Watch A Typical Day Of A Real Day Trader

[ForexTraderX 10]

Well, I covered just over half of the GBP/USD short trade.... was away from the keyboard as we stalled out near 1.6005 after the drop from 1.6045ish.

 

Was a good entry tho for a short. Now, price action shows a pretty clear bias back to the upside, which is no surprise given the barrier option located at 1.6000. Long story short, this is a very large option (as in, usually $50 million - $500 million) that loses a significant portion of that value if price reaches the strike price (which is 1.6000). In other words, it has more than just a time component, it has a price component for expiration.

 

So, the large finanancial institution that sold the option to whoever, usually will try to push price into that level once it gets close enough (40 pips is often close enough). Then, the institution who wants price to stay above that strike price of 1.6000 will start aggressive buying just a bit before that option is reached.

 

Of course, with the trend being what it is, the institution who is defending (buying, and creating support above 1.6000) is probably very aware of the fact that their option will get touched very soon (today, tomorrow, this week very likely), so they are more concerned with buying up "at the low" now (they are likley creating the low)... then, as they run stops back up above the london session highs (1.6045), even as high as 1.6060, they will close their long trade, and get short themselves...

 

thus, they push price back into their own option, but the idea is they made enough defending it (buying GBP/USD ahead of 1.6005), and then selling that out for a profit at or above 1.6040, and then actually getting net short and making profit again by joining in the trend.

 

I know, it sounds like i'm pulling all this totally out of my ass. And, i'll admit its my own personal speculation of what will happen.

 

HOWEVER, there IS a large option barrier at 1.6000 on the GBP/USD, and it clearly is being defended, because very large volume occured as buying started between 1.6010-1.6003.

 

How did i find out about the option barrier? well, I pay for a newsfeed. They give lots of good stuff away.

 

How did i figure out how/why price acts as it does when it comes into an option barrier? I read some forum postings by some very informed individuals, and I watched a heck of a lot of price action when I would learn of a barrier option in play.

 

FTX

 

P.S. the defense may not be able to overcome the attack right now, since the attack is with such a strong trend to it's back..but if it does, i'm looking at 1.6040-50, or 1.6060ish for a reversal, and a test of 1.6000

Edited October 9, 2012 by ForexTraderX

[ForexTraderX 10]

actually, based on some back of the envelope math, i closed out my entire GBP/USD short position, and am now long with about a 15 pip stop, 20ish pip target.

 

I have an order to get short again slightly above that target.

 

This is not a trade I take often. However, based on what the evidence is showing me, whoever is defending this level probably has a considerable amount more they are willing (needing?) to buy, in order to create a profitable long trade to the degree that they will actually make money defending and then later attacking their own barrier option.

 

based on this, I'm going to take only a very small position at 1.0640 for a short, because from what im' seeing, we may very well push higher before we resume our drop. Maybe not much higher (1.6060-80?), but the odds are increasing towards a higher pullback before the continued drop.

 

Pretty exotic trade really. not the type of thing i do normally. but, if the shoe fits... and today it does.

 

I'm taking off now, won't be taking any new trades except what i've already set orders for.

 

Will find out sometime tomorrow how everything turns out..

 

EDIT: of course, this could completely lose, in which case, I made less than I would have otherwise, but I will still end up with a net profit on the GBP/USD trading for today.

[The Catabolist 10]

Hey there, just wanted to ask a few questions here.

 

Do you put more value into more recent data, though? Some daily charts show a lot of movement but end up in generally the same average, so it's hard to identify a trend. If I mentally weighted more of the recent data, I could develop some better trends, but I don't want to do this if it isn't actually a good idea.

 

And what would you recommend I specifically look for with daily candlesticks?

 

Thanks!

[ForexTraderX 10]

Well. That was just pretty gosh darn sexy trading of mine in the GBP/USD if I do say so myself.

