Gatsby Trading Journal

Well I have decided to start my own journal since I have been trading more than most people on here. If you can learn something from what Im doing, more power to you. If you have questions or comments on what Im doing I would love to help and answer. I do have Skype if you want to connect off of Forex Factory; I love to connect with other traders. I did post a system about a year ago or so which they moved to who knows where but this is pretty much a variation of it with a couple other features to enhance my accuracy. The concept is to find a trend and jump in at a good level AFTER price has begun to move back in the direction of the trend. I use Stochastics, Moving Averages, and Heiken Ashi candles for this. I also have a THV indicator on the chart and that helps me determine what may be going on; it helps me let my winners run or avoid a potential trade (especially by using it on higher time frames!)

Anyways, my rules are as follows:

1. My 20 period moving averages must be crossed below the red/green/yellow moving average in a downtrend and the opposite is true in an uptrend.

2. Price MUST have reached the moving averages in order for a valid buy or sell trade to be in place. If price has not, it may have more room to run and I am NOT interested in a trade!

3. For a sell trade, price MUST be rejecting off of the moving averages and the HA candles MUST turn red and stochastic must cross down and have JUST crossed down from being OVERBOUGHT (over 80). If price has moved beyond ALL moving averages and not quickly rejected (wicks) I am NOT interested in the trade as that is showing too much strength in the market (or weakness). For a buy trade, the exact opposite is true for these rules. It is important to note if it does move past the MA's on that time frame, often it will set up on the next higher time frame, IF THE TREND IS THE SAME. I trade only the 5m, 15m, 30m, and 1 hour. Okay, on occassion ill do a 4 hour if it looks AWESOME. I have to be careful on the 5 tho...I am looking for SMOOTH price action...none of this all over the place price action and no major wicks. You will see what I mean as I post charts.

Also, I take into consideration support and resistance and DIVERGENCES on the THV. I do not buy at major resistance on higher time frames, neither do I sell at support! With so many pairs and multiple time frames there is ALWAYS trades to be had! If im looking to go long and major divergence is setting up on a higher time frame I stay out. Again, patience is key and there are tons of trades so cherry pick only the PERFECT ones. Even then you will have failed trades, but lets keep the win ratio high!

As far as my stop loss, its usually above resistance or below support. I define this as 00 numbers, the 60 period moving average, and price support/resistance AND daily pivots and R/S 1-3. All of those qualify. As far as take profits, I take off some once i hit the 1:1 reward to risk and the rest I let run to the last area of support and resistance. Remember, in most cases price will retest that and even plow through it if you are in a strong trend! Let the winners run! This is the key to being a profitable trader. And of course, cutting losses. Anyways, if I think of anything else Ill post it with the pictures. Thanks for reading hope you learn something

Indicators and the template are below if you care to use them.

Here is the first trade that I took today. USDCAD 5m chart

Notice the red box where I got in. I saw price approaching the 20 period moving averages and so I was ready to go short at the cross down. Looking at the higher time frames it was very evident price was going sideways after a big move down. This tells me the market cant find buyers and its called a BEAR FLAG. Also, THV on the higher time frames had crossed down and was showing no momentum really as price moved up. It was definately a sell. I will admit this was in the Aussie session and this being a usd cad pair i was not expecting a big move so I got out totally at 1:1. Price did move quickly to the lows which would have been a 2.5:1 trade had I held. Anyways, its a win. My stop was just above the 60 as it usually is because price should not be moving past that or I would question the trend.

Here is my EURO trade for today. First of all, I saw the oversold conditions in the stochastic and also saw price coming back to retest the moving averages. These are my first conditions for a buy. I did see a small white HA candle which told me to buy along with the cross up on stochastics from oversold conditions so thats what I did. Also notice the yellow trendlines. Equal high and higher lows. This is an ascending triangle pattern and a good 75% of the time they break IN THE DIRECTION OF THE TREND and very forcefully. My stop was just below the 60 MA as usual and my first target was at the recent highs. I had on several trades so I did close this one out at the highs in case the triangle did not work out. A quick 1:1 reward to risk trade. (well almost not quite) Obviously this did explode and go about 3:1; again you are dealing with the trend so in most cases they will keep going! In all honesty my trading today was terrible, but I do have those days.

