Pure Price Action Trading

Euraud short has been stopped out at half the initial risk, a loss of 0.5 percent of the account. We focus on cutting our losses when the market is not favourable for our trend following method. We are trend followers and in market conditions like this, we tend to get some small scratches or small dents to the account, but as long as we cut our losses, we can live to trade another day. Looking at all the pairs we trade, they are all moving sideways and if we manage to get out with small scratches we are doing ok.

Some people might say if you are trend traders, why don't you stay out when the market is moving sideways and then trade when its trending. We dont have a crystal ball and no one have, so nobody knows when the trend will start, how far price will move or when the trend will end. So even when the markets are moving sideways, we keep trading our setups, that when the importance of cutting losses come into play...and then we let our profits run when the market is trending, so the small scratches we suffer in sideways markets are easily covered by the huge profits we take in trending markets.

Dont try to guess how far a trend will go, you will definitely get hurt, because by doing so you are trying to pick tops and bottoms. And your account will let you know that you are doing it wrong, because you will see a big dent in your account. Remember price makes the news not the other way round. Economic figures or company earnings can be doctored, but the traded price can't be fixed, it's the only number to believe. How many times have you watched market drop after a positive news outcome, and how many times have you bought a market on good news, only to drop and stop you out. Our job as traders is not to argue why price is behaving that way, our job is to systematically sift price to find trends and act on them and not let the latest news affect our market opinions or our trading method.

Many traders try to make a killing on one trade, so instead of risking less than 1 percent of their account, they put more risk thinking they will make more. When you are trading with a very high stake than you are comfortable, you are more likely to be emotionally attached to a trade, you don't even want to leave your desk, you will sit on your desk and watch pip by pip. If you are still doing this, you are trading with scared money and it hinders your trading decision...Reduce your trading size to a more comfortable size, place your trades with stop-loss order, profit targets and walk away from the desk...let the trade take its course without you fiddling with it.

Now that the 1.0500 handle has been broken we expect price to retest the 1.0500s zone and she will make a decision wether to follow through or continue falling, if you were short from the 1.0550-1.0560 zone we discussed previously, you could have taken partial profits at 1.0510 and moved SL at breakeven. A retest of 1.0500 could be a good level to add to your trade.

Watch how I have walked you through a trade on Aussie, I will compile all the posts on the trade and post them in one post for learning purpose. Watch the simple analysis, nothing complicated, just a few trend lines, support and resistance lines. I was bearish the pair not because of some news or fundamentals, but by just looking at the structure market. The post below is my thought process before the trade and during the trade. It shows how I have levels marked and how I expect price to react to those level. If price fail to react accordingly I stay out of the trade and reevaluate my analysis. I hope some people will find this lesson useful

14 Jan

Price is at a very signficant level on this pair...a level where price might either keep pushing higher or bounce off. Looking at the weekly chart, the pair has been in a wedge for a very long time now and price is at the upper TL of the wedge, if price breaks through and follows through, the pair will move higher, but if price breaks through and fails to follow through, there is a lot of room for a move to the downside. For now its a wait and watch closely, because this level is very signficant. If we move down to the daily chart we can see how price is pressing on the upper TL of the wedge...could be a very good trendy trade from this pair in the next

Weekly Chart


Daily Chart


18 Jan

aussie failed to follow through above the upper TL of the wedge...price is looking heavy now and we might see a drop in this pair...and there is plenty of room to drop...price could easily reach 1.0400

Daily Chart



18 Jan

Is she ready to go now, as we stated, a good entry could have been on the slight pullback. She might be saved by the bell (Friday), time will tell.

22 Jan

Aussie didnt do as we expected, we were expecting a drop towards the 1.0400 handle. Now the pair is back to the upper TL of the wedge, this is a very signficant level for this pair now, either the pair will breakout or bounce off. If the pair breaks out, just wait to see if it follows through after break, but if it fails to follow through, there is plenty of room to move back to that 1.0400 level. Keep a close eye on this pair now, because if she breaks out of this wedge, she has plenty room to move and could be a very good trend trade...aslo keep in mind that a failed breakout could be a very good trade as well.

22 Jan

A very interesting and signficant level on this pair is the 1.0560-1.550 zone, if the pair retraces to this zone, she will make a decision wether to continue moving up or drop. The level is the broken upper TL on the wedge and the broken pivot high. I am favouring the failed breakout on this one, time will tell.

240 min Chart



24 Jan

Aussie reacted to the zone as we expected, watch the false breakout of the upper TL and the pivot high. Also watch closely how price retested the pivot when it broke to the downside...a simple entry was on the retest, 1st target could be placed around 1.0510 and SL at breakeven. Price is more likely to bounce off to retest the upper TL of the wedge and then push back down towards the 1.0500 handle. Price has been to this level and now could probably break it for a move down. We have been talking bearish this pair since last Friday, lets see what happens.

Before


After



24 Jan


Now that the 1.0500 handle has been broken we expect price to retest the 1.0500s zone and she will make a decision wether to follow through or continue falling, if you were short from the 1.0550-1.0560 zone we discussed previously, you could have taken partial profits at 1.0510 and moved SL at breakeven. A retest of 1.0500 could be a good level to add to your trade.

Weekly Wrap Up

Another slow week for trend traders, but we managed to escape with just a small scratch. We had three trades, short gbpjpy reached 1st target at +120 pips (+0.25 percent), but some of our members were lucky to get 2nd target, making a total of 480 pips (1.00 percent) , short euraud was stopped out for half the initial risk at -165 pips (-0.50 percent) and short eurnzd was stopped out at breakeven.
So this week, our total loss is = -45 pips (-0.25 percent)...and the lucky members who stayed in gbpjpy short are in profit with +435pips (+0.91 percent). A total loss of 0.25 percent for a swing trader is a drop in the ocean, just 1st target of one trade can cover for that, so nothing much to worry, its cost of doing business. We are trend traders and we usually have small scratches when the markets are not trending. Cutting our losses in sideways markets is what keeps us above water every month.

