Craziness on a FOMC day

FOMC is announcing its rate decision today and expected volatility came in at its best. I got stopped out on the very first trade I took. G/U broke support by 40 pips, retraced to it but never bounced. This cost me 20 pips.



Other than that I made another mistake. After getting stopped out I attempted to short G/J and E/J too at very bad levels which cost me too. So the day started quite negative. After seeing the upside momentum, however I reversed my shorts to longs and made up for all the losses. This however, constitute breaking of my rules. The only trade according to the rules should have been the G/U short so far.

Now a good one. G/J rallied a lot so I exited my longs and started looking to short this crazy upmove. G/J came to resistance at previous high slightly below 137.00. I let it break a bit, then shorted at 136.99. As you can see it fell 30 pips from there.



At around the same time, E/U hit a round number too, 1.3700. A short would have been good, but I was already short G/J so I didn't enter. Also, this was just moments after ZEW surprised to the upside so I stayed away from this one.



There was a good long on U/CHF on hourly/15-minute support. I didn't take it, because I was already short in E/U.



U/CAD also bounced off hourly support, good for 15+ pips.



I went long E/G on strong support again and got +8. It's getting closer to FOMC.




-Tyler

Up and down

It should not come as a surprise that the recent rally in G/U and G/J was about to be reversed soon. G/J broke the raising trendline today and fell as much as one would expect (that is to the next support level).



USD showed some strength by retracing G/U and E/U, however failing to bring U/CAD higher. U/CAD created a strong resistance, so I went short when G/U and E/U stopped their fall. Initially, I was planning on holding the short a lot longer, but I got out after the momentum vanished.



Here's an opportunity which I missed. I had planned to short E/G at 0.9132, but unfortunately we never reached this level. We came to 0.9128, but I do not enter until a level has been reached, since the price can attempt to fake a breakout. Some people advocate using multiple entries and smaller lot size, but I'm not a fan of this, since it gives us unfavorable R/R ratio.



Finally, I wanted to short U/CAD at 1.0222 - previous strong daily support which got broken last week, but I was in school already. The trade would have gone to -8 and +35 at the time of writing.




-Tyler

Don't trade dead markets

Yesterday, I was able to avoid one of my common mistakes - trading slow markets. However today, I fell into the trap and got caught. Fortunately, it only cost me very little. Let's see what happened.

I managed to quickly make 16 pips by shorting E/J and G/J in the first 90 minutes of London session. The trades were not textbook though and I'm not going to post them here. After a while of the price failing to fall I decided to go long for some reason. This was a really bad decision as the price was already caught in the range with very low volumes being traded. This mistake cost me 3 hours of waiting to get out of the positions, which I finally managed right before US retail sales hit the wires. I faded the news, but got in a bit too early so made nothing on this.

Like I wrote last week, news respect S/R levels more often than not, you just need to have the courage to execute the trade properly. E/J hit strong resistance upon release and only went south from there.



Later on, G/U did what it does best - go ballistic. Hourly resistance was at 1.5193 and I was going to short at 5200, possible slightly higher if it breaks. Well, miss sterling broke by 20 pips and then crashed. I missed this trade though, because I was sleeping.



And finally, A/U had a beautiful bounce too. I don't trade Aussie too much though, so I missed out on this one too.



Total performance for this week very positive.

-Tyler

Slow Thursday

Absolutely no volume in the first two hours on the London session. I went back to bed and decided to trade US session. Around 8.00am, I was looking at shorting E/J and G/J but with upcoming weekly jobless claims at 8.30am I decided to wait. News moved both pairs down, breaking support. I decided to short, since the move wasn't big in size (I usually fade news if the move is significant) and made around 30 pips.



Second trade was interesting. I had planned to long G/U on support at 1.4990 but somehow I got in at 1.5000. It broke down right away so I got out for -8, not realizing that my entry was bad. Of course, G/U rallied 25+ from the support. I guess a mistake from lack on concentration. Looking at my strategy though, this would have been a perfect trade, had I executed it correctly.



Well I think I'm going to call it a day, since pushing trades when the market resembles a sluggish dog is pretty much just like tossing a coin and betting it will land on its edge. Off to school and C++.

-Tyler

You can't catch all of them

I woke up at 4am, quickly glanced at charts and immediately became slightly disappointed because I had missed out on fantastic trades. Let's review what were textbook trades:

G/J went to retest yesterday's low exactly at London open, got rejected and rallied over 100 pips. I doubt I would have stayed in for the whole ride, but 20+ pips were sure here. Notice the accuracy of the bounce. I don't know many other strategies which allow you to use a 20 pips SL on the Dragon, but this one surely does.



Similarly to G/J rallying after the bounce, E/J rallied too. However it was quite clear to predict where it will stall/bounce - at previous resistance at 122.80. It only bounced around 20 pips, but that's half of your day's work.



News trade - UK released manufacturing production, which disappointed (just like all other data coming out of the UK in the recent months). G/U reversed the morning rally and plummeted to previous support. I got in/out for 10+ pips. As you can see the support got broken later on. Quite normal.



I indeed played the breakout this time, however I got in before it was even attempted and I got in based on price action. I shorted right after the strong bearish bar on the M1 chart (two bars to the left of the entry arrow). First the momentum slowed down, then the support broke and I quickly got out for 15+. I suspect, however, that this might have been a stop hunt and a fake, but we shall see later.



Well...



There were two other perfect trades around noon. I wasn't trading, because I was at school, but these should have been taken no matter what. E/J bouncing off resistance on hourly chart. Broke by 10 pips then plummeted 60+ pips.



