Sheep or Lion?

There have been a few times I have started journals on FF but then get distracted or bored with it so I stop. This one may or may not be just like all the others.

I called this one Sheep or Lion to describe how I use to trade based on how I trade now. When I first started in Forex, I was taught many things by so called experts and guru's 99.9999999% turned out to be total BS! Fact is that most of them were "teaching" forex trading mostly because they couldn't trade themselves so they would put together a "system" and then pick out the best trades to show everyone how great the system worked.

Like many I traded hard earned money based on what these mentors were telling me. Wiped a few accounts thanks to them. Finally got frustrated enough with the "bro-science" they were teaching and stopped everything to study. For nearly 2 years I didn't take a single trade. I stopped listening to the experts and began to observe the markets. I would wake up at 3 am just to watch the London open and see how price moved. I spent many hours in front of the screen analyzing what I saw. Every mental trade I would make regardless of how it turned out, I would determine what made it successful or what caused the loss. I took notes. Even on the weekends when the markets were closed I would analyze charts. 10-12 hours + each day. I had to prove to myself beyond a shadow of doubt that I could confidently enter trades and understand completely why I did so. I also began to see how the sheep are brought to slaughter based on how I was originally taught to trade. I began to see things like what some call "stop hunting", which really isn't hunting at all. The big boys know where everyone is parked, herded together with all of the other sheep. Because I could see this "hunting" on the charts, I started to take advantage of it. Over time I created a "system" that worked well for me.

Since this is a journal and not a discussion of trading systems I won't be covering much on how I trade other than to say I have 4 moving averages on my charts and my focus is on the relationship of price movement in relation to each moving average. I usually trade very short time frames 10 second to 1 minute. This does NOT mean, however, that I scalp the market. Some of the winners will only be a fraction of a pip and others will be 20+ pips. It will depend completely on what the market is doing at the time. I will attempt to post trades as they happen but due to the short time frame it may only be an entry like "Short EU 1.06155". I will try to add pictures later. Since I trade with Interactive Brokers, I cannot put up a trade explorer. I like trading with them especially since their spreads on EU are normally 0.1-0.2 pips. Even in conditions like today where the market is a bit thinner.

You will also note that although the starting account value is relatively small, I will be trading with much larger amounts than most will feel comfortable with. This is primarily because of the very short time frame that I trade on gives me an opportunity to jump in with very small "mental" stops. This doesn't mean I am risking too much. Even with the large lot sizes typical risk is sub 2% per trade. I will typically trade without a hard stop. While I don't recommend this for most, I am confident based on the number of ways I can get to my account and close a trade that loss of connectivity isn't really that big of a deal for me. I have 2 internet service providers, a decent sized battery backup and I can even switch to mobile if all else fails which includes tablet and mobile phone trading. Because of the redundancy I have never had to use mobile trading to close trades in an emergency. I even have a natural gas powered whole house generator that came in handy during a major ice storm a year or so back.

To answer a few questions that I know will come up. Yes, I do trade full time. It is a portion of my total income. I don't like having just one revenue stream so I am constantly involved in many ventures and investments. Most of my income from Forex comes from a few trading robots I created that do reasonably well. These are not in MT4 but created in Windows as stand alone programs. While they are consistently profitable, a part of me misses the trading live excitement so I have set up an account to get back to trading hands on. These robots that I created have been trading the market for about 7 years with no adjustments by me for over 5. No they are not for sale nor will I post them. I know that some will want me to outline my trading system but I won't. By doing this journal, I am hoping that I can get you to create your own. When you do, then it is yours and you will be able to move in and out of the market with complete confidence.

I will get started tonight after I pig out on Thanksgiving and take a post feast nap. LOL! I will most likely start looking at charts around 7pm Eastern time U.S. Shortly before the open of Tokyo.

Ok, belly full nap time over. Lets do this. Trading only the EURUSD watching the 10 second charts. Looks like liquidity is good (very few candles with no movement).

