Make Money Everyday - A Guide to Short-Term Trading

Goal:

Make Money Everyday.

How:

Capture as many moves as possible each day.

Framework:

Currency price action has natural support and resistance levels at each whole number, as well as each quarter level between whole numbers, AND the halfway point between each quarter level as well.

Some Things to Remember:

 

1. The length of expected move is directly related to the length of time you are looking at. More often than not – Short timeframe = Small move and vica versa.
   
2. Trading is not about being right or wrong, it is simply about being profitable or not.
   
3. You are not your trades. Profitable trades do not make you better than you are and unprofitable trades do make you any less of a person. (I struggled with this for a long time).
   
4. Time is time and Money is money. One is not dependent on the other.
   
5. Price level is irrelavant to your trading. Your job is to trade price action, not to forcast whether something is too high or too low. When you have an opinion like that – you will miss trades.
   
6. Your money is your inventory, so NO MONEY = NO BUSINESS. Love your inventory, use it prudently, and protect it with urgency.
   
7. “No excuses, No explanations”, Tony Dungy. One of my favorite quotes. Take this however you like, I take it that if I have a problem, it's usually me.
   
8. Risk can be predetermined, Reward is unpredicatable. I stole this from someone, but cannot remember where.... so my apologies if it's you.
   
9. Market Orders are an easy way to go broke. I feel like when I am using Market orders, I am chasing the trade and I have not done a good job of planning my work. Use limit orders, stop orders, and OCO.

Nuts & Bolts:

My goal is to capture as many 12 pip moves as my day will allow. My chart has price action, lines drawn at each .25 level, (xx.00, xx.25, xx.50, xx.75) lines drawn 12 pips away from each quarter level also (so xx.00 would then have a line drawn at xx.12 above it and xx.88 below it), plus I put on Pivot Points. I don't trade exclusively off Pivot Points, but enough people look at, and price action respects it, so I have it on there as reference.

I also start with an excel sheet with a dark line drawn through the middle, horizontally. I graph out the days moves, but with each 12 pip move. The 12 pip move has to start from a whole number, a quarter number or an 1/2 way (the xx.12, etc.). I start each day @ 5pm EST, and just block out on my graph paper each 12 pip move. Why? It helps me avoid getting caught up in the moment by moment movement of price action. I know that I'm looking for movement between two levels, this just helps me stay focused on that.

Now, everyone's 2 favorite questions – What time frame to use and which pairs? This is personal preference, but I use as small a time-frame as I can. Also, I use tick charts, instead of time charts, however 1M charts should suffice if you are unable to use tick charts. But if you can use tick charts - I use 10 tick bars. As far as pairs go, I believe again - personal preference. I trade EUR/JPY and EUR/USD primarily.

See attached excel file for the Examples and Master Copy of what my 'graph' paper looks like.

How do I use the graph paper? The first block is either +1/2 or – ½ off the middle horizontal line. It is always the first full 12 pip move between the quarter mark and the Eigth. (I have the 1/8th lines marked by double yellow lines on chart). Let's say for example, first move is up, so my first box filled in is the 1 box @ the +1/2 level. The next box I fill in will be a 2, and should it continue up, then I will box in the 2 @ the 1 level.

Now let's say it retraces – comes back down one 12 pip move, my next box would be still at @ the 1 level, but now in the 3 spot. It may be helpful to use different colors or symbols for up vs. down, I however just use a pencil and fill in the boxes as I go and I map out the day as it unfolds.

How does this help me? Well it keeps me going the same direction as the market. I know that if I am seeing a couple of + boxes strung together, I'm looking to buy. I also know that often times PA retraces, so I'm placing my orders to buy under the PA at the last 12 pip level, waiting to be filled. I continue doing this until it fails and the direction changes.

I have attached a chart, which may or may not help. It is from this evening's trading session. I'm pretty darn tired at this point, so I'll follow up with this more later.

Here is another chart. The thing that has worked for me is really narrowing in on what I'm looking for exactly, putting myself in a position to attain that and then not worrying about anything else, like was it unprofitable, did it keep moving and I got out with $$ on the table. I don't even think about those things anymore, because I know I will get AMPLE opportunities each day to clip off a few (12 less spread) pips.

For reference sake on this chart - red circles indicate buying opportunities, blue indicate shorts.

Thank you for sharing your method. It is quite interesting and really fits the way I think about trading. I like short term trades that are highly likely to go to profit.
Once you have identified a trend, do you just enter when the next 1/2, 1/4, or 1/8 level is reached or do you let price pass that area and then get in on the next pull back?

Where do you place your stops and what is the rational you use to do so? Thanks for your reply.

Thanks for the questions. I primarily enter on the pull backs, but not exclusively. I have, like most of us I would imagine, made my share of bonehead trades. Going back and reviewing my body of work - I can point to usually one of two things when i am not profitable.

1. Indecision, which leads to chasing trades. Being early or being late on entry still = being unprofitable. OR
2. Not doing my homework. When i first started trading, I started with 1800 bucks and the first day live I made 2K. Now I had 3800, I thought this was easy. Of course - lost all of it in short order. Not so easy. I also had one night, where I was completely over-leveraged and I managed to lose 75% of my trading funds in one evening.

