Trend Trading with Extras

Hi Everyone

Its taken me a couple of years, but Ive finally found a trading style that suits my time allocation, time zone, and personality. I have tried various different tactics and trading philosophies but have finally settled on my version of Trend Trading.

Before I set out my Guidelines (not Rules) for Trading I want to acknowledge a few people who during my journey to learn to trade, have influenced, in some part, my education. Having started out with only a very limited working knowledge of how the FX Market operated, I thought this was a way to get rich quick. Initially, I fell under the spell of Joseph Nemeth (founder of Global Technologies) who had this contrary view of trading without stop loss and hedging your trades. He also introduced me to EA (robot) trading, which I spent too many hours on trying to develop my own Robot, which all worked for a while but then spectacularly crashed and burned. Anyway with all the time I spent researching Joseph's trading style I learned to hedge and manage my losing trades. Generally speaking, I wouldn't recommend Global Technologies 4X DAT software, it promised much but delivered heartache.

Second influence was Scott Barkley (Scott Barkley is the President of ProAct Traders LLC) his general influence was more favorable and less costly than Joseph Nemeth. Through an email, ProAct Traders offered a fortnight of learning to trade with Scott. In this time you get a general overview of his methodology, which is swing trading. Importantly I learned to set targets, and how to multiply your winners by adding to your favorable trades. Whilst I didn't continue past the initial fortnight of trading this method, (mainly because of my time zone) I want to thank Scott for this input and generous offer.

Further instruction was provided by the FX web site Forex Peace Army and in particular Sive Morton,a technical trader who follows the teachings of Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Sive is a Professional Banker who gives daily updates on mainly EUR/USD and Gold. His analysis is detailed and educational. Though his teaching and his detailed free educational course I updated my skill level and learned many types of Trading, but most of all through his daily analysis I learned discipline. It is this aspect of trading which everyone has to learn in their own way, whether it be by losing heaps of money or just by understanding that not every impulse to trade is a good one. As Scott Barkley says "Don't push the Button"

Also on the Forex Peace Army site was another of my mentors Jarratt Davis. Through Jarratts teachings I have learned Fundamental trading, and the importance of keeping up to date with Economic news that shapes and influences the FX markets. Events such as Non Farm Payroll, Reserve Bank announcements, CPI figures etc all effect how the market moves and therefore can effect your trades. But most importantly Jarratt has emphasized the significance of Market Sentiment

Finally, I want to thank Rayner Teo, an FX blogger who shares his time and wisdom weekly. It was by watching some of his videos that the last piece of the FX puzzle finally fell into place for me. Our trading styles are similar but not identical. Im sure you will end up developing your own style and technique depending on your own time frame, personality and amount of time (and money) you have to devote to trading. - believe me when I say that FX is a real time consumer.

It has been said, that to be an expert at something you need to spend 10,000 hours developing your skills. Personally, I have worked out that, so long as I keep my skill levels up to date, keep studying and reading, educate myself further, I will reach this goal of 10,000 hours in 7 years (5 years to go). So please understand that I am just a beginner in the FX scene, and you follow this technique at your own peril.

First Guideline

Do your Home work - As I trade from Australia, I spend a few hours on Sunday looking at charts and catching up on FX and economic news. I will typically print out a FX weekly work sheet, and highlight daily news events on the work sheet. I normally just use a highlight pen to mark against the currency to which the news event relates to on the relevant day. I then go through the currency pairs and commodities to see if they match my criteria for trading.

Criteria for Trading (Guideline Only)

First thing I do is look at Weekly charts for the pairs and commodities I trade. If the pair has been trading in the same direction for the past 3 consecutive weeks or more, then it matches my first criteria. On my FX Worksheet, I normally mark these pairs with the number of weeks that the pair has been trending and the direction of the trend. For example, GBP/JPY 7 Up (meaning the pound has been trending up for the past 7 consecutive weeks in an upward direction) or sometimes if the trend is strong but not for consecutive weeks, it may be GBP/JPY 10/11 Up (meaning the Pound has been in a uptrend for 10 out the past 11 week.......still a good trend and not one to miss)

Once Ive looked at all my pairs, and marked the FX Worksheet accordingly, I concentrate only on the pairs that have met the criteria....these are the pairs that I trade for the week.... AND ONLY IN THE DIRECTION OF THE TREND

To give you an example of what one of my completed Worksheets looks like, I have attached one below

As you can see by the Worksheet I also look at the Daily Chart and 4 Hour charts for confirmation of trends and to set Targets.
If the Weekly chart is in a trend, by looking at the Daily chart, you can normally get a idea for entry. I will plot my support and resistance points on the Daily Chart, and this will give me my Targets.
Here is the Weekly Chart for EUR/CAD, as you can see, it has 4 weeks in an uptrend, plus all moving averages are below the price.{ Lime 50 SMA, Dark Blue 200 SMA }

Next I look at the Daily chart, just checking the trend looks OK, then plotting the support and resistance point. This can be done with either an indicator like the one posted below or for the more experienced by sight. The support and resistance levels give me my targets.
As you can see the price is above both the 50 and 200 MA. and the pair is in an uptrend.



