Bad Assed Trader: I hear that many traders pack up their trading tools well before Christmas and return the week following the first week of the new year. It's a good idea to take a break and I'm sure they know what they're doing.
But I'm not there yet myself.
I like to keep in the flow of things and so have been at my trading desk every day over Christmas except Christmas Eve, Christmas Day and Boxing Day, such is my dedication... I haven't actually done much trading but have kept up with my daily analysis. The last trades I placed before Christmas were on December 22nd and Santa was on my side: two out of three of them hit target yesterday:
The first little chicken to come home to roost was trading the British Pound (GBP) to go down against the Canadian Dollar (CAD). I entered the trade where the yellow arrow marks and came out where the pink arrow points.
If you remember my rules from a few blogs ago you'll know that I look for various pieces of evidence that price is turning to take my trades. On this occasion you'll see that before price first started dropping there were three peaks where price tried to get above a level at about 1.6170 and failed. This was one of my indicators along with a soft level of resistance on the daily chart and two high test bars on the daily chart, the second of which was a reversal bar and formed a "train track" formation with the previous bar as shown below (the train tracks are the green and red pair that are almost exactly the same size and position and after which price drops):
To me this combination of soft resistance, high tests and train tracks formed a powerful indication that price was about to head down which was in line with the overall trend for that currency pair. I placed my stop loss above the highest peak (the central green bar) and entered when the dip in price on the four hourly chart was broken to form a lower low following a lower high.
I placed my target just above where price had previously dipped to on the daily chart: it had dipped at around 1.5750 so my target was 1.5778 which was 276 pips, equating to 1.6% net profit.
As it was, the pound was clearly taking a pummeling over Christmas - bad for the pound but great for me as I happened to be in two short trades on the pound at the time.
I've often see price tanking fast on the charts and usually when it does I'm just watching from the sidelines but when the pound really dropped off the cliff yesterday (December 28 2011) I was, for once, actually benefiting. The pound dropped against the US dollar by 250 pips yesterday and I caught 189 of them which was great for me. Here's a pic of how this drop looked on the daily chart:
Yesterday's bar is the second to last on the chart and you can see it took out all the gains of the previous two days and was an even greater move down than the large move up on Dec 20 which was pretty exceptional.
Now I had placed my trade on 22 December as an order so that if my criteria were met I would be taken into the trade and I was on 23 December.
Here's a picture of the four hourly chart which shows my entry on this short (selling) GBP USD trade:
I entered at the yellow arrow as price broke through a level of support to form a new lower low. Whilst price had been bobbling along somewhat before I traded down it had some lovely examples of reversal indicators in that bobbling process. Firstly the great big red high test bar and then a few bars later a large high testish green doji bar (looks like a cross) which was immediately followed by a red doji bar.
As you can see, I did have to sit through a retracement back to my starting point and some, but my stop loss was above the top of that high red test bar as I'm a cautious trader really so I was still in when price plummeted.
As it was I could have put my stop loss lower, above the green high testish doji bar but one of my mantras is that Cable (GBP USD) suffers from "chop at the top" and also has a choppy bottom so I like to be extra cautious with my stop losses as I hate to get chopped out only to see price shoot to my target. This also met my rules which I now stick to like glue.
My third trade placed on December 22 was on the good ole Euro and again I've put the four hourly chart up here to show my entry (yellow arrow) and profit target (pink).
On the daily chart price had retested a level that had been support but was now resistance with a big high test reversal bar. I entered, in my usual manner, as price broke the low after making a lower high (again with a nice big high test reversal bar). I think the Euro then got struck down by Christmas spirit as it fuffled around indecisively for days which nearly drove me to kill the trade but I stuck to my rules (thankfully).
It was weird how price edged up ever decreasing bars until it touched the 50 Moving Average (red line) and then just tanked, but great to watch when you're trading it short, especially after I had to find so much patience during the retracement which happened almost immediately after my trade had kicked in so I'd been in negative position for days on this trade.
It's still a slightly irritating trade in that although price has clearly hit my target (1.2857) which I placed 22 pips above S2 (a strong support line) on the daily chart the spread on my broker's platform has kept me in and now it's starting to retrace. I took half of my position off once I saw this had happened to capture 85% of my target with half of my position and moved my stop loss down to the high of today to lock in 73 pips profit on the other half in case it retraces right back up.
