For the first time ever I show you all of my live trades taken in a single day. As with all of my live trading videos, these are actual real-time live trades that I took on Thursday, July 23, 2015 (and not a replay of previous market activity).
Over the course of the day, I entered positions on 6 pairs and walked away with a 331 pip profit!
My hope is that after watching this video, you develop a greater appreciation for the benefits of getting into trades and letting the trade play out (without unnecessary interference and premature exits). While my trades were active I took my toddler outside to play for an hour, went shopping, home schooled, and spent most of the day away from my computer completing other activities.
If you have any questions/comments, feel free to leave them in the comment section below.
In yesterday’s post I reviewed an intraday forex trade that I took on AUDJPY and how I managed the trade when price action showed me that my short-term bias was incorrect.
Today I am expanding on that initial trade setup and how I was able to identify a new setup that supported my initial bullish bias of AUDJPY.
Technical Analysis Review
I showed you where I drew intraday resistance on the 5 minute chart. This area represents where bullish price action was rejected and supported my revised short-term bearish intraday price bias.
Fast forward several hours following my AUDJPY sell position and price has broken through AUDJPY and retested it as support. And if you’ve watched my previous videos then you already know that I frequently talk about the importance of learning how to identify levels of support and resistance. Learning this one skill can transform a trader’s results.
Price action then offered two excellent opportunities for traders to buy this pair as price rejected a move lower and continued upward.
For those of you who trade fibonacci retracements, notice how price retraced to the 38.2% level. (If you want to learn more about trading using fibonacci retracements here is a link to a video that I created on the topic.)
As price consolidated I drew a line on my chart to represent intraday support.
As long as price action continues to demonstrate bullish behavior then I will remain in my BUY position. However, if there is any indication that price is reversing to the downside then I will close my trade and wait for the next trade setup.
AUDJPY price action shifted downward after news on the US was released and Janet Yellen announced that economic conditions are “likely” to justify raising interest rates this year. Price action demonstrated that my intraday bullish bias was no longer valid, which provided sufficient evidence for me to exit my position.
Key Take Aways
Rather than chase price I waited for a retracement before buying AUDJPY
Identifying key levels of intraday support and resistance helped me to develop my directional bias and avoid being whipsawed.
I maintained my directional bias until intra-day price action shifted.
Yesterday, I posted about the importance of understanding your trading bias and sticking with it until price action proves you wrong. Today we are going to explore this topic further and review how being wrong can lead to big profits.
The overall trend of AUDJPY is down; however, the pair has trended upward over the past few days. The upcoming NAB Business Confidence announcement may be all that is needed to push this pair to a higher price.
Approximately 5 minutes prior to the NAB Business Confidence announcement I decided to buy AUDJPY with the expectation that price would move higher, and the intention of taking profits at 92.30.
As predicted the NAB Business Confidence announcement pushed price to the upside gifting me with a 30 pip profit in less than 30 minutes. Not too shabby for trading the slower moving Asian session.
When trading intraday news announcements I am careful to never become too comfortable with quick gains. Monitoring price action before and after major news announcements is a must for intraday Forex traders.
My initial plan was to reassess my trade once price reached the previous day’s high, but that plan was cut short when I noticed a price pattern that changed my game plan. Let’s take a closer look at the price action that prompted me to change my mind.
After the quick price burst to the upside following the NAB Business Confidence announcement I noticed that price was creating a pattern of short bursts to the upside followed by pullbacks. This is not what I want to see for a continuous upward movement. At this point I realized that my expectation for price to climb to 92.30 was wrong and in fact that price was actually reversing.
I covered my buy position and entered a new sell position. My decision to sell AUDJPY was further confirmed when price retested resistance before plummeting and erasing all of its news-driven gains.
Contributing thoughts and factors that went into this trade.
I did not have a long-term bias on trade direction of AUDJPY
Although my short-term trade bias ended up profitable it was wrong and I accepted that after price action proved my bias to be wrong.
I took my profits after noticing the reversal and did not let a winning trade turn into a loser.
I used a pyramiding strategy to increase the size of my position once price action confirmed the reversal to the downside.
It’s Sunday and EURUSD has gapped down for the third consecutive week. I started this week with no open positions, but for the previous two weeks I sold EURUSD on Friday and profited handsomely when the market gapped downward over the weekend.
Gaps are one of my favorite setups to trade. And today I am trading the EURUSD on the 5-minute chart.
Using the 1 hour EURUSD chart I identified a key level of support. Last week, price repeatedly tested this area as resistance before finally breaking through. I am now looking for evidence that price might revisit this level and become support.
Price Action Analysis
After a market gap, my first step is to begin observing price action. I want to determine if price is going to close the gap within the next 24-48 hours, or continue moving in the direction of the gap.
Price action grabbed my attention when I noticed the large bullish candle circled in the screenshot below. This single candle covered a significant portion of the open gap.
My next step was to assess price action and determine my trading direction bias. At this point, I was looking for signals that price was either going to move lower or finish closing the gap and continue to the upside.
My price action analysis showed me that price should be heading lower. So, I began looking for further evidence to support my assumption and now bearish trading bias.
Let’s review how I came to the conclusion that price would move lower.
A Trader’s Role
Part of my job as a trader is to assess price action and constantly think ahead. I think that my previous career as a project manager helps me with forward thinking and risk management, but perhaps more on that in a future post.
So, how would I know if the gap is going to close or not? Well I don’t. In fact, I am writing this blog post while I am actively in this trade. What I do know is that my job as a trader is to read price action and mitigate the risks of falling for tricks and traps.
The Trick and Trap
After the large bullish candle was followed by a pullback most traders would consider this as an indication that price is going to close the gap and continue to the upside. However, I try to always also have the contrarian view.
Notice how price stalled after the large bullish candle and reversed.
This has the potential to be a trick and a trap as most traders would look at the bullish candle followed by a retracement as being a setup to buy the EURUSD.
However, this is where I entered my first SELL order on EURUSD.
Price repeatedly bounced off of resistance
As price supported my decision and continued rejecting resistance, I added to my position in this area using my pyramiding strategy.
The next part of the trick and trap followed hours later after the China Trade Balance announcement.
Price spiked through resistance potentially trapping bulls and hitting the stop loss of bears who trailed their stop loss too close to current price action. If you’ve watched my previous videos then you know that I frequently advise against smothering your trades with close stop losses. This of course is subjective advice as my predominant style is swing trading. However, if you are a scalper or intraday trader with small profit targets then you need to follow a risk management strategy that aligns with your trading plan and goals.
As price spiked to the upside this is where I would have ordinarily had another SELL order waiting to add to my existing position, however, I was distracted with writing this blog post.
For several hours following the China Trade Balance announcement EURUSD continued to retest resistance.
In this area of consolidation and resistance, it is very likely that there are a lot of traders who are being whipsawed due to confusion about which direction price is moving in.
My advice is to determine your trading bias and stick with it until price action proves you wrong.
Just as price appeared to have settled underneath resistance, the unanimous deal reached on Greek sent price skyrocketing and along with that bulls who were previously long, those who chose to chase price, and those who had buy orders waiting in the 1.1160 to 1.197 area before price plummeted. This is the trick and trap for those who hung onto their buy positions with an expectation that price was continuing higher.
As I observed the price spike my only regret was that I had already put on a full position. I knew my trading bias and profit target. The hard work was already done. All I needed to do was keep my emotions out of the trade and either wait for my profit target to be hit or for price action to prove that my trading decision was wrong.
Watch my live trade of EURUSD on the 5-minute chart and discover just how much I profited from this very volatile intraday trade.