Divergence Pip Range Trading

Still trundling along, will close out before end of the day.

Happy Easter everyone.

Here's a video showing anyone how to install pip range bars in MT4:

Not a typical divergence setup but a nice example to post of how you can maximise the use of pip range bar charts. Given most of Europe is on a Bank Holiday, it wasn't a big surprise to see a flat UK session. Incredbily flat. However, with US data on tap there was a good chance price would have a breakout. I waited for the news to be released and once price cleared to the upside, I waited for a re-test of the level to ensure it wasn't going to dive the other way. +15 including a horrible spread of 2.4 pips at the time.

Good to see I am not the only one who make the same mistakes. I found that double bottoms work big time as a signal, in addition to hidden divergence. JPN225 had formed a double bottom. Now waiting for price action and confirmation on Renko.

Yes, such opportunities do come along once in a while. I found a classic Ichimoku set up along the way (aususd). Might as well pick that up after Eastern.

What charting package do you use Batavia?

Hello all,

I've been wanting to write this post for a couple of days and have some free time whilst waiting for the US markets to open. This topic is going to discuss the use of averaging into your trade/s. If you Google average down in forex you'll be greeted with wave after wave of posts/blogs/videos telling you it's the worst thing you can do. Yet I use it every single day and profit from it by using it in the correct manner.

I will use an actual trade to show you how it can work for you.

Here is a trade from Thursday 13th April on GBPAUD;



Typically if I'm doing a divergence trade in a particuarly heavy trend (up or down; down in this instance) I'll try and enter a few times to stagger my entry which provides the ability to gain a better entry price. For a visual here is the heavy trend:



I know I want to take a trade but I am cautious of the trend and I am fully aware and importantly prepared for the trade to go against me. Typically a trader will set their risk per trade and have a stop figure in mind and then let the trade play out. For example, trader A risks 1% with a 30 pip stop giving a pip value percentage of 0.033 per pip. They enter EURUSD at 1.0650 with a stop at 1.0620 and a target of 1.0675. The trade wins for 25 pips therefore giving them a reward of 0.83%. A good result but we must know all the details of the trade....

Ask yourself; how many times do you enter a trade and it never goes against you? For me, I can only recall a few instances where it instantly goes the right way and never enters a loss. If you're able to pick perfect entries then carry on doing what you're doing!

To carry on with the example, let us imagine the trade went to -7 before recovering and going onto win. Wouldn't it be a smart decision to make 2 entries and split the risk? Using exactly the same parameters but this time we will use 2 entries of 0.5% each being 5 pips apart. Trader a enters at 1.0650 and 1.0645 risking 0.5% per entry and keeping the same stop for both trades. What does this create? Firstly it allows the 2nd trade to be of a higher value per pip as the stop figure is smaller and importantly it creates a better entry figure.

 

1. Trade 1: 0.017 % per pip (0.5% risk divided by the stop of 30 pips)
2. Trade 2: 0.02 % per pip (0.5% risk divided by the stop of 25 pips)

The result:

 

1. Trade 1: 25 pip profit for 0.42%
2. Trade 2: 30 pip profit for 0.6%
3. Total: 1.02% gain

Had the trade lost trader A would still have lost 1%. However under scenario two the profit has improved by 23% in relation to the original gain.


To go back to my actual trades under the scenario of only taking 1 trade the result would have been: +20 pips for a gain of 0.4% NOTE:I used 1% risk with a hard 50 pip stop and willing to exit prior to the hard stop. This is worth covering in another topic.

Using the actual result of 3 entries the result looks a lot better:

 

1. Trade 1: 20 pip profit for 0.13%
2. Trade 2: 25 pip profit for 0.18%
3. Trade 3: 35 pip profit for 0.33%
4. Total: 0.64% gain

Remember, I have NOT risked a single percentage point more....had ALL 3 trades lost my loss would still have been 1% yet I have improved my profit by over 50% in relation to scenario 1. If I do that just 5 times in a month I have made an extra 1% in the month and if you extrapolate that to 12 months it becomes a significant advantage.

 

1. Trader A uses just 1 entry and makes 5% month on month for 12 months. His $10k bank turns to $17,958 for a compounded gain of 79.6%.
2. Trader A uses an averaging method and makes 6% month on month for 12 months. His $10k bank turns to $20,121 for a compounded gain of 101.2%

I understand not every trade will allow all trades to be entered but I do know over a period of time this method is a fantastic way to increase your profits by using some skill and adjusting of mindset.

There are 2 very important things to remember when doing an average:

 

1. Before you enter a trade, know EXACTLY how many trades you want to do.....2, 3, 4+?
2. What gap you're willing to accept between entries.

I cannot offer any hard and fast rules however I will never use more than 3 averages. When identifying a trade I'll mark some levels that I'll want to average at if the trade goes against me.

I hope you find this post useful and any questions please let me know.


Originally published at https://flipfloptrader.com

I apologise for this posting I was talking nonsense, see the pic in this posting for my understanding of double bottom.

Hi FlipFlop, I use FXCM Marketscope. Do you have any experience with FXCM by the way? What package are you using yourself?

regards
BT

gbpchf looks like it's setting up for heading south

Some crazy moves in the GBP.

GBPAUD has done a complete reversal and now setting new daily highs.

You've gotta' love a snap general election announcement, lol. Blows the cobwebs clean away...

A quick video showing the use of Pip range bars and ichimoku in a strong trend:

Whilst I usually prefer to stay within the bigger trend, sometimes it is worth the risk to attempt a counter trend trade. GBPAUD has been relentless the last 24 hours with a 600 pip rally from the low of yesterday.

The key factor was seeing the bearish pinbar and then a quick follow up candle. Aimed for +30.

Not a huge amount of movement thus far but enough to create a winner which is ultimately all I am looking for.

GBPUSD had a little pop higher pre UK open and I enjoy these sorts of setups as more often than not it always creates movement and opportunities. I entered at 1.2834 and once price had come back to the same level I took a further entry. The determining factor was purely down to the fact the AO had dropped significantly compared to actual price. Held the trade down to 1.2810 for +34 each trade.

Nice one FlipFlop, I keep that in mind.

usdchf aiming for few pips. I tend to set tight targets, because I want to get my entries right first, afterwards I want to work on setting better targets.

eurusd in the oven. Double top. Hopefuly ready for a short in a bit.

A good result to start the night off on GBPAUD. I almost hesitated taking the trade as I was mindful there was news in 45 minutes. However, I was willing to close the trade out prior to the news if no result was forthcoming. More often than not prior to UK news, price will want to stay within a range or test the limits of it. Price was pushing higher and I took my first entry at 1.7015 and added at 1.70245 as price had topped out and then tried a retest whilst the AO was tapering off. I aimed for the area where price had last stalled at 1.6990 area and got some nice positive slippage as price rushed down prior to the news.



More info at https://flipfloptrader.com

A small trading community looking to grow.

Lookd like you'd have had a winner?