 

every once in a while, a situation will arise that a trader can see perfectly clearly. As if the future can be seen. Fairly rarely, but it does happen from time to time.

 

Trading today, in the GBP/USD, was just such a day for me. Only problem was my last order I misplaced (!!!) by 2 pips (just sloppy order placement on my part), so when price hit 1.6040, I didn't get filled for the short. Sigh. Waste of a crystal ball today in that respect.

 

Otherwise though, wow. All sortsa cool trading. Not to mention doing it while I wasn't at the computer... and the USD/CAD long couldn't have worked out better, either. If only I could do this every day...

 

But, no. It doesn't work that way. In fact, after today, I personally will trade the rest of the week EXTREMELY CAUTIOUSLY. My biggest losses have always followed my best trading... In the past, such situations would get to my head, I'd get cocky, and then I'd spew cash like it was the water I was using to put out a burning house.

 

I won't risk more than 0.5% on any given trading opportunity, and I'll be very selective about which opportunities I take. Nothing sloppy, nothing too risky. And nothing that I have to struggle with to figure out. After so many years of this, I find the best trades feel like they leap off the charts at me. This is what i'll be looking at for the remainder of this week.

 

Will be looking around more later for another good trade...

[ForexTraderX 10]

Hey there, just wanted to ask a few questions here.

 

Do you put more value into more recent data, though? Some daily charts show a lot of movement but end up in generally the same average, so it's hard to identify a trend. If I mentally weighted more of the recent data, I could develop some better trends, but I don't want to do this if it isn't actually a good idea.

 

And what would you recommend I specifically look for with daily candlesticks?

 

Thanks!

 

Hey man, thanks for the questions! I have been wondering in recent days if the page views I see here are just bots or something, lol!

 

As far as recent data... hmm, not really. I put more value in levels and patterns and such that I see on longer term charts. A level that shows it acted as support for a monthly chart, I take it very seriously. One that shows up on an hourly chart, but not on a daily chart, no so much so. A 5 min chart level that doens't appear on a 1hr chart? I don't really care much about this type (though it does create a reaction most of the time, for sure. just not one big enough to do much with usually)

 

And, I actually prefer levels that have not been tested. Even years back.

 

HOWEVER, if we specifically talk about trend... that DOES change things. To answer your question quickly, YES, I DO put much more emphasis on recent data. (trendlines are by far my favorite tools, and a broken trendline is a new trend for me) I was just telling someone that I STILL don't know exactly how I define a "trend", but I always feel I know it when I see it. Of course there are some basics that I'll try to explain. I don't have time to do it right now, however, I'll post some charts before next week (probably today or tomorrow), that will give kind of a "step by step" of my trend analysis.

 

For daily candlesticks... my favorite things are pinbars and engulfing candles, when the occur at a previous market turning point.

 

Here are some examplesIf you just take situtations like this and trade them, you'll probably do pretty well.

[ForexTraderX 10]

Also, let me know if these pictures are able to be understood. if not, i'll explain it further. (pics from the previous post)

[ForexTraderX 10]

I won't be trading tonight at very much at all. I have a few orders in, but don't be placing any new orders. This week, everything unfolded just about how I figured it would. I really need to work on a few different things to make sure I can get paid better on my trading analysis. AUD/USD, AUD/CAD, both making new highs, over 100 pips off their lows. GBP/USD fell apart, as did GBP/AUD and EUR/AUD, USD/CAD is making new highs for the week, and AUD/NZD is doing the same.

 

All of which are markets I had direction figured out, and trades in. Should have double or triple what I have, but I've always been more of a day trader, and holding positions for longer periods of time is a bit of a problem for me. ANyway, just goes to show one of the many aspects of trading that makes it difficult.

 

Hope everyone reading has found this helpful so far. Will address the trend question I was asked in a little bit here.