When I opened my charts, there already was a small downward move in progress. Waiting for the next set up. No sense in trying to catch a falling knife.

Waiting for a pull back to the second fastest moving average on my charts. Normally I won't trade movement across the fastest MA. Let it wind up for the move.

Next post at first trade.

Perfect example of why you don't try to catch a falling knife. Price has turned and now I am waiting for a long set up.

Remember these are small movements in relation to what most will see on the higher time frames. Going from short to long may only involve a few pips. But it will look the same as it does on higher time frames.

Price movement has fallen off. Getting multiple zero tick candles. Makes it hard to trade. Usually a hard spike is about to show up. Unpredictable as to which direction.

The yellow bars with no wicks are the zero tick bars I am talking about.

Plenty of initial signals but no follow through. I always wait for confirmation before entering. So if I get an initial short signal I look for a confirmation candle right after it. If they cannot sustain the movement for 20 whole seconds then it is not a valid signal.

Short EU 500k lot size. ( 5 Standard Full Lots) at 1.06019

Slow choppy trade. No clear reverse signals though. Riding it out

Trade closed. 0.8% loss. Waiting for next set up

Hey, welcome back and Happy Thanksgiving!

Thanks. Hope your day was great as well.


No new setups at this point. Price is dancing around yesterdays close (according to Interactive Brokers pricing) at 1.06100. Going to let it move away from the line before committing to anything.

The previous trade was a good trade based on my rules. Tokyo can be a bit hit and miss when it comes to EURUSD. If nothing sets up soon, I will take a snooze for a few hours and then pop back in around 2 am. Some moves for EURUSD start around that time which is about 1 hour prior to London open for me.

With the US markets being closed today for Thanksgiving tonight kind of plays out like a Sunday night. We shall see. Small move off of yesterdays close now, lets see if I get the signals I need to enter.

If anyone is curious, spread on IB for EURUSD right now is 0.1-0.2 pips and commission adds 0.4 (ish) pips to the cost round trip. Slippage is typically minimal with several of my trades in the past actually filling at better than market. Just depends on what is going on. Tonights trade saw about 0.1 slippage which is unusual. Could be an indicator of actual liquidity being lower than normal. I have no proof of that however. I do not attribute that slippage to how the trade turned out. Stuff happens get over it.

Price pulled away from yesterdays close then drifted back to it. Had an initial signal when it bounced back off again but no confirmation.

Since I am in a typing mood, one other difference people will notice with IB pricing on their charts it shows up as the midpoint between the bid and ask price. This is not changeable. This is different than most brokers who will use last pricing, bid or ask. Took a bit to get used to but it really doesn't impact how I trade.

There is also a dangerous fundamental flaw in their charting software. When you first load a chart and if you have a very long moving average on that chart, you need to scroll back far enough for the software to pull enough candles to calculate that moving average. It can and will bite you hard if you don't know about it. Even if it doesn't have enough candles it will display that line however wrong it is. Bit of a nuisance and I have a ticket in with support warning them of that flaw. They are looking into it. It's one of those things that if you know about it then it really isn't a big deal. Just a nuisance.

Must be just about time for a big move....... Want to know how I know??? Getting sleepy. LOL!I have slept through a ton of big moves in my lifetime. Usually within an hour after I leave to go sleep.

We have only seen about 12.5 pips of movement in EURUSD since the close of what would have been the US session if they were open today.

Even most of the JPY pairs are sluggish with all of the ones I look at having sub 30 pip nights. That's measured peak to peak so catching any of that would be tough. Not impossible just tougher than when the markets are moving. Maybe everyone is waiting for London and then the US. Who knows I just trade what I see.

Ok, dead market. I will be back sometime between 2 and 3 am eastern time US.

Missed two signals while I slept. One at around 145 am eastern and another at around 204 am eastern. Unfortunately, I can't stay awake 24 hours to catch all of these. One of the reasons I like robot trading.

Waiting for first set up.

i see you got bored