GBPCHF short - would you have traded this?

On Friday afternoon, we had a compelling case to trade this set-up short. We had a high test bar on the daily timeframe which rejected the yearly high and it also rejected the monthly R2 hidden level of resistance.

However, looking at Friday's close, it actually closed as a doji bar, which is not quite as good as a high test bar. So my first filter came into play. GBPCHF is not looking quite as good short. But what the REAL deal breaker for me was the fact we did not have a reversal (ie. double top or head and shoulders on the hourly timeframe). So, for those two reasons alone, that disuaded me from taking it short.

*If you want to improve your skills in reading price action intuitively, I seriously recommend reading: Reading Price Charts Bar by Bar: The Technical Analysis of Price Action for the Serious Trader (Wiley Trading) 

GBPCHF - daily - Doji

GBPCHF - daily -hourly (still NO REVERSAL here)

Trader Toolkit: recommended resources

Hi All,

Here is a list of free resources which helped me to consistant profits, month after month, in my darker days. I will keep adding to this list as and when I find things worthy of your time. Please bear in mind that if you are trading your chosen strategy, do not just suddenly leave it for something else but if you find something that you think complements it, then it will serve you better to do that.


Websites:

l. Nial Fuller - great for reading price action on the four hourly charts as well as daily without indicators, moving averages and all that nonsense!Nial has a bunch of fluff cutting videos which prove that simplicity is the key. http://www.LearnToTradeTheMarket.com


Books:

1. Trading in the Zone by Mark Douglas  - between thinking the market is actually doing something and actually making the trade. It is designed to give readers the insight and understanding they need about themselves and the nature of trading that will earn them constant success. Reading this is far more important to your trading progression than any book on strategies, believe me!!

2. Come into My Trading Room: A Complete Guide to Trading (Wiley Trading) by Alexander Elder... Shifting focus from technical analysis to the overall management of a trader′s money, time, and strategy, Dr. Elder takes readers from the fundamentals to the secrets of being a successful trader––identifying new, little known indicators that can lead to huge profits. It is here where he outlines his experiments conducted to reveal that woman actually make better traders than men because of their lack of ego. Very interesting!!

3. Reading Price Charts Bar by Bar: The Technical Analysis of Price Action for the Serious Trader (Wiley Trading) A very comprehensive book on, quite literally, reading price action bar by bar. It will hold great appeal amongst the price action puritans out there, just like myself, as Al Brooks cuts to the chase, disposing of the hype, the indicators and the crap. 

GBPCHF short ready for the watchlist?

Ever since GBPCHF reached the 14755 level, which remains unbroken in over a year - it has been one which I have been stalking...and as they days have gone by, it just looks better and better for a short.But it is not quite ready yet, alas.

For the trade

If GBPCHF closes as a high test bar this evening (the formation seen in the last bar on screenshot below) off the level of resistance which has not been broken in over a year – probability will be to the downside.  The fact that it is bouncing off the monthly R2 level (a hidden level of resistance) is another clue to a potential move to the downside.

Against the trade

However, against the trade, we have the fact that the hourly timeframe does not give us a lower high (we have no idea whether the shorter term buyers/market are ‘singing from the same hymn sheet’ until we get clue like a lower high and thus a sign that momentum up into the level is starting to wane). 

GBPCHF

 This is where trading can sometimes be like two politicians arguing on a TV debate - the most convincing one may seem to the casual observer, the most resulting chain of events may be.

What do you think?

Trade less and live more!

We all know that the occasional 'great kahuna' trade is all we need to make things better again after a losing streak. But how about not falling into the temptation of taking silly trades before the high probability, high reward set-up manifests itself in the first place?

If you had traded GBPCAD and its low test bar off a very strong level of support on 20th July 2011 (confirmed with inverse head and shoulders on the lower timeframe) to the conservative target of: 16087, you would have made about 15% (risking 1%). Had you traded it short once it got to the top of its range in August and taken it to target three quarters of the way down to the bottom (50 pip stop), you will have made an additional 17%. Had you done the same again in September, you would have most likely have broken even if you're unlucky but those who held their nerve in November who did the same YET AGAIN would have been rewarded by another 17% by simply selling the top of the range and taking profit three quarters of the way down for a higher probability/lower reward outcome.

That's 49% made in 4 trades....in under 1 year! Trading a strategy which is as old as the hills.

Did you spot any of those set ups?

Do not worry if you did not, because the great news is...the range is STILL IN PLAY. The levels of support and resistance remain unbroken and this has been the case for the past 2 years. So all we need to do is lie in wait for price action to get up to the level of resistance in order to sell, or down to the level of support for us to buy.

