P2: A batch of FX market trades

[peter2]

T09: AUDUSD long, System 4T, pullback setup
Bought 0.7198, SL 0.7176, risk 22p, T1 0.7220, T2 0.7242.
Initial target is the old high at 0.7222 which is better than T1, just.

Pic shows the 4T setup on the 4H, 1H charts and confirmation with gold.


I'm also stalking long setups on DAX and FTSE again.
The narrow range in Oil makes for a potential bracket BO setup (both directions).

Easing down because it's Friday and I don't hold these over the week-end. It's been quite a good week for the system and myself.

 

[peter2]

At the end of my trading day, in the early hours of the morning I'm usually too hyped to sleep straight away. This morning I reviewed the markets I monitor and noted all the possible trades for System 4T. I usually do this during the weekend.

I don't do this for self-flagellation but to improve my efficiency at recognising the setups in real time. Many of the setups require placing a pending stop order in the market as they trigger hours later. If I didn't place the pending order itm I need to know why. I also need this data to assist with money management guidelines. I've already limited the number of these trades to 4/day. Knowing what I'm comfortable losing each day, I can set the value of R. I've also set a max loss for the week (in R multiples).

This review noted that there were 22 setups across the markets I monitor.
Indices: 4, Gold/silver/Oil: 4, FX: 14.
I subtract the ones that setup while I'm away and sleeping (~4), but I do consider if it was possible to anticipate the trade and place a stop order.

If there's someone who wants to understand the system and process a little better I'm happy to review any market for you with detailed notes. Please ask. Most market provide only 1-2 opportunities each week. So, its important to be ready for them.

 

[aus_trader]

Easing down because it's Friday and I don't hold these over the week-end. It's been quite a good week for the system and myself.

Great to hear Peter, learning quite a bit from this thread. Keep it up.

 

[peter2]

Weekly update: T09: AUDUSD long closed for a small loss -0.2R

 

[Trading Athlete]

If there's someone who wants to understand the system and process a little better I'm happy to review any market for you with detailed notes. Please ask. Most market provide only 1-2 opportunities each week. So, its important to be ready for them.

Hi peter2,

I've been following along and getting a lot out of it!

I would really appreciate if you could help me understand how it would apply to the Hong Kong Index over the last few days.

It went from a very strong downtrend to an immediate uptrend. How would you have recognised the change in state? How would you have traded this instrument using your system?

Appreciate any insight!

 

[CanOz]

An important note regarding the action on the hang seng, most of this moved occurred in the overnight session. There is a significant gap on the regular session as a result.

 

[Trading Athlete]

Yes that's true.

Would you have entered in the overnight session if you happened to be at the screen?

 

[andymac]

hello all and hello again Peter and thank you for your ongoing contributions which i always find are of great value. i often feel like i should contribute rather than just take. on the other hand i do not want to clutter Peter's excellent thread or take it way off topic, but now it is sunday and i thought i may throw something in.
i too trade a bit of forex mostly to satisfy my urge to be involved. this urge can bugger up my longer term trading which often works quite nicely if i just leave it alone. having said that i do take it seriously, like anything i am not here to lose.
I trade using a quite different style of T/A to Peter, but funnily often end up in the same trades. I have noticed over the years that often all types of T/A lead to similar outcomes and the take away from this must be to just find the style that suits you. My style uses Elliot Wave theory and fibbonaci. And OH NO there is the can of worms opened. so lets not turn this thread into an elliot wave debate. let me just say that after many years experience i find it helps and that the most helpful part of it is that it tells you when you are WRONG and if i know when i am wrong then at least i can cut out and re-start.
I trade most days , but i only trade from roughly 3pm until US open (WA Time). this is just the times that suit me as i am awake and alert. I trade mostly AUD,Euro and Gold on 1 hour charts as a starting point but once i am stalking will often use 15m or even 5m to find an entry and a stop. I have only a couple of specific setups and most weeks will find a dozen trades.I always lose more trades than i win, around 60% losers, but my winners win at about 4:1 over my losers. I pay very close attention to the US dollar index chart and start with this every day as it obviously gives you a lead into the others.
so i have attached a 1 hour chart of AUD. i was looking for a short trade on friday afternoon. without getting into too much detail there had been a clear 5 wave move up of the lows earlier in the week. From an EW perspective next would be 3 waves A-B-C back down. by friday we had 1 wave down(A) and one smaller wave back up to resistance at .76 (B). so i was then looking at shorter time frames for an entry into C down, which i got and went to bed leaving a target in place, which i never do unless i have already comfortably moved my stop to breakeven or better. so that was a nice trade for me, but now it is sunday and there are possibly bigger fish to fry for the coming week. the main point to remember here is to not fall into the trap of letting your excellent T/A analysis (for the last trade anyway!) lead you into believing that you can PREDICT, always remember it is a guide to a possible pathway. As soon as the market varies from that possible pathway, get out and reassess.