It's always highly annoying when you're kept in by spread, on this occasion price went 2 pips below my target and the spread on this pair is 2 pips on my broker's platform so according to my charting software it actually precisely hit my target before heading back up. But clearly my broker has a different story. Still, it may head back down again and through my target and if not I've got 73 pips protected.
So it's been a good Christmas trading and I haven't even got onto all the wonderful trading books I got from my family for Christmas: more on those in my next blog....
But I'm not there yet myself.
I like to keep in the flow of things and so have been at my trading desk every day over Christmas except Christmas Eve, Christmas Day and Boxing Day, such is my dedication... I haven't actually done much trading but have kept up with my daily analysis. The last trades I placed before Christmas were on December 22nd and Santa was on my side: two out of three of them hit target yesterday:
 |
| GBP CAD Short Trade from December 22 - 28 2011 shown on 60min chart |
If you remember my rules from a few blogs ago you'll know that I look for various pieces of evidence that price is turning to take my trades. On this occasion you'll see that before price first started dropping there were three peaks where price tried to get above a level at about 1.6170 and failed. This was one of my indicators along with a soft level of resistance on the daily chart and two high test bars on the daily chart, the second of which was a reversal bar and formed a "train track" formation with the previous bar as shown below (the train tracks are the green and red pair that are almost exactly the same size and position and after which price drops):
 |
| GBPCAD High tests and train tracks |
I placed my target just above where price had previously dipped to on the daily chart: it had dipped at around 1.5750 so my target was 1.5778 which was 276 pips, equating to 1.6% net profit.
As it was, the pound was clearly taking a pummeling over Christmas - bad for the pound but great for me as I happened to be in two short trades on the pound at the time.
I've often see price tanking fast on the charts and usually when it does I'm just watching from the sidelines but when the pound really dropped off the cliff yesterday (December 28 2011) I was, for once, actually benefiting. The pound dropped against the US dollar by 250 pips yesterday and I caught 189 of them which was great for me. Here's a pic of how this drop looked on the daily chart:
 |
| GBP USD showing big down move 28 Dec 2011 |
Yesterday's bar is the second to last on the chart and you can see it took out all the gains of the previous two days and was an even greater move down than the large move up on Dec 20 which was pretty exceptional.
Now I had placed my trade on 22 December as an order so that if my criteria were met I would be taken into the trade and I was on 23 December.
Here's a picture of the four hourly chart which shows my entry on this short (selling) GBP USD trade:
 |
| GBP USD Short Trade Dec 23 - 28 2011 |
As you can see, I did have to sit through a retracement back to my starting point and some, but my stop loss was above the top of that high red test bar as I'm a cautious trader really so I was still in when price plummeted.
As it was I could have put my stop loss lower, above the green high testish doji bar but one of my mantras is that Cable (GBP USD) suffers from "chop at the top" and also has a choppy bottom so I like to be extra cautious with my stop losses as I hate to get chopped out only to see price shoot to my target. This also met my rules which I now stick to like glue.
 |
| EUR USD Short Trade Dec 22-28 2011 |
On the daily chart price had retested a level that had been support but was now resistance with a big high test reversal bar. I entered, in my usual manner, as price broke the low after making a lower high (again with a nice big high test reversal bar). I think the Euro then got struck down by Christmas spirit as it fuffled around indecisively for days which nearly drove me to kill the trade but I stuck to my rules (thankfully).
It was weird how price edged up ever decreasing bars until it touched the 50 Moving Average (red line) and then just tanked, but great to watch when you're trading it short, especially after I had to find so much patience during the retracement which happened almost immediately after my trade had kicked in so I'd been in negative position for days on this trade.
It's still a slightly irritating trade in that although price has clearly hit my target (1.2857) which I placed 22 pips above S2 (a strong support line) on the daily chart the spread on my broker's platform has kept me in and now it's starting to retrace. I took half of my position off once I saw this had happened to capture 85% of my target with half of my position and moved my stop loss down to the high of today to lock in 73 pips profit on the other half in case it retraces right back up.
It's always highly annoying when you're kept in by spread, on this occasion price went 2 pips below my target and the spread on this pair is 2 pips on my broker's platform so according to my charting software it actually precisely hit my target before heading back up. But clearly my broker has a different story. Still, it may head back down again and through my target and if not I've got 73 pips protected.
So it's been a good Christmas trading and I haven't even got onto all the wonderful trading books I got from my family for Christmas: more on those in my next blog....
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