Okay I just took an AUDUSD trade here as it is the ASIA session so im really only interested in asian traded currencies. First of all, we can establish we have a downtrend as the 60 sma is RED and the 20 SMA's have been trading below it. I love this trade because all the moving averages meet at one spot and so its going to be harder for price to push through them. Also, u can see the trix was turning red (both lines!) and crossing down. Another great indication it wants to go down. So, I placed my entry at the cross of the stochastic after i had seen my first red HA candle. It quickly went to the lows, which was my target and then kept going. Wasnt expecting it to behave like that; I did get out pretty fast since that was such good support, plus I was enjoying a tv show LOL. Notice price came right up to the 60 and failed. If price had kept going past the 60 and then put in a stochastics cross down I would not have been interested as it may try to use the MA as support.

Heres another trade I took today. Now this trade actually hit my target area BUT I was greedy and did NOT get out and so I paid the price and took 0 pips. I always try to take off at least half once it hits my 1:1 but for some reason I was being greedy and I walked away with nothing. price was holding the lows so it gave me MUCH opportunity to get out...not sure why I didnt. Anyways, I should note here that once a trade gets about 75% of my way to target i place a breakeven stop...OR if its not going down and just going sideways...thats a good indication it may want to keep going and u may be about to get stopped out! in that case i bail...and often if it does end up dropping u get another change to get in.

So in this trade you can see that we had a great move down as the 20s were trading below the 60. I saw price move into the 20 ma's and so I was on watch. Stochastics were WAY overdone and so when I saw the cross down and the first red HA candle, i took my short. This level is illustrated by the yellow line. The stop was my red line, just above the recent high and the 60. I realize my stops are pretty loose but I do like to leave room for it to move. Besides, this still allows for my 1:1 to be near the lows! Also note we were given a sell arrow on the THV. Thats an added bonus that I love to see...had i seen the thv not turn red after my sell i would have been a bit concerned as price moving down and thv staying green is BULLISH MOMENTUM, indicating more upside. Anyways, the target area was hit with plenty of room to move....I did not get out because I was braindead LOL. and price reversed into my entry area and i was stopped out for 0 pips. Like I said before, TODAY WAS AN OFF DAY for me. I think i left my brain in bed. There was actually a second trade opp on this the next time the stochastic lines got overbought and then crossed down. it retested the lows yet again but i did not take the trade. Why? Well, while we made a lower high, the lows were the same...when the lows are unable to break thats an indication of a nearterm bottom...plus it was later in the day and i was at the gym. LOL. Another thing is on the 15 minute...while price was moving down on this second trade...THV WAS NOT!!! IN FACT, it stayed green which is a sure indication of higher prices to come. So, it was saying stay out out out!!!

hi there, mind sharing your template and indis?

Thanks in advance.
Have a good day.
N

Here is the audjpy trade I took today based off the 5 minute time frame. Again, another NY session trade on this one. I saw price migrating slowly to the MA (which often is a sign of the markets inability to move higher in this case) so when I saw Stoch overbought and crossed down I got in on the first red candle. Also I noticed that THV had crossed down and was retesting the crossover line. This is another GREAT SIGN of lower prices! Not only that, but on the 15 minute time frame the stochastics were in the overbought area! For this reason i knew this 5 minute trade could turn into a 15 minute trade and therefore a better risk to reward. So, I took it short and set my stop just above the 60 sma and my TP was near the lows for a 2:1 trade as illustrated in the picture. A great trade today! I did hold the whole thing to the target as I said, it became a 15 minute trade and the thv even went red on 15 so that would be a sure sign to let it run!

Here is my eurcad trade on the M5: This was def a bit tricky but i stayed with it and it paid off for another 1:1! I did get in just after the stoch cross after the candles turned white for a buy trade. Something I want to say here is price went sideways at the 60 sma...that is NOT BULLISH. I should have gotten out but I stayed in it which was very foolish on my part. I will say however the 15 stochastic was oversold and thats probably why I stayed in it, to some degree anyhow. My target was at the highs; again i normally put my target at the last swing high with an equal stop loss...within reason. My stop could have been much tighter in all reality because it was WELL below the 60. At any rate, another winning trade, that Im not very proud of.

Here is the last trade of the day, but was actually my first trade of the day an the most important one! Why? Because i did not obey the rules and I got stopped out! If you look at the pic you will see a massive move up and then sideways action...normally this is bullish and leads to a continuation move. Well on this trade, for some reason I did not wait for stochastics to become oversold. it was close, yes, but not totally oversold! So, i got in on the cross up and when the candle turned white. That was the first mistake. It MUST be coming up from oversold conditions! Also, I did NOT wait for price to hit the moving averages! This is yet another requirement that i did not abide by. Another thing to note is we were already at the highs so unless we broke through we would not hit target. Its best to have a decent pullback so you can get your money even if highs are retested and not broken. This was early this morning and totally braindead trading!! Cant believe I did this. I should have had my morning coffee first I guess Hopefully tomorrow will be better.