[ForexTraderX 10]

EUR/AUD today looks like it's setting up for a move to the upside. Daily chart is pretty clear with a nice bullish reversal candle (pinbar)

 

Nice entry levels are 1.2570, 1.2535, 1.2520, and 1.2510.

 

The best levels are probably 1.2570, and 1.2510.

 

easy target should be 1.2620, but we could see this push up towards 1.2692-1.2703 before any significant stalling.

 

I will be looking to hold something up towards 1.2700 unless I get a pretty clear price action signal that we won't make it that high.

 

FTX

[ForexTraderX 10]

I'm actually already long the EUR/AUD, around 1.2580ish. Will trade around the position if price drops further, if it moves up, will likley hold for 40-50 pips for a 1st target

[ForexTraderX 10]

Here is a chart with a further breakdown of the EUR/AUD long opportunity presenting itself today.

 

I would also consider 1.2570ish for a long, in addition to what I spell out on the chart pic here, because that's just about the low of the U.S. session from yesterday.

 

If that doen'st hold, 1.2550ish would be solid...probably the best level besides 1.2510-1.2520

[ForexTraderX 10]

Also, the EUR/USD looks to be setting up for a nice potential long as well, in about a 55 pip range, between 1.2890 and 1.2835. I'll be looking for a potential long based on price action and volume as it develops when price is in that range.

 

Bottom line, euro is probably gonna see some support today across the other major currencies.

[ForexTraderX 10]

Also, the USD/CAD looks like a decent long, particularly if the risk off theme takes the day, considering the recent 1hr and 4hr price action of the USD/CAD, and the lack of any significant new levels being reached recently on the long side of things.

 

I think we're going to need to retest 9870+ before we retest 9700 or lower.

 

right now we are at 9780.

 

But overall, I'm thinking EUR/USD or EUR/AUD long will be the better trades, so long as no new catalyst comes out that creates renewed bearish sentiment for the euro.

[ForexTraderX 10]

Well, the EUR/AUD long is up about 30 pip from my entry price... took half off, moved stops to BE.

 

Will consider reloading if it drops back down, but for now, being friday and all, i'm happy to just take a small profit and eliminate risk as quickly as possible.

[ForexTraderX 10]

Well, I also took a short in the GBP/USD. My view on this is that price is very likely to hit 1.5060ish before we have any chance of a significant rebound.

 

we have prior support at 1.6067, from around oct 3rd, and price finally pushed up right into it, only to start dropping back pretty quickly. my short is around 1.6062ish

 

The problems are we have spent a fair amount of time consolidating around the 1.6050-1.5980 price range, and this COULD be a breakout in the GBP/USD up towards higher levels around 6100 or even 6175-6200...

 

but I am having a difficult time seeing that a move above 6100 is very likely. More likely IMO is that we retest 1.6000, or lower.

 

The only other market I'll consider really taking a trade in this week is the EUR/USD, if it drops down far enough to justify an entry. Otheerwise, I'm pretty much done for the week, and will just wait to see how the current trades resolve.

 

At this point, I'm really betting on a strong USD for friday, consideirng i've already closed 3/4 of the EUR/AUD long, and moved stops well over break even on that trade. So, my exposure is that a bearish USD will hurt both my U/C and G/U trades. I suppose time will tell.

 

FTX

[ForexTraderX 10]

One more comment on that GBP/USD short trade... it's likely the weakest trade I have on currently. I think it's worth taking, and has a good risk:reward ratio, but it would be the worst of the 4 opportunities i'm looking at for this friday.

[ForexTraderX 10]

Closed out the final portion of the EUR/AUD long I had. Wanted to take profits on it primarily to reduce my exposure right now. If the U/C and the G/U both stop out, I would like to have part of that loss offset by the profits in EUR/AUD.

 

Best way to make sure I have profits to offset a potential loss is to take them.

 

Maybe a bit shortsighted, but I hate ending friday with any significant loss... and htis will help reduce that possibility.

