how do you handle retracements? | Forex Factory

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how do you handle retracements?

  • #1
  • First Post: Apr 14, 2009 12:50am Apr 14, 2009 12:50am
hi all

im new to forex trading, been trading about 2 months now, and with mixed results, i trade on the 1H chart now and my main problem is retracements, how do you handle them?

for example as soon as i enter the trade i see it go into negative terriority and sometimes it goes higher into negative, then i question my reason for entering the position (although valid at time of entry) so what do you do to minimise retracements?

my stop loss is approx 30-50 pips away and im aiming for 30-50 pips profits.
  • #2
  • Apr 15, 2009 5:36pm Apr 15, 2009 5:36pm
Quoting clayton4115
hi all

im new to forex trading, been trading about 2 months now, and with mixed results, i trade on the 1H chart now and my main problem is retracements, how do you handle them?

for example as soon as i enter the trade i see it go into negative terriority and sometimes it goes higher into negative, then i question my reason for entering the position (although valid at time of entry) so what do you do to minimise retracements?

my stop loss is approx 30-50 pips away and im aiming for 30-50 pips profits.
I trade much longer term on 4hr/daily charts so can't really comment to much on your retracement issue. However one point I reckon you should draw your attention to is your Risk/Reward ratio. You mention trading with a 30-50 pip SL and state that you are aiming for a similar take profit. This makes your Risk/Reward ratio: 1:1. On this basis you will need to win 50% of your trades just to break even! Just something to think about....
  • #3
  • Apr 15, 2009 5:50pm Apr 15, 2009 5:50pm
when using the H1 you must understand that within EACH CANDLE lies moves UP and DOWN, which are seen on the lower timeframes.

when you wish to enter an H1 trade, move down to at least the 15 minute and figure the trend and price direction --- if the direction is moving DOWN, its not a great time to take a LONG position on the H1 as the price will drop for approximately 1.5 hours before it starts back up again.

to explain the interrelationship of all the timeframes is impossible in a short post, but do that (and open up your sl for the H1 -- youre way too tight) and you should have much better luck

should you desire, i teach how to UNDERSTAND the market on two threads in the rookie section --- look for my initials MP, although someone has just stolen my initials and is "theoretically" teaching how i trade, so be careful and find the ones with MAJOR viewership !

enjoy and trade well

mp




Quoting clayton4115
hi all

im new to forex trading, been trading about 2 months now, and with mixed results, i trade on the 1H chart now and my main problem is retracements, how do you handle them?

for example as soon as i enter the trade i see it go into negative terriority and sometimes it goes higher into negative, then i question my reason for entering the position (although valid at time of entry) so what do you do to minimise retracements?

my stop loss is approx 30-50 pips away and im aiming for 30-50 pips profits.
  • #4
  • Apr 15, 2009 7:41pm Apr 15, 2009 7:41pm
thanks for your input, something good to think about when entering a position, especially looking at the 15M timeframe before i enter the 1H.
  • #5
  • Apr 15, 2009 8:27pm Apr 15, 2009 8:27pm
Quoting clayton4115
thanks for your input, something good to think about when entering a position, especially looking at the 15M timeframe before i enter the 1H.
Why would you wonder deeper into the forest to find your way? You're only going to see more trees and get more lost.
  • #6
  • Apr 15, 2009 8:38pm Apr 15, 2009 8:38pm
Ya think ?

personally, i find it to be the yellow brick road and the way OUT of the forest !

enjoy and trade well

mp


Quoting philmcgrew
Why would you wonder deeper into the forest to find your way? You're only going to see more trees and get more lost.
  • #7
  • Apr 15, 2009 9:16pm Apr 15, 2009 9:16pm
Hello,

I think the answer depends on your method. To some traders 30-50 pips is just random noise and is expected to others it's a profit, thus you are going to get a lot of different answers.

In reality the only one that can really answer the question is you. Simply do you review your closed and open trades? If so does it really "always" retrace? If so and you are getting the direction correct you might want to put that into your method. For example enter half when you normally do and then enter the second half on a retrace. NOTE: I didn't say double up I said half! This way you don't miss the train if it takes off without you and you get to re-enter if it pulls back.