Why do I bring these things up? These are some of things that have led me to where I am now, to using a piece of graph paper everyday, plotting it out by hand. How I trade is not flashy, it's not sexy, and definitely not exciting. It's not a "Holy Grail" and it won't produce a Home Run. It will however, give me singles, over and over and over again. So, now that I've turned a short answer into a long one... in my attempt to be prudent - I like pullbacks. It's like the market is inviting me back in.

As far as stops go - I pretty much stick to a tight SL, I figure I'm playing with fire a little bit by using such a short timeframe - if I prove to be in an unprofitable trade, I'm out, looking for next one. As far as pip-total goes re: SL - it depends on the pair. I give the more robust one's a little more room, because they move faster and deeper - like the EUR/JPY. The USD/JPY I'll keep a short leash, just because it doesn't move as much, so If I'm in an unprofitable situation with USD/JPY I'll be out with a shorter SL than others.

I hope that helps.

Mongolian

Thanks for sharing.
Could you include in your post a chart and a "graph" of the trades?
This would help to see more clearly what is happening on both.

Thanks again.

Bruce

Thanks Bruce. Attached is the excel graph for today Tuesday starting @ 5pm EST Monday night, plus 2 charts through 7:30ish AM EST. Obviously I do not trade 24 hours a day, but I do graph out how the day looks as I start. I marked as good as I could the trades as I saw them. Red arrows = short, green = long, yellow = stopped out, and white - unfilled orders. I'll try to put up the rest of the charts for past day - I have 3 boys I have to get to bed here soon.

Mongolian

Mongolian,

Thanks! This is Great! Thanks for taking the time to post this.
It is very helpful to me.

Bruce

You are Welcome!

I'm a fan of scalping EUR/USD also.
(I saw you had posted a few EUR/USD charts.)

What stop-loss do you use on EUR/USD lately?
What kind of winning trade % do you have?

Thanks in advance.

EUR/USD has in my humble opinion, really taken off the past 4 or 5 months. Not saying that because of the fall of the dollar, but just the quality of the moment. It really respects the whole number, quarter #, etc. S/R Lines. So knowing that - I keep my SL pretty tight - If it breaks one way unexpectedly, I'm out. My S/L is only 6 pips. It may sound low - but given how the pair has consistently behaved, this has worked well for me.

Batting Average? Like I've said before, I'm going for singles, just putting the ball in play. So my average is pretty solid, I'm right in there about 4 out of 5 times easy. Some days more, but that's about right.

I do want to say one thing about stops and trade % - I do have stops in place, I've played with fire before and unfortunately I just wasn't good enough to do so and got roasted. Am I better now? I would hope so, but I still use them because trading for me is about discipline and routine even. Doing the same thing day in and day out. Looking for the right setups, not chasing trades, and Loving my inventory. Now I've been running with this current setup for a couple years now, so while I still play with stops - I will often times not wait for the stop, and just get out.

We've all had those trades where you are in it at the price you wanted, and it's just not responding like you anticipated it would. What is in your best interest there? Wait around and see if you get stopped out? For me, when I first get that - I don't think this is going to work like I wanted - feeling, I'm out. In my early days of trading, I employed the ever popular strategy of Hope. I hope this thing goes back up, I hope it get's close enough I can get out with a smaller loss, I hope I can double up on the next trade to make back what I just gave away. HOPE is not a strategy. HOPE, in the context of trading, is dangerous. HOPE, in trading, is for losers. There is no hope, there are your rules, guidelines, whatever - you either Believe in them, know them and live them, or you don't and you'll be out of money before you know.

Sorry for the soap box...Appreciate everyone taking a peak at how I work.

Mongolian.

Attached are the graph for todays price action and 4 charts. I would have 6 to put up, and if I need to I will, but I think 4 is a pretty good representation. Pretty great day. Hope everyone else had success as well!

Mongolian

P.S. - Again - I do not trade all day long, but I have put up charts starting with the beginning of the day @ 5pm through just after the FOMC.

Sharing charts from today. Pretty good day today, no major surprises which is a plus. Hope everyone had success!

Just got back from Little League practice. I'm beat.

Mongolian

Is est time the same as N.Y. time? Or could some one give me the GMT time please. I'm down under in Kiwi land.
This sys looks very interesting thanks to all I will give it a try and see how I go. I like the clear charts very nice
Thanks

EST is the same as NY. I have tried to figure out the GMT before but I always would end up missing things because I would have the time wrong. So I quit trying and just went with what I knew. Don't know if that helps.

Thank you I thought it mite be N.Y. time. 3:18pm here now 5pm est is 9am NZ time so Ill come back then and see how it all pans out .
Bruce

Excellent! Let me know how you do.

HI,

Thanks for sharing your strategy,just a few questions.

Could you go a bit more into how you determine whether you are a buyer or a seller,how you determine short term trend??and how do you determine trend change??

Im sorry if its a stupid question,i'll probably have a few more

TIA

P.S. - Again - I do not trade all day long, but I have put up charts starting with the beginning of the day @ 5pm through just after the FOMC.
What is FOMC? please and what time would that be?
Thank you
Bruce

Find your answer here:
http://www.federalreserve.gov/monetarypolicy/fomc.htm

Here is an indicator that I developed to test this strategy. It builds a grid according to the strategy and inserts labeled vertical lines where session open and close. Correlation of the session lines to GMT and your broker GMT has to be worked out by YOU. If you can not do this then this indie is not for YOU.

Any questions about repainting or adding alerts will go unanswered.

Regards, KingHigh