Old school trading journal

This is going to be, just like the name of the forum, a journal of my trading. I hold a regular job and trading (only real money please) part time. This journal is meant to learn from my own mistakes. I will try to talk about my expectation in the coming days for a particular pair, trades that I have already taken and wisdom that I have gathered elsewhere - basically anything to make me a better chartist and trader. Calls will be made, sometimes live, but the focus is to learn from my own mistakes later on when I (or someone else) look back on a chart. I look at all time frames (M15 and higher mostly). I am a discretionary trader (no MTs) and use bollinger bands, psychological levels, S/R (including moving averages), candlestick patterns and an oscillator (although I hardly look at it, stochastics for the most part). So thanks for dropping by. Let me start of with my outlook for AUD-USD for the first week of January.

First, to get a quick view of what is going on let us look at the daily. The down channel from Oct is intact and the pair seems to be retracting from the BB mean.



H4 seems to be going flat for several days now and usually a signal for a slight move up.



I thought the pair was going down by looking at H1 where it formed a double top (vertical line). My profit taking time frame was 15 minutes so I got lucky but the double top failed.



Now the weekly is still on but it is green at the moment (and at a potential double bottom area)



The downward trend gets into trouble if the weekly closes above the current level. But 4 hourly wants to touch something higher it seems. Given the confluence of the psychological 90 (horizontal yellow line), 200 EMA and SMA, and upper bollinger bands on H4, I think they will act as magnet for the price to rise up. But I am bearish on this pair and don't see the weekly breaking this trend. So in the remaining two days of this week I see the pair moving up to 90 but then quickly dropping from there so as to close the week red. If instead the week closes green then the weekly double bottom becomes a possibility and that changes the perspective completely.

I will follow this pair and short if the pair touches the 90. Depending on the PA I might also trade quick pips upwards on its journey to 90. However, I will trade a very small position if the pair does not behave as expected and instead keeps going down without touching 90. My target will be 8750 (level + weekly low Aug '13).

I will give you a quick rundown of what happened this week. The pair gapped down after 1st january break. But just as expected, it reversed direction around 6 in the morning on the 2nd. As I noted in the earlier post, the pair wants to touch the 90 level and this was its first attempt.



Although, this is what I was expecting, I took a bearish trade (1 in the figures) when the pair retracted from 8950, thinking that this was it (and 90 would be too perfect a call - basically not trusting my own call). What followed was interesting.



When a pair breaks out of a range and when you expect it to take long strides in any direction be very wary if you start seeing hesitation immediately. The third candle from left (in the figure above) shows the initial signs of hesitation. It would be ok if this was lower down in the trend, maybe after 2 or 3 red candles but after just breaking out from a range - not a good sign. I should have taken note. What followed was a red candle and that made me complascent. Immediately after that a green candle (sorta bullish engulfing you can look up the fancy name) taking back all the gains I made. That was the last alert I got before it just kept going up until I closed and took a loss ( numbered lines showing trades I took - cyans are losers and whites are winners). So important lesson - if you are at the beginning of a trend get out if you see hesitation already.

The pair went straight up to the nineties and I got some good trades of it (7 and 2). The next interesting lesson is from how the pair reacted at the 90 level. It was obviously trying to reach up to 90 and was crawling on its way. Again if it was a bull flag, waiting for the next leg up it should have gone down instead of up (profit taking). But this pair was trying to reach up. I did a small channel trade successfully (3) but placed a breakout bet very foolishly (4). Now notice how all along its crawl, the pair throws up wick above 90 but it never closes above 90 till 10.15. 10.30 we have another close above 90s before the big drop. Although technically the 10.30 M15 is called a hanging man and is supposed to indicate possible reversal it is not very accurate (check out how the 23.30 candle on Jan 2 becomes a continuation pattern ). As an aside I take note of wicks being longer than at least three times the body, at least for this pair. But together with the fact that this hanging man is appearing at the psychologically critical 90 should have raised red flags and I should have closed 4 right there. But by not doing that (and by losing money) I was reminded of an important lesson. It doesn't matter how many times wicks cross a level, sometimes the big orders just won't pile up to drive the price down until you have close above that level. AGAIN, be very watchful when a price CLOSES (M15 or higher) for the first time above a closely guarded level. The big red candle that followed is proof of that. The price bounced several times from that level but to drive it down real hard M15 close was necessary. After that there was no real struggle for the bears.

But the most important lesson was this. Even if you make all the right calls your trades can suck. I think this was the worst trading I could do given the accuracy of my call (last post). Yeah, it tastes worse than that monkey piss they call Budlight.