The target for this trade will be the third, resistance line at 1.4942. As you can see from the ADR, this pair average 144 pips per day, so this target while just under 400 pips, wont take too long to reach. In my trading once I set my target and open my first trade, I also will set at least 2 pending orders, each one a little above the previous bid. In this trade, those will be set at the resistance lines above.(1.46554 and 1.47361) You should use stop losses. However it this case I wont, as I'm confident in my ability to manage the trade if it goes against me.

Other reasons to take this trade

Sentiment

CAD: weakened significantly on July 15 when the BOC cut rates. This was only 50% expected by the markets, hence the abrupt move. Governor Poloz was also dovish. This has confirmed our bearish bias on CAD and we expect the currency to weaken against the USD and GBP over the medium-term. A further leg lower in WTI will add to bearish sentiment on the Canadian dollar. - Jarratt Davis

EUR: A third bailout for Greece has been approved and appears to have resolved the debt situation, at least for now. This has brought euro fundamentals back into play. At the recent ECB press conference Draghi did not cause any noteworthy moves in European assets as he reiterated that the QE program is going along as planned. The euro remains fundamentally weak - Jarratt Davis

Fundamentals

Neither currency has any major announcements until Friday 21, this leaves 4 clear days for the market to keep running on course without interference. This should be plenty of time for our trades to hit target. If not we will reassess before the announcements.

One important Rule (Guideline)

One trade per day. To me this means I will enter the above trade and lodge the pending orders as advised. But I still consider this as one trade (not 3)

This is an important guideline as it makes you decide which opportunity is is best and to focus on that opportunity. It requires discipline

Saying that, I have broken this rule plenty of times if some short term opportunity arises. I mean we are traders after all.

In case you cant find the ADR indicator here it is
No matter which pair or commodity you are looking at this indicator will give you the Average Daily Range.......very handy for deciding whether your trade is likely a day trade or longer

I'm about to do my Weekly assessment of the market using the worksheet I will post it shortly. This will show which pairs I will possibly trade during the Week

Here is my weekly assessment worksheet. The green highlighted pairs will be the one I consider trading this week. The orange highlight shows major news events (care of Forex Factory) for the relevant currencies for that day highlighted.

The commodities are not shown on this sheet (maybe I should update it - cos I tend not to trade CHF, and should remove these) but oil WTI fits my trading criteria too



You may notice 2 pairs which match my criteria but are not highlighted, so probably wont be traded. USD/JPY as the pair are too close to a major resistance point at around $1.25, and AUD/NZD because the price is still above the 200 MA yet it shows an uptrend

Hi Orange
Good luck on your new thread. Trend trading is not new but your way of analyzing and entering trades is refreshing.
However your one statement ruins the entire excitement.
"You should use stop losses. However it this case I wont, as I'm confident in my ability to manage the trade if it goes against me"

Believe me I understand your skepticism, however I have had some experience in hedge trading, something I picked up from Joseph Nemeth.......but it did cost me dearly. Fortunately, here in Australia we are allowed to have opposite trades open at the same time.

Thanks for your interest

This is going to be a great thread. Subscribed!

Agent orange

Sharing is good and I am sure it is appreciated by all.

Having said that I see two problems here.

 

1. Your joining date to the forum suggests that you have very little experience .
2. Your trade explorer is a demo.

I am not trying to take anything away from you , but the above points will be vital for you and those following your thread.

No harm meant and good luck going forward.

G.

Scott Barkley is the best Forex trading educators...on earth! I've known Scott for over 10 years. He and the rest of the team at ProAct Traders do a great job. In addition, Scott is an outstanding trader...he practices what he preaches. If you want to learn how to trade and how to become a trader, ProAct is a great place to start, and I think the only place you need to go.

Thank 5abi

Appreciate the support

Hi Cobra
No offense taken
In response to your points - 1. In my introduction I make this point (read the last sentence.) Maybe I should have written this in bold

and 2. The account is only a demo because I am on a journey to make sure this strategy and my management of it works. I do have a real account with FXCM, which is trading a robot unsuccessfully. When this account can be closed I will and manage it myself. At the moment the robot prevents me from having complete control.....its complicated

I agree Scott is good, however trading from Australia (and still holding down a real job) the time zones differences suck. He starts at midnight my time in summer, as I get up for work at 5.15am I would be a zombie

My trade with EUR/CAD is in the hole by about 40 pips....I'm buying again

Part of my strategy with this type of trading includes cost averaging if I'm sure the trend is strong and fundamentals are sound. The EUR/CAD pair have been in an uptrend for the past 18 weeks (14 of 18 up) All the Moving averages are still below the price, so indicators still look good. Oil prices are still decreasing putting pressure on CAD, and no new information is due out on this currency until Thursday at the earliest. so I'm happy to follow the price down, buying to lower my average my cost price.