 

[andymac]

ok so i posted that as i have never posted a chart before i i did not know if it would work. so it seems ok so i will carry on shortly with what i am looking at for the coming week

 

[andymac]

ok sunday analysis. AUD daily chart in a downtrend has been all year. US dollar index daily same but of course uptrend all year. US dollar index has recently made a high on waning momentum (macd at bottom of chart) AUD continued making new lows after USD HAD TOPPED and MACD divergence is not so pronounced which is a sign that there may be more lows to come, so caution!
looking at 4hr charts USD has made a lower high and now a lower low - downtrend - or at least a larger pullback.
AUD 4hr chart appears to have a small 5 wave move up off the lows. 1 hour chart posted above strongly agrees with this.
So from an Elliot Wave perspective the 5 wave move up(impulse wave), after it has corrected, would be followed by at least another leg up. C wave or a wave 3. so for this week i may be looking for the C wave down on the 1 hour chart to complete and then a new larger wave up.
Looking at the 1hr AUD chart again, the C wave down(not marked on chart) may be complete. it is already longer than the A wave and often A=C. It has not however yet retraced .618 of the 5 waves up which is a common retracement area. So the first thing i will be doing is nothing. Waiting until i feel the C wave down has completed. this will not be confirmed until the high of the 5 wave up is taken out at .72293.
on the other hand this downtrend could just continue down to new lows below the sept 11 low which would then invalidate all i have proposed so far. and i would then start again.
However if the AUD makes a low monday, and starts up again breaking to new highs, then how far? i have attached a 4 hour chart( i hope) with a fibonacci extension plotted. the Fib uses the range of the first leg up then placed on the start of the new second leg. as i do not know where the new second leg is going to start yet, i have used a .618 retracement of the the first leg as this would be common. on the chart the yellow solid lines are a fibonacci retracement of the first leg up showing us the .618r i have used for the start of a possible new leg up. the aqua dotted lines are a fibonacci extension from that point.
these extensions were shown to me some years ago and are amazingly accurate for targets. in simple elliot wave terms we have 2 possibilities if a new leg up starts.
it can be a wave C. which is often the same length as the first wave, in which case it would stop at a 100% extension. so enter a trade at the break of .72293 and target .72842(100%). all that is left is to find a stop that gives you a reasonable risk and reward.
the second possibility is that the first wave up was a wave 1 and that the next is wave 3. in this case , and if the move up continues on past 100%, a wave 3 often targets 1.38 or 1.618. i always assume 1.38 and set my target there.
so at face value this lot looks like a very simple trade plan. as always it is a lot harder to execute in real life. but i try not to make it harder than it has to be and the biggest problem is always waiting until it sets up as per your plan and if it does not, don't worry, go to the next one, there is always another one.
so anyway the whole point here is just to show that there are many different methods to achieve the same outcome. if the AUD breaks .72293 this week very good chance Peter will get an entry right around there on a 4 hour bar and we will be off on he same trade again.

 

[andymac]

the last post ha.
so my casual editor has accused me of not being clear enough especially for the non- elliot wavers- . Without writing a lecture, the critical point of my analysis - that maybe i did not make clear enough - is the possible 5 wave structure up from the AUD lows shown on the first 1 hour chart.
In elliot speak a 5 leg wave CANNOT stand on its own, it can only be part of a larger wave structure. first leg of an ABC correction or 1st leg of a large 5 wave structure upwards. so my whole analysis and my trading for last week and upcoming weeks, swings on my believing that that leg IS an impulse or 5 wave leg up. if it gets broken to the downside this week then it was not , it was only an abc correction in itself. if it is a 5 wave impulse leg up then there must be more follow through upside this week.
but as i said back at the start somewhere no predicting, just a pathway, will see which way it goes

 

[CanOz]

Yes that's true.

Would you have entered in the overnight session if you happened to be at the screen?

I plan on trading the overnight sessions eventually with my algo, the results in backtest improve with that.

Looking for a possible gap down Monday if Trump follows through with tariffs.

 

[peter2]

@Trading Athlete My MT4 provides a cfd market on the HK index labeled HK50.

As Canoz has mentioned there are lots of gaps in this chart because the index doesn't trade 24/hrs. It trades in sessions and there is a possibility of a gap every time it reopens. The 4hr time frame doesn't suit this market. However I can still use it to demonstrate the system.

At the start of the week the 4hr trend is down and the only option is to short it until the huge up bar on the 12/8. I've marked the bar with an arrow. This bar was big enough the change the 4hr trend up. According to my system you have two options to consider.

1. Buy the open of the next 4hr bar. I've marked this with a black line (26700). The initial stop loss should be placed below the low of the signal bar (red line at 26250). This makes the trade risk 450 which is similar to the daily ATR (not shown). The risk size is quite large relative to normal bars and means that the trade must last several days in order for it to become acceptably profitable.

This setup while with the 4hr trend is against the longer term daily trend and unless you think that this reversal is a start of a much bigger trend reversal it's unlikely to get to +2R or more without a few pull-backs.

1b: As the initial risk size is large I sometimes apply an 80% rule. I place my iSL at 80% of the range. In this example that would mean the initial risk would be 360.

