This board exists as a place to log all my Forex trades as I learn this craft.
Starting May 1, 2011 and continuing for 2 months, I will be testing a new breakout method that I've been working on. I've noticed that there are periods of relatively little movement during the Asian session as compared to the London and US sessions. Often times this is nothing more than a period of consolidation. With the idea that breakouts often occur after these periods, I am going to try to capitalize on that by noting the high and low from 2pm - 10pm MST and setting up an entry order both to buy (10 pips above the high) and to sell (10 pips below the low). Each buy and sell will have 2 lots, with 1 lot set to take profit at 12 pips and stop out at 20 pips while the other lot will simply have a dynamic (trailing) stop loss of 20 pips. The former will allow me to lock in profit for a quick gain. The latter will allow me to ride the candle(s) which in some cases is substantial in movement before retracing.
I will be testing this on an FXCM micro account. It will be done on 6 pairs with various characteristics: EUR/USD, USD/JPY, USD/CHF, GBP/USD, GBP/JPY, EUR/JPY
For now, I am manually entering 24 trades. Though I'm sure an EA can be easily made, I would like to make sure it's worthwhile.
I am also keeping track of a couple of other factors that I later hope to test for correlation wise. If a correlation does exist, I might then be able to fine tune in the selection process. These factors are (1) the range of pips between the high and low (some say that a smaller range results in a greater breakout - we'll see) and (2) taking note of the direction of the trend on a 4H chart (the trend will be determined by observing whether the pair is trading above the 200MA (uptrend) or below the 200MA (downtrend)).
Long terms trades:
My strategy is based on mutiple time frame analysis (1D/1H). That's it... no other indicators are being used to decide, though sometimes they might give a little boost of confidence in the end. I can't bother being at the computer all day since I have a day job. Maybe one day that will change??? I generally hold positions between one and a few days.
I examine a 1D chart to visually determine whether there is a trend. Let's assume there is a possible downtrend (since I've been taking quite a few short positions lately). I ask a few questions to determine my confidence level in the trend...
- Is there a pattern of lower lows and lower highs?
- Has a there been a breach of a trendline connecting highs?
- Is there a proper order of moving averages (10, 20, 50, 100 and 200 EMAs)?
- Has there been 2 or more previous "retracement cycles"
- How steep is the trend line slope?
If confident that a trend exists, I will then look to enter on a retracement. I examine a 1H chart to determine the entry point. I ask a few more questions...
- Is there a violaton of the notion of lower highs given the retracement?
- Has the rising retracement trendline been broken?
- As a bonus, can I find confirmation through an indicator (e.g. an overbought RSI reading breaking below 70, a MACD divergence, etc)
One method that has caught my eye is simplegreen's pincher setup. It consists of setting up the ADX/DMI indicator, waiting for the ADX line to go up above 50 and either the +DI or -DI to fall below 10. As it crosses back up, if both DIs are seen to be converging, enter long if it's the +DI crossing up and short if it's the -DI crossing up. I've been using the MACD (12,26,9) as a way to confirm entry. I've been scalping using the M1 chart.
Anyway, I've been trading about an hour in the evenings (10-11pm) and an hour in the mornings (5-6am).
My basic money management rule:
I don't risk more than 5% on a given trade. This helps me focus on managing my losses, not my gains.
My take on trading psychology:
I try to keep myself clear headed by not getting too excited if I win or lose. Your emotional response should be the same in either case. If you get too excited through winning you will become a slave to greed. If you get too excited through losing you will become a slave to fear. Both will ultimately lead to disastrous results. The only way to deal with this and survive in the end is to trade, trade, trade based on the rules you initially set up for yourself. First trade with a paper account, then a micro account and finally a standard account. Don't change the rules until you've had a chance to test them out. Constantly changing your rules based on doubt through losing will likewise lead to disastrous results. There are books written about trading psychology. Read a couple.
That's it for now.
If you do happen to stop in, don't be afraid to say hello.