Now forecast for the next week. I will still be on this pair and obviously have enough reasons to be bearish still. The daily seems to be bouncing of the bollinger band nice and heavy but the weekly is showing a bullish engulfing pattern, which can be a solid reversal indication , especially near a double bottom.





And today's down move although encouraging can be simply profit taking at close. So I will remain bearish and cautious. I am hoping the green weekly to be completely covered with a red and in that case the pair has to show direction early in the week. My target remains the same.

Two quick trades, 59 pip profit, sunday evening. Good way to start the week.

Today's post is very interesting. Trading the EURUSD.

Now I have been bearish this pair for a long time now. In the last few weeks it was going down and I was waiting for a nice retracement to 3700 level. Below is the post where I post my sentiment.

http://www.forexfactory.com/showthre...42#post7191142

Now that was last night. Today, while at work I was faced with the following scenario.



So the pair has retraced its way to the mid 3600 from the high 3500 of last night when I commented on the EURUSD thread - still not my target. But I decided to play it long till 3700. Couple of missteps (left) before I finally settled in for the long haul near 3650, hoping for the best. But it never plays out exactly like you think it would and within a few candles I knew I have had had better entries. But why did I stay in the trade?

Three reasons:



Check out the following riddle I posted on the EURUSD thread:

http://www.forexfactory.com/showthre...67#post7193267

Reason 1
Bascially the pair is moving upward in a 2 step forward one step back manner. It is gaining an average of 50 pip and giving away 25 pips - from 1.3575 to 1.3625 back to 1.3600, then 1.3650 and it was slowly heading its way back to 1.3625. So basically in the next leg up it should be somewhere close to 1.3675 or basically near my short target 1.37. And 1.3625 becomes a level to watch.
Reason 2
As a technical analysts I am nothing but a consensus seeker. So if there is any kind of confluence then I get interested. I don't care about an arcane indicator shouting buy or sell. Look at the perfect elliot wave it is setting up. So we have the Elliot bandwagon with us. More the merrier.
Reason 3
Lets look at the move on a longer time frame. The pair has been slowly going down since the high at 1.39 and this is its first major retrace.



Do you see why I love fibonacci? So when you apply fibonacci the 23.6 level is near 1.37. These two together form a potent magnet to draw the PA toward them.

So the above reasons made me stay. Besides, the time it was taking for the next leg up I ascribed it to waiting to hit the trend line and 20 MA on the H1 (both yellow in fig 2 above) and that would be due in the evening.

Come evening.

I see the pair maintaining its pace downward, straddled between the 200 ema and sma and touching the lower bollinger band repeatedly. At one time it also crossed the trend line that has been established for a long time now (white in the figure below)



Now this made me a little wary. If it had to take that last leg up then it cannot wait for more push from below. We already have them all: trend line, 3 standard deviation of the bollinger band, 20 sma, 200 sma support, 200 ema already breached. I decided to see some more bars and call it quits. And I posted this after a candle touched 3625 level and moved up (at left yellow line in figure below).

http://www.forexfactory.com/showthre...08#post7193508



Soon afterwards I saw a higher low which I also posted ( at right yellow line, notice the first higher low in a while, white circles)

My hunch that there was reversal seems to have been correct but I am not sure about the strength of the reversal. Let us see what happened after that.

The pair kept dropping and I finally closed and went short after the breakout. I reversed on the next candle because the price action did not look right. The second candle showed hesitation. I was saved because the pair reversed direction completely.

From the USDJPY chart

I am not showing the hourly or the 4 hourly charts but rest assured the conditions were ripe for a retractment and very similar for the two regions circled below



Question is why the first bounced off and the second did not but kept creeping upwards.

One reason is pretty simple, that it was trying to test the 105 level. But the other is subtle. In the first case, note the steep slope prior to hitting the resistance. The second one was much gentle. Beware of gentle slopes hitting resistance, they might or might not bounce. Always short sudden demand (with confirmation please!) hitting resistance but steady buying should be treated with respect.

Once again the pair had to close above 105 on the M15, with a hanging man for the pair to start dropping. Just what we saw in the AUDUSD pair few days back (second post). As in the that one I predict a down move closer to 104.

1) PA for long
2) PA for short

PA sandwiched between SMA and bollinger band. SMA wins. USD/JPY in the evening.

Hi Mitrapips
Glad to see another BB fan.Our styles are strikingly similar.
I also use double BB bands with 2nd and 3rd deviations but I use RSI 8 for filter.
Here is my chart
Green pips