Sure, Ill post them on the 1st post.

Posting this chart as a reminder of why i said in my rules if price does not respect the 60 SMA then it is necessary to stay out of a trade. As I said before, if a sell trade potential is coming and price blows through the 60 and does not quickly retrace (at the 60) it could be a change in trend. the 60 is great barometer for the current trend. As in the case of the yellow box on this chart you see price did change trend there and as i said in a prior post the 60 has now become support....and that it did for quite some time. Until the next time it broke with force when that was yet another change in trend. We can see that everytime price comes up to the 60 and quickly bounces the move continues the direction of the trend. The 60 is such a good friend of mine!

Another example of how POWERFUL the 60 sma is. Notice how many price reversals there are at the 60 level. The 60 acts as major support and major resistance on charts so often. Also notice the yellow box, how price came to the 60 and could not bounce. In most cases when you have consolidation of this manner at the 60 its getting ready to break. I see this soooooo often and thats why had there been a long trade there (notice there was not as no candles turned white for a buy) it would have been wise to cut losses and get out after a few candles of going no where. After a big move down and sideways action thats a bear flag and the market is saying I cannot find any buyers here and so more selling comes into play. Also, where I have the question mark this is very important. Price has blown past the 60 and not bounced (or quickly reversed) so for that reason this is not a valid trade. The market is telling me that it could be a change of trend or perhaps it wants to go much futher. So, even if I did get a sell signal on stochastic and the candles i will Not BY ANY MEANS be willing to take this trade. Only the perfect set ups are worth trading.

Here I will mention the importance of PATIENCE. This is a chart I was watching last night. Was setting up for the perfect h4 sell on EURCAD. Like I have said before, I do not like to take long trades because then I have to worry about setting alarms on my computer and I like my sleep. I set alarms so I can place a breakeven stop once price gets going in my direction, but anyways. If you look at the h4 chart here on the EURCAD, you see the yellow arrows and that was the valid SELL! You could have entered here at a price of about 1.4185 and your stop would have been about 1.4285 which is 100 pips. You would therefore have to have a reward of at least 100 pips and the low by the way is 120-150 pips depending on whether or not you count that long wick. In this case I would not because there was alot of sideways action 120 pips down from the entry. Now, that sounds good with a reward of 120 and a risk of 100 but what if we could make it way better? Now, if you switch over to the 1 hour chart take a look at where price was at when we got the sell. The price was where I have this yellow down arrow. It was SITTING ON THE 20 PERIOD MOVING AVERAGES AND STOCHASTICS WAS OVERSOLD! Also, we had higher highs and higher lows on the chart so it looked like FOR SURE it was going to go up from here, so why would I place a sell on the h4 when we know with 90%+ probability it was going to go higher??? IN fact, we had a BEAUTIFUL buy signal off this level...see the cross up on stochastics and the white candle? That would have been another winning trade I might add. So, my plan was wait until price gets back up to the top area where the red arrows are....which is also daily R1 RESISTANCE! That would have been a great place to put on the sell trade. I will also add this is the exact level where the 60 period SMA was at on the h4 and ALSO where u see my red line...that was the last swing low which was about 20 pips above the target area to go short here. Had I placed a sell stop up there before I went to bed I would have gotten in at 1.4225 which is an additional 40 pips of reward! I could have brought my stop down to 50 pips or so in this case OR had I kept it at 100 pips (which would not be necessary) That gives us a risk of 100 pips and a reward of 160-190 pips, which is far better than the original. And if I would have placed a 50 pip stop loss which would be acceptable this gives you a 3:1 to 4:1 reward to risk which is EXCELLENT. Time will tell if it makes it to the bottom here......

Just closed my first trade of the day on the NZDCAD H4. I did sleep til noon today LOL...late night last night so I didnt initiate any small trades but I do have on two swings. The second one is in profit with a breakeven stop. But anyways this is the trade that just closed for a profit of 54 pips. My original stop was about 45 pips. Looking at the chart here is why I got in:

1. We were making lower lows and lower highs; price was moving right into the 60 SMA and quickly a red candle was formed. This tells me that the market is respecting the level and we are def in a valid downtrend as price is moving lower. At the red arrows, which is the cross of stochastics and my first red candle I took a short and my stop loss was at the last high, far above the 60 sma. Again, my stop could have been tighter but I keep relatively loose stops in case the markets whip around a bit. My target was near the low which was just hit for a nice 1.2 to 1 trade or so. Also notice the THVTRIX turned red which was a VERY GOOD THING as well. Not only that but if you look at this high on the charts and thv versus the last you see that thv was way higher, and therefore way overbought. The likelihood of a move down was GREAT because of this. A high THV on a sell trade like this is a thing of beauty.