[ForexTraderX 10]

Well, I've reduced my open orders and positions to the point where a loss today (from where I currently stand) would cost about 0.64%, and a profit would be about 0.80% or more.

 

Considering I'm up 2.43% this week so far, a 0.64% loss would result with a net profit of about 1.75% for the week. For me, this is acceptable.

 

So, looks like this is it for the week. I won't do any worse than 1.75% profit, or any better than about 3.25% profit. Time to slow things down, and look forward to the weekend.

 

Hope next week provides such nice opportunities as this week has.

 

FTX

[ARTjoMS 10]

Hi there,

 

I really enjoy to read your thought process on the 1st page.

 

My platform provides only usd and euro indexes. As far as I know usd index is based only on 4 pairs.. and EU is more than 50% weight. Don't even know about euro index. When you say ''weighted basket of currencies'' are they average weighted?

 

Besides where could I find charts for other currencies?

 

http://www.traderslaboratory.com/forums/technical-analysis/14432-leading-lagging-pairs-illusion.html

 

Please take a look in the above topic and give me your opinion here.

 

Do you think usd index had any real weight on causing actual retracement..? In other words.. could it possibly work as leading indicator for eur/usd.. or it is just a coincidence?

[ARTjoMS 10]

Do you consider also correlation between currency pairs and/or metals/ oil/ gas?

[ForexTraderX 10]

Hey there, just wanted to ask a few questions here.

 

Do you put more value into more recent data, though? Some daily charts show a lot of movement but end up in generally the same average, so it's hard to identify a trend. If I mentally weighted more of the recent data, I could develop some better trends, but I don't want to do this if it isn't actually a good idea.

 

And what would you recommend I specifically look for with daily candlesticks?

 

Thanks!

 

Ok, here's some charts and some explanations of how I would view "trend" in context. These pics are of the GBP/USD daily. I may post more later, but this should give you a basic idea of what I look for in terms of trading "with the trend" or "against the trend"

 

Please let me know if this helps. It's a difficult concept to explain well for me, so any feedback you can give will help me, help you better

 

FTX

[ForexTraderX 10]

Thank You

This is an excellent method for picking the strongest and weakest currencies for the Forex pair to trade.

 

I like your style of trading and the amount of risk you typically take on a trade.

 

I personally would prefer intraday trading because of the tighter stops and quicker feed back from the market.

 

1.

On your charts showing the horizontal Market Profile bars what does green and red

mean ?

Does it mean up volume for gree and down volume for red ?

 

2.

What time zone are you trading in ? I saw your spreadsheet table showing account performance for 9-6-2012 showing entry and exit times but I wasn't sure what time zone that was for. Also I was trying to match up your post times with my Forex charts but I wasn't sure what your time zone was.

 

3.

And what chart program are you using to see market profile and VSA ?

 

Henry, just realized you made a few posts that I never saw! I think they took a while to get "approval", and I don't generally look back at the thread after i've put it up. So sorry it took forever to answer you.

 

1 The red and green I don't pay much attention to. The size of the bar, I do. It's essentially showing the amount of volume that is made up by bids executed at market (green) or offers executed at market (red)...

 

2. I am trading out of arizona, so pacific time.

 

3. ninjatrader is what you seeing, though I often use think or swim's TPO profile indicator when trading spot due to the fact that it shows a pretty decent MP estimate without volume.

[ForexTraderX 10]

Taking a harder look at AUD/CAD, i'm noticing we've had some really critical, multi-year support that we are coming up to...in fac,t it's been support or resistance going back at least to Nov of 2010.

 

We are just blow parity for the first time in about 5 months, and the A/C is fairly over-extended in this drop, having sold off nearly 300 pips in only 7 days, without a single "up" day.

 

There are several price levels i'm looking at, actually, right here at 9970-75 is good. then better still down at 0.9956 is the low for may. Then we have a year ago october low at 0.9939, and then a multi year low at 9917.

