Plan the Trade

Wow, two bad trades last night to finish and two more early this morning. Difficult to overcome for the moment. I'm not sure if it is because of my having the lurgy, but my discipline has all gone to f*ck right now!

Just shows how easy it is to go off track in this game. Simple stupid mistakes as well. Deviating from the norm slightly and taking riskier trades, plus bringing stops down too quickly. I need to practice what i preach;

'The fear of losing money, costs you more in the long run...'

Trying to hold out for the bigger move short on the UsdCad, ignoring nearly 30 pips of profit and bringing stoploss down to BE. That is the very point the market will retrace to in the event of a pullback. It will either cross slightly if we are playing out a diagonal, or it will use it as Support now turned Resistance. How come, knowing this full well, i still did so???



Reason for taking 123 after deep pullback; still in downtrend imo, as the last sig LH not breached. A 123 setting up near to the breach but back to original trend is common...

This was a typical 'double bite' trade that i mentioned yesterday. The 25 pips on offer should have been bagged and then re-entry (this time for free) at the retest, for the bigger bite. Instead, stopped out for BE. Ok, you have to weigh up trading for the double bite vs the let it run attitude. My mistake was merely moving stop to BE too early.

Poor... very poor - literally!

Clawed back to +20 for the day (so far), but failed to get back onboard the UsdCad short, despite it creating a nice bowl. That one haunts me, but it took around a couple of hours to return to a rational mindset.

I have since decided to try to ignore anything risky to try to maintain discipline.

My favourite 123's are generally born out of shallow retraces, but i will include the opposite as well... as explained briefly in last post. A deep retrace nearly breaching it's last significant trend break point, creating a 123 before this happens, generally works well, when in the right perspective. That last bit is a little too difficult to explain, but maybe i can do so with a couple of charts. Firstly the successful UsdCad chart 123 set-up earlier;



(Successful, as in, it was a good trade, not so in my case as explained, i got stopped out for BE and did not take the 'double bite' trade!)

So that is the 'perspective' i meant, the R:R looked great for a run to a potential fresh low.

Now a similar set-up which i ignored on the FTSE earlier. It simply looked too risky (blue circle);



So despite being a 123 starting close too, but without breaching, the last sig LH, it looks very different to the above UsdCad chart. The 123 simply has far too much chance of being merely an abc within a bigger pullback, (as was the case) - well left, me thinks...

So what we really want is any one of these;



and here are a few of them in practise on Cable over the last couple of days, only for reference except the last one, which i took +30 out of. I haven't even looked at Cable for a while, seems i've been missing out!



In fact, looking for something a little more specific, means the need to cover more charts.

In the trade i mentioned above, (red circle), we had a couple of things go right. Firstly, the slight fresh HH, for a C&H, then the small pullback and 123 creating a nice shallow flagline. Wait for trigger and easy +30...

To me, it is interesting how charts get viewed alternatively, by different people. I read elsewhere, that another trader had gone long on the Loonie, viewing it as a potential double bottom, with stop below last low.

This is the difference with an EW view. We had not taken out the last LH with either a wave 1 or A, thus trend still down. To me it looked far more like an abc retrace in 3w, thus a fresh low to be expected, i've already talked about the nice looking 123 near to the breach level;



The final gap down being upon favorable Cad data - isn't it funny how that happens?! so - 100+ pips, with original 22 risk;

Three winners and four failures in this chart and this is why i suggest giving any of the in-betweens a miss;



The 2nd and 3rd failures in the chart would be easily taken. There is an argument for each. Do you place stops above point 1? Imo, that means it is not waves 1&2 of a new cycle and the other one looks a lot like the deep pullback/close to breach area that is permissible as good R:R...

man i need to learn how to count the waves, i love your charts. so clear those setups im struggling a little myself but determined to get it right!

Hi YSL,

well, i will keep posting my observations. I'm still tweaking right left and Chelsea, after having taken several losers lately.

There are so many aspects to overcome with trading. You have be at the top of your game and stay disciplined to do this properly.

I swear having the lurgy has affected my decision making this week! (or maybe that is just an excuse?!) I decided to run the UsdCad trade this morning for 100 pips and it got there perfectly, but i made zero out of it, through bad trade management, so whereas that should have covered a few bad trades..... it kind of didn't!

Move on to the next and don't make the same mistake next time.

I do believe it has a snowball effect. A couple of bad trades last night probably affected my judgement. It's so true that you have to become a machine.

Being ill always does that i was the other week and couldnt function. Im sure your trading will be back to normal soon.

It needs to be! Cheers!

The AudUsd has been playing well recently. I'm currently letting this short run as i think that we just had a bigger top than normal (of a larger degree cycle) and need to correct some, so first target is for a fresh low. I am trailing a stop, but with the fresh thoughts from earlier, that i need to give it some room to breathe.

Currently nicely up, but nothing in the bag as yet. Here's the chart;



This falls nicely under the criteria from earlier, (recap);



The 123 as a flat, thus trigger simultaneously makes a fresh LL (adds a little extra likelihood that the 123 is waves 1&2 of a cycle.

Remember how i said it is important that the last sig HL/LH gets taken out in one cycle and that a cycle should be in a channel, well they don't get any better than that!

Break last HL, pullback in ABC, 123 creates a flat, trigger and run...

Dow 1hr chart;



Trend trading is great - when there is a trend! The corrective chop since last night has thrown up a lot of losing trades on the Dow, with another one earlier this evening, to add to the 4 in the chart i already posted earlier. It's about par for the course and complex correctives should be left alone. Luckily, a few trades elsewhere have countered the situation.

