Thursday, April 17, 2008

Trade Entry


Its 1:45am EST, so I’m looking at the Euro for a possible morning trade, knowing that during the switch from Asia to Europe Forex trading usually some nice moves happen in the currencies with one market closing down while the other is just gearing up for trading.

On the 30min chart I see huge volume at the 1.59x level. We had a big move yesterday and were then unable to trade beyond 1.5940 or 1.5980FX cash. I see a HH, HL and a Lower High on that 30min chart and that whole flag seems to be leaning downward. So I’m inclined to look for a short trade near yesterdays resistance levels. The 2minute chart shows a Lower high at 1.5907 (marked HH with the automatic Ensign count, but I don’t like to adjust my templates for every symbol, so I take it as what it really is, a lower high compared to the 1.5913 high made overnight)

Now I look at the 10 tick and take a Short at 1.5903 or 1.5902 with a potential add-on at 1.5922. The market at this time is thin and moves happening before the UK Forex market opens are usually reversed. Add to that, that 1.5925 was very strong resistance and I feel comfortable, that even if 1.5925 prints, we will see 1.59 again, before 1.60 is taken out. Meaning even if this short would go against me, I see a high probability, that this trade will work.

The trade did work, but made a low at 1.5891 and held there


This kind of behavior is a red sign saying – GET OUT or +7 or +8 ticks

Later in the day, I might just adjust my Stop to breakeven plus a tick as I would expect more selling volume to come in, but due to the thin market conditions prior to the London open, I take what I get and reenter the same trade again, if the opportunity presents itself.

I use no Moving Averages on any of my charts. Well that’s not entirely true, as I use Heikin Ashi charts, which incorporate a fast Moving Average within the Candles itself. But these usually help me to stay in a trade and are not consciously used to time the trade entry (at least I haven’t identified such a use yet. Still I can’t rule it out, as I don’t take every trade which presents itself and that might have to do with patterns my subconscious mind sees on these candles.)

Entries are based on Support and Resistance levels marked automatically on my chart and a retest of these levels. I have a trade bias, meaning I lean to the long or short side, based on the trend seen on the longer term chart and based on the range the contract selected for trading has made already. Then I watch the 2 minute for a possible entry signal (double Top, Double Bottom, Trader Vic2B, etc.) I also watch correlated markets to see how they behave and whether they give me a clue, how the market I trade will actually behave. Take a Trader Vic2B entry. It usually works on the DAX when the ES is holding a Support or Resistance level, while the DAX is breaking it for a Stop hunt.

Once I identify a possible signal on the 2minute I look at the 10tick chart and watch price action. Now the 10tick tells me what to do and where to enter.

Once I’m in the trade I first watch the 10tick to see whether the trade is working or not. If it starts working I switch to the 2minute until we near support or resistance, then I go to the 10 tick again and see what price action is telling me. Stay put, move the Stop or Take your Profits and leave.

That’s the area I need to work most nowadays, as I’m not yet able to grasp the real force of a trend wave correctly. Meaning I leave a lot on the table after I entered a trade correctly with the trend.