Results 1, 1b: The MFE so far has been +640 providing a +1.4R or 1.7R result as a maximum. If your target was at +1R no problem. If you wanted +2R then the trade remains open for next week.

2. This option allows me to use the 1hr time frame to look for a smaller sized risk setup to enter the trend. Be aware that if you wait for this sort of opportunity rather than buying the next open, you will miss out when price continues higher without pausing.

I've posted the 1hr chart showing an acceptable lower risk setup with the two blue lines. The risk for this setup is only 200 points and the MFE would have produced a max win of +2.8R. My usual +2R target would have been hit and in the bag.

Conclusion: The system would have provided two trades in the HK50 market, a short early in the week and a long near the end.

 

[peter2]

@andymac Thanks for the contribution. I hadn't noticed the classic 5 waves up in the AUD 1hr chart. They're not as obvious in the 4hr chart. You're right in that our two ways of looking at the charts will often result in us taking the same trades at the same time.

I'm "lucky" that the two EMAs that I've chosen, respond quickly enough to indicate opportunities.

 

[sasch]

@sasch If you like pin bars (I do) then we could create a pin bar trading plan. We would have to start by defining our pin bar, then I'd add a few filters to try to select those with higher probabilities for a successful trade. eg You might like to trade pin bars with or against a short term trend, with or against a longer term trend. You might like to find pin bars that reject a defined level. You might like to trade pin bars at the extremes of a volume profile.

Starting with a simple pin bar, the possibilities for research are huge and if you find an edge, priceless.

Thanks Peter,

Now, I can see my scope was too broad before, your given me some great ideas, and I have research to do!

I do favour pin bars against the long term trend. However, I do notice in these situations, the first pin bar often gets taken out, and you need to wait for a second for confirmation.

Do you think using 50% retracement strategy on a pin bar is a valid strategy to improve your risk and reward?

Just one more question, as I don't want to clog up your examples.

Do you mind going into your general stop loss strategy for your system? For example: Do you move
to break even, when at 1R-1.5R?

Thanks

 

[peter2]

Do you think using 50% retracement strategy on a pin bar is a valid strategy to improve your risk and reward?

If you mean placing your iSL at 50% of the range of the pin bar. Yes, it would certainly improve your RR, but it will lower your W% slightly. Overall I think it will improve your edge if you can trade it consistently.

Do you mind going into your general stop loss strategy for your system? For example: Do you move to break even, when at 1R-1.5R?

Yes, I move my exit stop quite quickly to reduce risk. I anticipate that price will move quickly in my direction and if it doesn't I'll reduce risk quickly. My AL is -0.6R. Another reason to do it, is that there's always another opportunity coming up.

 

[Trading Athlete]

Hi peter2 & Canoz,

Thanks for your insights. Very useful!

I never thought about how having many opens in the Hong Kong can lead to many potential gaps.

peter2, in terms of knowing when a downtrend changes to an uptrend was it the large candle that was the big give away?

I have always tried to trade with the trend but this type of trading is very different.

I might be mistaken but from my understanding your approach is to find the spot when the trend changes. I've always struggled psychologically with that idea and am interested in what contrarians look for.

Thanks

 

[sasch]

If you mean placing your iSL at 50% of the range of the pin bar. Yes, it would certainly improve your RR, but it will lower your W% slightly. Overall I think it will improve your edge if you can trade it consistently.

Sorry, I should have been more specific. No, I mean entering the trade at 50% retracement of the pin bar, and initial stop loss set to usual spot behind the tail. Aiming for a 3R reward versus 2R, or looking to get out earlier for a 2R win. See below for example.

Yes, I move my exit stop quite quickly to reduce risk. I anticipate that price will move quickly in my direction and if it doesn't I'll reduce risk quickly. My AL is -0.6R. Another reason to do it, is that there's always another opportunity coming up.

Thanks, I can see why your reward ratio is so good compared to your losses. Well done on maintaining your discipline.

 

[peter2]

You're free to do anything you want, but test it first.

My view is that the pin bar hasn't triggered a trade until price trades below it. Your entry is before my trigger and I can't start a trade there.

Once triggered, I can chose to place my iSL above the pin bar high or reduce the risk size and place the iSL above the entry bar.

 

[peter2]

T10: EURUSD long. System 4T
Bought 1.1689, iSL 1.1869, risk 20p, T1 1.1709, T2 1.1729
I was late into this trade as my entry was in the current candle not the prior one. Price almost hit T1.5 and I've closed the trade at T1 (1.1709) for a +1R result. This move happened quickly while I was going through my ASX scans.

I've also posted two trades that I missed earlier in the day. The EUR strength should have been traded against the weaker JPY (EURJPY long). While the AUD strength should have been traded against the CAD weakness (AUDCAD long). These two setups complied with the 4T trend trading system.

Most days moves don't happen at 11am and I often don't check the charts at this time. Today, this laziness cost me two profitable trades. These moves were reactions to the latest news of Trump's trade war.