With that said, i doubt it will be much longer before we finish the current cycle. Either tomorrow or Monday, me thinks.

We should expect a 5w cycle long of which we have had 3 waves and either finished or close to finishing the 4th (of this degree). As i always maintain, nothing is set in stone, which is why i choose to trade short term pullbacks, but... i do like to do a little background work as to what to expect.

Wave 3 (or C) was 161.8% of wave 1 (or A).

The blue fibs are retracement levels for the current wave. I would expect it to be a 4th, thus we should not enter wave 1 territory, however, it could still be a diagonal and thus i have added ABCDE labels, in case of crossover, as i say, i would not expect that, in fact the 38.2% retrace of prior wave 3 (the 61.8% level fib) is roughly a retest of the large daily wedge (top descending red channel line in chart).

Of course, that line might be a little way out, so it's give or take. There is a bit of short momentum built in the last two candles, but then, that's probably to draw in a few more shorts before the next blast higher. Lets see what happens.

The current daily candle already shows a retest, it's difficult to judge;



I would imagine a proper retest after this current cycle completes and corrects in ABC.

As i always maintain. It's not how i trade, so it matters not a jot whether it goes up or down. I need to be actively day trading trend pullbacks...

My earlier (yet another), stopped out trade on the Dow;



Ooooops!;

oops indeed I was sat in the same trade saying to harold that it's a squeeze to pop higher haha oh well got out with +5.

That's better than me, i took -15, which was about half original risk. I didn't like the look of it after entry, with no follow through, so i bailed early.

Lets see if this FTSE scenario works out. I was going to take the 123 (wave (a) & (b) of last drop too, (but didn't);

A new day, a new dawn.

Two overnight trades stopped out, AusUsd short and UsdCad short. I have been trying to hold out for bigger moves recently and it's quite frankly been a disaster.

I am so used to trading with tight stops (ie - the appropriate place for a standard 123), that it is obvious to me that this wont work. You have to match the size set-up to the 123 you are trading.

Even yesterday, when i called the turn in the UsdCad to a new low, but messed up the trade. If i had bagged the initial 25+ pips on offer (which would normally have been appropriate to the 123), you then have a free ride for the next set-up. In this case it was a simple retest of the initial entry point, (which is very common). By taking that trade and bagging 30+ on the next run our mental attitude stays positive and we are now 55+ pips up for the day, with the earlier prediction becoming more likely, more trades get taken to the short side and it would have been possible to get close to the 100 pip target, but by trading the pullbacks.

My last night post of the FTSE labeling did not match my expected further decline in the Dow. Neither did my taking a risky long earlier in the evening. Again, by changing things slightly and by trying to trade a complex correction (as with the markets in the last two days), the net result is losses.

For me, the idea of 123 trading is basic scalping.



In last nights UsdCad trade, the 123 was at the last possible place before a breach of last LH. I thought it was worth taking in case we headed back South. See how the trade, in itself was a winner, giving 2:1 R:R, (although exit strategy is difficult to call due to PA and lack of wave structure), you would also likely have shorted the retest and given some of those points back, as this was clearly a counter-trend trade.

Fib levels of AudUsd move yesterday;



Hopefully it's readable;

Wave A took out prev HL in one channel.
Wave B was simple abc
Wave C in 5 waves, waves 1&2 as a 123. Wave 4 retraces 61.8% of prior wave 3
Wave 5 was 61.8% of wave 3

Worth being wary of expecting 5th wave to make fresh lows when wave 4 retraces so deeply (obviously the same fib for wave 3 is in play, so a double bottom result).

The other two most common fibs for wave 5 end are 61.8% of waves 0-3 or 100% of wave 1

Well last night i posted an hourly chart of the Dow;



I did say that i wasn't expecting it to be a diagonal and thus the present pullback would likely be a 4th wave to coincide testing the top red trendline, but that we should watch the blue fibs in case of crossover (into wave 1/A territory). This is what we got;



I'm sure quite a few shorts have just been caught out getting a bit carried away...

145 ticks long for me, clear as day it wasnt going lower. volume profile shape, low volume coming into the bottom. As soon as price was above the poc and pinned into it i was in. Then a 123 higher up, lovely day.

One of my favourite FX pairs is the UsdCad (Loonie). In general, i am not as keen to trade FX. I prefer the liquidity of the Dow, but the Loonie is quite closely correlated reversely to them and does tend to move a bit, when it wants too...

If i first repost the AudUsd H&S chart from last night;



Now look at how similar the set-up is on the Loonie a little earlier (both to the RHS of charts, i mean);



Last LH taken out in one channel, pullback, 123, trigger...

I went out on a 44km bike ride this afternoon with my missus. It's practically the first warm day here this year, so couldn't stay in, but i missed the NFP's as a result. I was expecting a turn on the markets as i've previously explained, but by the time i got back, the Dow had already gone up in a trajectory likened to a rocket. I had missed the FTSE too...

However, as mentioned above, the Loonie has a reasonably close reverse relationship to the markets, with the markets correlation to oil & $, so when i checked, it had taken out it's last LH and printed a 123. I was a little late to the party, but decided it was worth it - and it was, i jut made up for earlier mistakes by banking 42 pips. I think it's got much lower to go yet, but will take each set up and opportunity as it comes...

That's the way... nice one!