may use longer-term setups? )

Bill

Good thread mm2. Simple appraoch to the market being useful to some extent. I've been reading it and have enjoyed your charts, quite clear and useful for perspective. Feel free to post as often as you like.

Cheers...

Thanks for this post. I do enjoy hearing how traders manage their trades and can understand your points.

I do use very different techniques for CHOOSING the options than I do for currency trading, but I still use the BB and EMA to determining support/resistance levels.. With currency trading, choosing a trade is nearly all visual technical analysis of the charts to determine what patterns are occurring, but for the stock/index to buy the option on is ONLY extremely overbought or oversold instruments. While there are several ways to determine those conditions, I have an indicator that I have modified that I use to choose those with the most extreme overbought/oversold conditions. Although I basically trade Puts/Calls short term (usually less than a week), I only use end-of-day data on my charts and that works fine for my style of trading.

Although I am still looking for those changes in direction for both, the reason for the difference in determining what to trade and their entry points is basically:
1) News occurs on a 24hr cycle in currency trading, where news that affects the stock market is before the open/after the close.
2) I trade multiple time frames in forex, but only daily charts for options.
3) I have to consider the price of the option and the potential profit moving from the strike price to the goal price. As I trade 10-50 contracts at a time, some are just too expensive. Sometimes you can modify the price by going further out-of-the-money and/or a closer expiration date, but not always.

A short trade on the EUR/USD 4hr chart that should be good for some pips

Goal was reached. Resistance level off the 1hr chart used to determine a good exit point.

This is what I mean about high confidence, safe trades. Including the two pips lost, still over 160 pips in profit out of the nine trades so far on this thread. No big mathematical formulas, no staying at the computer 13hrs every day or anything like that. Just a systematic approach that makes me wonder why all those people screaming it can't be done feel the way they do. And these certainly aren't the only methods that are successful, as I'm sure everyone reading this has something that they use to make money. The key, in my opinion, is to become confident in your strategy to the point you don't second guess yourself when a trade appears. When I first started trading years ago as I was learning, I was filled with hope....because every time I got in a trade, I HOPED that it would go my way! Heck, I said the words "Please" and "Come on, baby" to my computer screen more than I did to my wife, and that's saying something, there! After I tweaked my strategies to the point where I was confident, I worry about placing an order on Amazon more than I worry about placing a trade.

This also illustrates my point in that the trade was going to happen exactly the way it happened whether I was in it or not, and regardless if I traded micro-lots or full sized lots. With that being said, to make more money I don't have to find another strategy or method, all I have to do is increase my lot size. There is actually a lot of peace in that knowledge; want to double your profit? Simply double your lot size. You would be surprised how quickly the money adds up as you get into trading >0.5 lots! And once you reach that confidence level, you won't go back to smaller lots....once I started trading full lots, I never traded below that and typically would trade 2-4 lots at a time. And there is good money in that even with 10+ lots!

I said all that to say: find a system that works for you. Find a strategy that works for you. Use every tool at your disposal until you do, and if that system or strategy happens to be someone else's, so what?! You don't get extra credit for coming up with a new indicator or EA or formula or system. Your mortgage company will not accept bragging rights as payment. I used to fish bass tournaments a lot, so I reference fishing quite often. But if I wasn't catching much fish (weight) and someone else was, don't think for a second I wouldn't switch lures to what they were using. Being "successful" is defined differently by people. I define successful in tournament fishing, as well as trading, as making good money at it. I could catch fish in every tournament I was in and be considered a "successful" fisherman, but I would not be a "successful" TOURNAMENT fisherman if I didn't catch enough to matter. A person can consider themselves a "successful" trader if they are consistently profitable, but if they aren't making much money with those profits, they aren't a "successful" PROFESSIONAL trader. But if you focus on safe, high confidence trades using whatever system you do use, that will give you the confidence to trade the same way over and over and over and just use lot size to develop your profits rather than hunting for those high pip trades.

Just remember: 1) This isn't rocket surgery, 2) Don't make it harder than it needs to be, and 3) Don't listen to anyone that says it can't be done!

Just my 2 pips worth...

A trade off the CHF/JPY 4hr chart. Should be good for 10+ pips when the spread tightens back.

Butted up against resistance on the 1hr chart in the form of the 10EMA, so a safe place to exit for a little over 10 pips.

Done for today, I believe. Its time for dinner and a few episodes of The Walking Dead. I'll check again before bed, but probably won't trade any more until tomorrow.

Let me know what you guys look at for setups, entry/exit points, any trading rules you stick with (or don't stick with) and favorite time frames to trade from and your normal pip goals per trade and anything else you want to share.

Let's show people that you can indeed make good money in forex and it isn't as hard as a lot of people make it!

Wife's on the phone so that's probably it for TV tonight....so I came back and found a trade off the EUR/JPY 30min chart.

If I would have know movie night would be short, I would have stayed with the last trade and milked out some more pips, but I got 10 pips and that's always the minimum goal, so it still goes into the bank.

Off the phone and The Walking Dead is a go...again....hopefully.

Closed the trade for just over 5 pips. I will watch it in the next 2-3 candles to see if an RSI Divergence forms.

It still looks like another good trade setup with the entire body of the last candle outside the upper BB, but I don't want to have to check it periodically while people are fighting zombies....

Hi Monemaker, can you please let ne know your BB settings.
And do you change them for the differnt time frames?
thanks

I trade similarly in terms of visual, and short term direction with higher lot size and use EMA's and a couple of oscillators.
DTO , RSi and also williams awesome oscillator.

Ive not had a lot of scces with BB hence the question above, keen to have another look.