Here is an AWESOME Aud/Jpy 5 minute trade from last night. My risk was 10 pips and my profits were 12 on half and 19 pips on the other half for a great trade. I actually got into this twice however. The first time, I placed my stop 1 pip too tight, by not allowing for spread and I was stopped out! So, when I saw price reject at the highs and come back down I got in a second time and placed TWO double positions. So, on the first trade I lost 7 pips on a single position but on the second trade I made 12 pips on the first double position and 19 on the second double position for a VERY NICE profit.

Anyways, I got into this because price was in fact trending lower and the last high was at the 60, so price is in fact respecting the moving average. Also, the last low was lower than the previous so we are in a nice downtrend. I did expect price to go to that low at least as higher time frames were def saying so that was my first target. I did get out at that low on half like I said and the other half I got out on 97.10 level as I was about to go to bed and it looked like it wanted to reverse again. Ultimately my target was 97.00 because that was the s1 pivot and an even number!!!! It did bounce there and has been there all day pretty much. Also notice there was another trade set up which was gorgeous after price bounced off 97.10! Perfect oversold conditions and failure off the 60 sma. Would have been worth 20 pips to the s1 pivot and a stop of 10 pips. It seems that price respects the 60 until it stops...i know that sounds foolish...but what I mean is as long as it is respecting the 60 it will probably continue...now if this chart was all over the place and price was not stopping at the 60 in the past i would not take the trade!! It has to be respectin the 60 or its not a quality set up. Same goes for the pivots. Most of the time price respects them but when they arent, dont use them as support and resistance levels.

Ive decided to go through some h4 charts from the last few days to show some set ups that popped up so enjoy. The first one is cadchf; again, we had a tremendous support level due to the horizontal yellow support line i drew, the 60 green sma and a trendline. Your buy area is when stochastics crossed up and your first white candle. My stop was 2 grid bars below as always and the profit was a test of the highs which you can see we hit to pretty much the pip! Just over 1 to 1 reward to risk. Something else to note; when i do get h4 trades I like to look at lower time frames so on the 1 hour you would see when the buy was in place you were at the 20 MA in a downtrend; not the place to be buying so the smart thing to do would be wait for a retrace back to the lows which would have given u 30 extra pips making it a 1.5 to 1 reward to risk. It is always a good idea to go down 1 time frame when you get a buy or sell signal....most of the time price will retrace and you can get a better price, especially if you are in a resistance support area!! trade smart.

Here is one that I am watching for next week. I like it because price has made a lower low and lower high and price is respecting the sma very well. Because this is a daily I would want to see a sell signal and then go into the h4 TF and get in at a double top area AFTER the sell was given on the daily! We are at the SMA right now so this needs to sell VERY SOON. Also something to note is the price action moving up has been a bit stronger in the past so I have to think just MAYBE this is getting ready to break out of the downtrend. On top of that, on the weekly, there is divergence on the THV so this could be getting ready to reverse. Again, I need a great entry on the h4 before considering this because like I said, it may be getting ready to reverse. Def worth watching tho.

Another daily I am watching here is the GBPAUD pair. Again we are at the 60 sma AND a powerful level of horizontal resistance. Looking at the weekly chart, we have negative divergence on the THV so that says it may want to come down and also, it is retesting the 60 sma on the weekly right now after breaking it. Again, I would need a sell signal and then a double top retest after it on the h4 for a prime entry. Again, we are seeing some pretty strong movement up so that is why I am somewhat hesitant here as this may be wanting to reverse. Def worth a gander however.

Another recent daily set up and the power of patience! Here we had a break of the 60 and the first retest after the 60 went red. Notice the overbought conditions and so we have an official entry on the daily when stochastic crossed down and a red candle, which is in the yellow box. Generally the first target is the lows which was not that far away so you certainly would not get in here! However, like I said, getting in on a retest of the h4 high is a GREAT idea! So, looking at the h4 you see the original sell entry was at 1.5103 for a reward of 50 pips and a stop of 150-175 pips. TOTALLY UNACCEPTABLE. So the thing to do is wait for a pullback on the lower time frame, the h4 and then go short so your reward to risk is at least 1 to 1! If you would have waited for the retrace in this case you were looking at a 125 pip stop loss max....and a 1st target to the lows on the daily would be just under 200 pips. A Much BETTER reward to risk!

Here are some more charts I am posting with explanations in them on why these are such amazing set ups. Also note the last one which will show up on the next post I meant to enter but did not. I did get into another JPY trade which ended up being a $320 winner with a risk of $280.