One last thing to think about is that this kind of entry is "mentally" comforting to most traders. It helps control your nevers until you gain confidence in your abilities. It keeps people from getting over anxious or excited and eliminates the feeling of the price "always" pulling back after an entry.

Trade Well....
Brent


Quoting clayton4115
hi all

im new to forex trading, been trading about 2 months now, and with mixed results, i trade on the 1H chart now and my main problem is retracements, how do you handle them?

for example as soon as i enter the trade i see it go into negative terriority and sometimes it goes higher into negative, then i question my reason for entering the position (although valid at time of entry) so what do you do to minimise retracements?

my stop loss is approx 30-50 pips away and im aiming for 30-50 pips profits.
  • #8
  • Apr 16, 2009 3:39pm Apr 16, 2009 3:39pm
Quoting mparker
Ya think ?

personally, i find it to be the yellow brick road and the way OUT of the forest !

enjoy and trade well

mp
I really quote. In my opinion the best way to enter an uptrend (for example) in the 1H chart is looking to the 15M chart and waiting an uptrend there too, or looking for resistances in that chart, or, if there's a down trend on that chart, waiting at least for a positive divergence, or someone similar... in any case, wait for the uptrend (or the weakness of the downtrend) on 15M chart.

my 2 pips

P.S. If you trade without using 15M chart for better entries, 30 pips of stop loss in the 1H chart are surely not enough in most cases.

P.P.S. Which pair do you use? If you use one with great volatility (like gbp/jpy for example) you need stop-losses greater than eur/usd (for example)
  • #9
  • Apr 16, 2009 5:22pm Apr 16, 2009 5:22pm
Depends on what method or style you are trading. On the next trade, why don't you wait for a little retracement then jump in. See if that works.

Quoting clayton4115
hi all

im new to forex trading, been trading about 2 months now, and with mixed results, i trade on the 1H chart now and my main problem is retracements, how do you handle them?

for example as soon as i enter the trade i see it go into negative terriority and sometimes it goes higher into negative, then i question my reason for entering the position (although valid at time of entry) so what do you do to minimise retracements?

my stop loss is approx 30-50 pips away and im aiming for 30-50 pips profits.
  • #10
  • Apr 16, 2009 6:22pm Apr 16, 2009 6:22pm
i have just entered positions on the following

GBP/USD
EUR/GBP
USD/CAD

i entered the USD/CAD position 12 hours ago, i am currently -38 pips on this one

the other two i am USD -10 and GBP -7

what you think, all of them i entered short on the 1H chart.
  • #11
  • Apr 18, 2009 3:17am Apr 18, 2009 3:17am
Quoting mparker

when you wish to enter an H1 trade, move down to at least the 15 minute and figure the trend and price direction --- if the direction is moving DOWN, its not a great time to take a LONG position on the H1 as the price will drop for approximately 1.5 hours before it starts back up again.

mp
Why will the price will drop for approximately 1.5 hours before it starts back up again?
  • #12
  • Apr 18, 2009 4:45am Apr 18, 2009 4:45am
Quoting fxtrader29
Why will the price will drop for approximately 1.5 hours before it starts back up again?
Because on average that's how long a 15m wave will last.
  • #13
  • Apr 18, 2009 4:53am Apr 18, 2009 4:53am
Retracements are a part of trading and there is no way around that. You could either, hold your positions though out the retracement or exit your position before a retracement.