The patience is the hard part. Even if this kind of trade is the only thing you do all year, you are head and shoulders above many traders out there who will challenge you for not trading as frequently as them.

You see, while they may smugly think you are a 'part-timer', not serious and potentially not as good as them lower frequency traders should remember those people have an ego while we do it for the money (or rather, capital growth)...and while intra-day traders demonstrate their ability to have a high level of interactivity with the market on a daily basis, we, in turn demonstrate our discipline in staying out the market until our chosen set up is ready...even if we have to wait 3 months for it!! Each side of the coin have their unique skill sets.

This is just an extreme example - I am not that low frequency...but I can happily live live being so.

Why let news get in the way of your trading?

So we had the FOMC this week and a list of other so-called ‘news announcements’, none of which I care to recall. In fact, whoever told me about them may as well have been talking to a vegetable. My mind was elsewhere. This is way end of day trading allows us to do. 

Thanks to the high reward, high probability and low frequency of the trading style, we can just celebrate any news announcement as an opportunity for our winning trade’s profit to be increased in a shorter space of time or for a losing trade to be eliminated in a short space of time.

Imagine you have a 50 pence coin where you have a 50/50 chance of it landing on heads or tails, but if you were right and it landed on heads you were to receive £20, compared to if it landed on tails and you were wrong, you will lose £6.66...if this was the case you would keep on flipping that coin! The probabilities would after all be stacked in your favour...

 

This is the reason I do not look at news – pure and simple. Worst case scenario it will lose me 1% and some slippage.  For the best case scenario, it will help perpetuate a 10:1 reward/risk trade in seconds, just like CHFJPY did for me in September with Swiss Bank’s intervention.

If the trader was intra-day trading and targeting higher probability, smaller reward trades then they would have every right to be attune to the news...but for us higher time-frame traders it's a different story!

Not having to worry about the news really make trading a peaceful occupation – I’m just surprised that not more people follow suite...I guess that society pre-conditions us into having to worry about unnecessary things no matter how minor they may be.

Welcome to my blog

...And so I would like to offer you a very warm welcome to my long over-due end of day trading blog...and I really mean EXCLUSIVELY end of day trading blog. If you after intraday advice then I'm going to have to disappoint you. You may as well leave now. I mean it, haha!

Here I will periodically give you trade set-ups, some market analysis and tips and tricks to help improve your trading. For those of you who know me already or if indeed you are my long suffering clients you do not need me to tell you why I have chosen this style to trade my own account and impart this knowledge onto. But for the benefit of those intrepid journeymen, who have come thus far, I will tell you why and the reason(s) may surprise you!

WHY END OF DAY TRADING RULES:
1 )You can have a life, leaving your money to work hard for you
2) You do not have to be glued in front of your screen all day
3) You do not have the emotional rollercoaster from watching your trades throughout the day like intraday traders
4) You can be in the opportunity flow with a lot less effort than if you were an intraday trader

I arrived as an end-of-day trader not be choice but by necessity. After making every mistake in the book several times over I realised that I wasn't actually that interested in trading. I mean, can there really be that much in pleasure derived in looking at a bunch of moving lines on a chart? I think not!

After losing money in the early days I finally came to the conclusion that even if I was still losing money intra-day by spending all day in front of the chart then I may as well do it 'part-time' end of day in the pursuit of learning and at least make up for my loss-making trading business in other ways (in my cases, writing!).

Through moving to the higher timeframes, not only did I find my market analysis clearer but the emotion of seeing the intra-day price fluctuations and flickering profit and loss balances was not longer there. Essentially, I could set my trades - and forget. To cut a long story short, I then developed a strategy, stuck to it and out of the net sum of all trades I did very well. I want to cut straight to the chase and be brutally honest with you, trading may be the best vehicle I use to further my capital growth. But I do not enjoy it that much.

You will never catch me talking about it down the pub, boasting about what I’ve made or trying to get sympathy for what I’ve lost. It just happens to be something I do to further my income and that’s that. I have other things in place to get my income. Writing is my real passion, travelling and e-commerce. My trading, with its end of day style, just happens to fit neatly into the background so I can do the very things I enjoy doing in the day and night. If you are reading this, ask yourself...is this the reason you chose to trade? To do more of what you want to do. You may as well.

In terms of my journey to consistent profitability, I am thankful to my mentors, in particular Kaye Lee, my colleagues and partners Jitan Solanki and Tom Franklin.

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