 

With the fact that this market has made an incredibly steep drop off in the last 7 days, and is coming into an area that has seen support for over a year now, and the last time it was at this price level, it rallied well over 600 pips....

 

well, It think it's safe to speculate on a bounce. I already am, that's for sure.

 

I think 1.0050-1.0100 is a really likely target. I'll be looking to take some profits probably just before that area, as well as near the top of it, and maybe a final target just before 1.0150.

 

This is probably going to be the best opportunity coming into this next week, IMO.

 

I really need to work on holding my trades for a longer period of time, considering this played out pretty much exactly as I'd originally figured, but I was not along for very much (if any) of the ride.

[ForexTraderX 10]

Hi there,

 

I really enjoy to read your thought process on the 1st page.

 

My platform provides only usd and euro indexes. As far as I know usd index is based only on 4 pairs.. and EU is more than 50% weight. Don't even know about euro index. When you say ''weighted basket of currencies'' are they average weighted?

 

Besides where could I find charts for other currencies?

 

http://www.traderslaboratory.com/forums/technical-analysis/14432-leading-lagging-pairs-illusion.html

 

Please take a look in the above topic and give me your opinion here.

 

Do you think usd index had any real weight on causing actual retracement..? In other words.. could it possibly work as leading indicator for eur/usd.. or it is just a coincidence?

 

Hello, thanks for the questions...glad you have found this thread helpful (at least the first page anyway). The DX (dollar index) is actually made up of 6 currencies:

 

U.S. Dollar Index - Wikipedia, the free encyclopedia

 

Fact is, one can make a weighted basket of currencies using really any weightings or inclusions in the basket as one desires. I believe it was the october 2010 issue of "technical analysis of stocks and commodities" magazine that I first read a breakdown of this, but it turns out the company LiteForex has a meta trader demo that includes their own weight basket of currencies as a tradeable market. I dont' trade it, but I use it regularly these days, since it gives me more clarity in understanding how each currency is performing overall against the other majors.

 

as far as the DX providing reason for an E/U move, i find that if the EU and the DX are both approaching a significant level simultaniously, the odds of a bounce are more likely than if just one or the other is approachign an S/R level.

[ForexTraderX 10]

Hi there,

 

 

http://www.traderslaboratory.com/forums/technical-analysis/14432-leading-lagging-pairs-illusion.html

 

Please take a look in the above topic and give me your opinion here.

 

Also, yea, your on to something... the DX hit major support, and the aussie just ran into major resistance... risk markets tend to move together, and the DX hitting support, all help increase the odds of a eur/usd stall. Also, considering the move, it ran from nearly 1.2000 up to 1.31... over 1K pips... and it crossed the critical 1.30 barrier without so much as a single selloff day. Once it hit 1.30 and failed to retrace, one really should start looking for ANY sign of a stall, since it was 1000+ pips up from the low and just moved past the most significant area of possible resistance... it would have taken a great deal of buy orders to cross 1.3000 as it did...and this is even more surprising considering how far the move had already come (900ish+ pips?)

 

Basically, the swing up was so exhausted that even a small speedbump would be enough to stall it out. that small speedbump was the low of april 27th.

 

Also, look at the 4 hr chart i included. The two significant, nearly textbook perfect pinbars should have been a real clue that something was about to change... also, consider that the last part of this 1000+ pip swing went parabolic as it ascended. Parabolic moves are wildly unsustainable, and a good living can be made just identifing them and fading them as they start to break.

 

There were many clues as to what could happen here. The lower SR line I drew on the chart is where I would expected even the mildest retracement to hit. As it turns out, we dropped quite a bit more than that.

[ForexTraderX 10]

Do you consider also correlation between currency pairs and/or metals/ oil/ gas?

 

I do, but not nearly as much as I do other currencies... bonds would be secondary, world equity markets 3rd, and other markets like metals, oils and gas, etc...those would be 4th