If you are following a trend and a retracement comes up, it would be best to exit that postion; just in case that retracement turns into a new trend. If the market continues the trend after the retracement, go ahead and open that position back up in the direction of the trend.
  • #14
  • Apr 18, 2009 7:31am Apr 18, 2009 7:31am
Quoting fxtrader29
Why will the price will drop for approximately 1.5 hours before it starts back up again?
Don't fall into the trap of trying to assign order to a random market. Price goes up until it doesn't. Then it retraces until it's done.
  • #15
  • Apr 18, 2009 7:41am Apr 18, 2009 7:41am
Quoting philmcgrew
Don't fall into the trap of trying to assign order to a random market. Price goes up until it doesn't. Then it retraces until it's done.
Surely you have to somehow assign some kind of order to market moves, otherwise how can you profit?
Living the adventure in my head.
  • #16
  • Apr 18, 2009 8:20am Apr 18, 2009 8:20am
Quoting Leonlorenzo
Surely you have to somehow assign some kind of order to market moves, otherwise how can you profit?
There are a lot of ways to profit from trading. Saying the market is going to turn around every 90 minutes isn't one of them. That simply isn't an actionable assumption.
  • #17
  • Apr 18, 2009 8:44am Apr 18, 2009 8:44am
Quoting philmcgrew
There are a lot of ways to profit from trading. Saying the market is going to turn around every 90 minutes isn't one of them. That simply isn't an actionable assumption.
Oh, I took your post as a blanket statement that there is no order/predictability to the Forex market, ie. totaly Efficient.

Thats what I get for not reading the whole thread.
Living the adventure in my head.
  • #18
  • Apr 18, 2009 9:51am Apr 18, 2009 9:51am
the market, except when trending strongly or in a "high" momentum day, changes direction (but not trend) every 1.5 hours as a "norm"

if you enter at the beginning of a reversal period, you will have to wait for that "cycle" to finish before you get another direction change --- its just a fact of life in the markets.

we talk about time based trading over on my threads -- MP -- 350 pips daily" and a whole lot of other situations that come from deep experience in the markets.

enjoy and trade well

mp



Quoting fxtrader29
Why will the price will drop for approximately 1.5 hours before it starts back up again?
  • #19
  • Apr 18, 2009 10:37am Apr 18, 2009 10:37am
Technically speaking an average 15 minute wave lasts about 270 minutes. They may last 10 hours but we are talking average. What appears to the naked eye is 90 min, but what you are looking at is actually one of at least three five minute waves that make up the 15min ( 3 * 5 = 15. Makes sence to me)
The 3rd 5 min wave here is always an impulse wave, hence it contains what appears to be 3 moves. I say always impulse because the 5 and 15 are finishing at the same time.This is a 15m cable chart in the middle of Fridays action. Counting the candle after the low as the first, we have 18 to the high,18 * 15 = 270 min, so this is an average move.
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  • #20
  • Apr 18, 2009 11:27am Apr 18, 2009 11:27am
certainly cant disagree with your concepts, although we seem to basically agree on whats happening, with different language.

remember that while "most" trading platforms present the normal one, five and 15 minute timeframes, WITHIN ALL THOSE TIMEFRAMES ARE MORE --- i trade the 3 minute, 9 minute and a few others when i feel like it and while SOME of the timeframes will overlap each other, the majority contain their OWN support and resistance points, although if one wants to be EXACT about the whole mess, the one minute support and resistance areas are the TRUEIST form of understanding, even up to the 15 minute top resistance.

Each move on the 15 is controlled by the retraces and upside moves made on the one minute --- one simply locks into the trend of the one minute (making higher higs and lows on each "cycle" ?) and you will see the 15 min is the same.

conversely, since all timeframes create the H1 and H4 trends, what the H4 says is reflective of what the lowers will do also --- obverse and converse work together in this situation until one reaches the top resistance of the present move, and the banks now reverse everything, going for the short.

Once one gets into the cycles and movements, it becomes a "relatively" simple matter of "timing" (where "timing" refers to time of day) the market for maximal gains.

wave theory and all the rest of the stuff (including what i teach) is simply a method to SEE WHAT IS HAPPENING in the macro sense, and the "accepted" methods work very nicely.

think were saying the same thing, but in different languages !

enjoy and trade well

mp





Quoting doublecross
Technically speaking an average 15 minute wave lasts about 270 minutes. They may last 10 hours but we are talking average. What appears to the naked eye is 90 min, but what you are looking at is actually one of at least three five minute waves that make up the 15min ( 3 * 5 = 15. Makes sence to me)
The 3rd 5 min wave here is always an impulse wave, hence it contains what appears to be 3 moves. I say always impulse because the 5 and 15 are finishing at the same time.This is a 15m cable chart in the middle of Fridays action. Counting the candle after...
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