Weeks total = -45 pips (-0.25 percent)

Thinking In Probabilities and Percentages

Human nature is afraid to be wrong or lose money, so even if you are consciously aware that this can hinder your trading, but subconsciously that's the exact you thing you will do...So the conscious and subconscious mind are in a tag of war. We all have losing trades and we all get it wrong some time, but it's how you cut your losses that keep you in the game longer than other traders. Every trader no matter how big or how well-informed there are, they will have some losing trade. Losses cause traders to be doubtful about their ability to trade, it cause them to change strategies. But they fail to understand that losses are part of the game, they are cost of doing business. They are emotionally attached to every trade they take. One way to keep these emotions at bay is to think in probabilities. Focusing your mind on the probabilities of your edge will definitely relieve the pressure of try to predict what is going to happen next. When you take a trade, you will never know the outcome, because its random and unpredictable, but as long as you play the numbers game you will come out profitable every quarter. By numbers game I mean playing a big sample of trades, knowing that you have an edge and the odds are in your favour.

As long as a trader is risking a small portion of their account per trade, there is nothing to worry about. You have an edge and you know that the odds are in your favour. Bookies and casinos are playing the numbers game, they know that with the number of hands played, the odds are in their favour, that's why they manage to stay in business.

I have noticed that a lot of new traders are attracted by pips..they are worried about how many pips you make a day/week. I think it shouldnt be about pips only, you should focus on percentage growth. I have never seen JP Morgan or Goldman Sachs recording their results in pips. Do you know that trader A can make 1000 pips a month compared to Trader B who makes 500 pips, but you will surprised that trader B can have a higher percentage growth than Trader A...its all about risk to reward ratio. Some new traders are asking how can that be possible....

Trader A:
Takes 10 trades and lets say they are all winners...so he is making 100pips per trade, but he is risking 1 percent to make 0.5 percent...so every 100 pips he makes equates to 0.5 percent of his account...for the ten trades, the account growth is 0.5*10 = 5 percent growth

Trader B
Takes 10 trades and lets say they are all winners...so he is making 50pips per trade, but he is risking 1 percent to make 2 percent...so every 50 pips he makes equates to 2 percent of his account...for the ten trades, the account growth is 2*10 = 20 percent growth

Trader A is making double the number of pips of Trader B, but Trader Bs account growth is 4 times that of Trader A. So making thousands of pips doesn't mean much unless you know the risk/reward and the percentage growth. So to all the new traders, don't just be attracted by the number of pips...think in probabilities and percentages.

When you achieve complete acceptance of the uncertainty of each edge and the uniquess of each moment, your frustration with trading will end…Trading in the zone

Enough of this nonsense, lets see some charts

Interesting to see audchf retest the 0.9600 handle broken yersterday...the pair moved as we expected, but we didnt have a setup on this pair. Hope to get a setup if the pair retraces to the 9600 handle.

850 pips in january??

wow, that is amazing

He is not an honest person. He created a duplicate username to praise his own thread. Check the profile details of both Tradingplace and Fxtrader to see the evidence.

Some interesting charts to look at next week

Cable could be interesting, it has been in a wedge for almost 4 years now...so either it will bounce off the lower TL of the wedhe and get back in the wedge, or breakout of the wedge, trading a retest could be a good entry. Interesting in the coming days/weeks if she breaks out...there is plenty of room to move. If she breaks out to the downside and fails to follow through, that could be a good play as well.

Euraud

Price has broken the pivot at 1.3000, so we will either see a retest of the pivot, thats where prie will make a decision to continue or to fall. So its wise to keep an eye for this level next week.



Euraud 240 min chart

Kiwi

Price is pressing on the resistance, notice the asymmetric triangle...so either price will break to the upside or retest the green TL, but i am favouring the break to the upside on this one...a simple entry could be a retest.

Kiwi 240 min chart

Dow

It will be nice to see a retest of the broken pivot high...since price started to go up this year, there hasnt been a decent retracement, it seems the bulls are in charge and its more likely to stay like that for some time....but if price pullsback to the pivot and fails to follow through, there is room to move to the downside.

Dow

Ftse

Same explanation as the Dow chart above

Ftse Daily

Lets keep any eye on the abovementioned markets and we will revisit the charts during the week to see how price is reacting to our levels. Some interesting pairs to look are all the eur pairs, gbpjpy, usdjpy....we want to see if the uptrend is still going to continue or we will see some sideways move as price digest the big moves. Kiwi and aussie usually move in the same direction, but if you notice this week they have been moving in different directions...kiwi is trying to break to the upside whilst aussie is breaking to the downside...they will be interesting to watch as well. Have a good weekend everyone

Very slow week as most pairs have been consolidating, we only took one trade this week, long gbpaud, we were unlucky to be stopped out for a loss before price pushed up as we expected…one of those frustrating trades, we wont dwell on that, we move on to the next trade. We have pending orders on eurnzd and eurusd, they are more likely to be filled today. So this week we had a drawdown of 0.5 percent….Gbpaud was stopped out at half the inital risk.

Keep an eye on the levels we identified last week...Ftse and Dow could be interesting when price retests the levels..

Not much posting this week because its half term and kids are on holiday...looks like we might some big moves this week, will update on trades at the end of the week....trade well everyone...