And finally, U/CAD bounced off strong daily support. The 15 minute chart on the left shows that it went really high and the daily on the right shows the obvious level.

-Tyler

Support becomes resistance

London open brought in very strong USD and selloffs in E/U and G/U with the latter falling a lot more due to buying in E/G. E/U broke support at 1.3595 by around 20 pips on high volume. Of course I didn't get in the breakout (since most of them are fake), but waited. USD strength developed across the board and E/G reached resistance slightly below 9100, suggesting a turn. I shorted E/U as it retraced to 1.3595 (support becomes resistance) and then fell down. I got only +10 here as the liquidity dried out. Better safe than sorry.



Same play on G/U. I missed this one, because I was taking a nap.



Another trade was a bounce on G/J. You can see it was pretty much in a freefall, but the first bounce at a round number was respected. What happens after the bounce (+15), we really don't care about. How did I choose the 134.00 level? Well 1) it's a round number, 2) G/U and U/J were both going down and 3) the move became over-extended.



U/CAD support holding strong. It will break eventually, but not yet.


-Tyler

Monday trades

Typical low-volatility Monday trading. First trade we had a was a beautiful bounce on G/U off of previous 15min low. Literally no floating drawdown. The trade would have been good for 20+ pips.



Second trade today, again a bounce off of strong support on U/CAD. The Loonie broke the support initially by 5-6 pips on very low volume, which signifies a fake. And so it was, buying came in and the pair bounced for 10+ pips. I got out as it stalled as the Loonie is a really slow mover.



G/J established a strong support too. I didn't take any of these trades, since I was already in the Loonie. One of my rules is to have only one position open at a time (due to strong correlations among all currency pairs). All arrows depict potential longs, all good for 20+ pips with minimal floating drawdown.



NY morning brought some USD strength, and yet, E/U bounced at a 15min support.



Finally, a fake breakout. E/J collapsed rather fast to support at 123.00 - round number coinciding with previous low. I took a 20 pip loss here. However, look at what happened. Price bounced twice between 123.00 and the new low, but failed to continue lower and created a bullish engulfing candle. Seeing this both on E/J and G/J I went long for 15+ pips. The proper way to play situations like this to fade the breakout below support. This however, depends on volatility and experience. Some traders would reaverage upon the breakout, but I am strongly against this as it skews the risk-reward ratio.




-Tyler

Counter-trend trades after NFP

If you read my post from yesterday, you know that fading moves is the only way to trade with consistency. Today, NFP surprised to the upside printing -36k, causing a huge rally in stocks. I usually fade all news and today was not an exception, however it resulted in a loss, because I miscalculated my entry (I wasn't looking at my H1 charts because I had too many other windows opened :/). Anyway, G/J rallied 250 pips after the announcement. Seeing this big move, we would be looking to short it at strong S/R levels. I took two short trades here.

First, we had a hourly resistance at 136.73, quite obvious from the hourly chart. I didn't take this trade, but it would have been good for 20 pips. Second, we had a beautiful bounce at 137.00 (round number), good for 40+ pips (I got out after 20).

Third trade was on G/U, when they faked a breakout above 1.5130 (hourly resistance) and then sold off like there's no tomorrow. (I managed a +2 trade here, because I wanted to get out quickly and avoid extra risk).

Notice how a 20 pip stop was a safe play in all three cases. Now seeing this huge move to the upside, how many of us would consider going against it? Probably not many. However, even in these crazy market conditions, fading over-extended moves is a usable strategy. Buying the strength today would have made money, but only because we a had strong intraday trend in place. On most days, no such things happen.

-Tyler

Intraday trend trading is a fallacy

Last summer, my trading consisted of fading all strong moves at major S/R levels and quickly getting out with 5-20 pips of profit. Risking 2% on a 20 pip stoploss, I was able to achieve 3-10% daily increase in my capital. I took my 1000 dollar account to 4000 in about 2.5 months. This was a live account, not a demo.

Then one day, the market decided to trend strongly (several hundred pips on E/U) and I realized that I want to be trading with the trend, i.e. getting in on pullbacks and riding the whole thing. I created a simple trend-following strategy based on moving averages and it worked as long as the market was trending. I was able to achieve some profit with this, but only for a short period of time. Two weeks later, the market stopped trending (surprise?) and my gains evaporated. I can attribute this to bad money management too, since I was trying to scale into positions (i.e. add to losing positions).

To make the long story short, I lost all of my gains by trying to trade with the trend, because the trends ceased to exist. The market was ranging again, bouncing off of everything and taking money from naive traders like me.

Meanwhile, all counter-trend strategies worked like a charm. Finding intraday s/r levels and banking quick pips proved to be the most consistent strategy I've ever seen. Round numbers, pivot points, highs/lows, etc. After an over-extended move (also referred to as oversold/overbought market conditions), the price simply has to correct. Why? Because the people who made it move will be getting out of their positions, hence moving the price the other way.

Two weeks ago, I met a professional equities trader, whose personal account is over one million dollars. The guy has been on CNBC and has been trading for over 10 years. He trades intraday and in short, he fades all moves. In other words, he couldn't care less about intraday trends, he just fades it. The more extended it becomes, the more it retraces. This is exactly what I was doing last summer, except I was picking my entries more precisely.

Same thing works for what most people fear the most. News. I remember an NFP announcement last summer, during which I made over 100 pips by fading a 150 pip spike on G/J. Just wait for a strong S/R level and fade the move. Simple.

To conclude, I decided to completely abandon intraday trend trading and play only the bounces. Given that the market ranges 80% of the time, I am determined to repeat my fantastic gains from last summer.

-Tyler