Four Sure Ways of Trading Forex Sideways

Hello and welcome to another edition of the bulls vs the bears. Today we are going to learn four sure ways of trading forex sideways. Now I can hear someone pulling his hair out saying” This guy is giving us mental whiplash today.” Don’t sweat this one. This is my own short hand way of showing you four tips for trading sideway markets. Let’s face it guys, you are not always going to enjoy sustained trends on the forex marjet- be it uptrend or downtrend. There comes a time when the markets are moving sideways. In other words, they are neither trending upwards nor downwards. This is where rookie traders fall victim to these skittish patterns. They end up up losing all their profits to these whiplash setups and then turn around and curse the market for their losses.

However, there is an interesting twist to this tale. Not all sideways markets are as crazy as you think. Some can be traded while others you just leave them alone if you value your sanity. Hopefully by the end of today’s lesson you would have acquired valuable knowledge as to how to make critical decisions when the market switches from a strong trending pattern to to a swerving whiplash situation. So Onward

First Tip

Is The Market Worh Trading Or Not?

The first question you need to ask yourself is “Is the market worth trading or not? If the market is not swinging between defined support and resistance areas, with good distance between both levels, don don’t even think about putting in a trade. Your account will become barbecued chicken.

I can hear someone asking”Well how do I know whether a market is worth trading or not?” Well you can start by zooming in on the daily chart frame. Now the question you need to ask yourself when looking at the daily chart frame is ” IS the market trending up or down?” If it’s not doing either, the market is moving sideways. Let me show show what sideway markets that are range-bound look like

Ladies and gentlemen this is what a range-bound looks like. See the distance between the support and the resistance levels of the range. Even more important these levels are well defined. This gives you the trader something to work with when looking for solid price signals and great risk/reward potential. You do all this hoping that price will move to the other end of the range, or at least inch closer to it.

If The Waters Are Choppy Dont Trade

It’s simple advice . Isn’t it? If the waters on the forex market are choppy don;t bother trading. Because if you take a dip in those waters the sharks will eat you up. Somebody is scratching his head wondering”What;s a choppy market?” Well a choppy market is one that consolidates so tightly. In fact it consolidates so tightly it’s as if a noose is hanging around the neck of the major traders. When you see a market like that it’s not worth risking your market in because the distance between reversals is not big enough to allow for a risk/reward ratio.

The next question I hear somebody asking is “How Do I know if the market is choppy?” Like I indicated earlier zoom in the daily chart frame. With lots of practice and experience, you should be able to tell whether the market is range-bound or shark -infested(choppy). Let’s take a good look at a good example of of a shark-infested choppy market

See how choppy and tight the price action is in the area with the sloping blue line. Any time you see setup like this, it can only mean one thing. The sharks are around looking for prey to devour. Put in a trade and you could become shark bait.

If you ask me you’d be better off staying away from shark infested markets. Because markets normally consolidate after long sustained trends. The big players are basically saying” We are tired. We need a break.” So when you put in a trade during consolidation, you risk blowing a crater in your trading account. The most painful part is you are giving away hard earned profits that you made from previous trades Let me show you exactly what I’m talking about using the GBP USD pair

See the the choppy price action all over the charts All over the charts you see a period of strong trends followed by choppy price action so tight you could catch a hernia. Even more important there distance between the key levels is very small. So if you dare put in a trade entry in this setup you are toast.

Trading in this scenario is like gambling in Las Vegas. Because the market crawls like a tortoise in this setup you’ll end up chewing in your finger nails and wondering to yourself “Is this going to be a move or a breakout?” Next thing you know the sharks eat you up and the market sucks you out of your position. S word to the wise is more than enough.

I guess the question burning everybody’s mind is:

What Do I Do When I See A Sideways Market Worth Trading?

Just like any other market look out for price signals at the support and key levels of the ranges. The best way to go about is by applying the false break strategy. When you wait for the false break to take shape out of the trading range you increase your chances of making a decent profit. Every trading range has at least one false break in its tank. And these false breaks trigger humonogus moves in the opposite direction back towards the other end of the range.

However false breaks can blow holes in your trading account, If you get your timing all wrong you could be in for a long day on the markets. But the most important thing to remember is that false breaks present great trading opportunities. You just need to be as sharp as a marksman

Dont bother following the herd when looking for false break opportunites. You may end up being sucked out of your trading position and lose a ton of money. When a breakout is legit, price closes outside the range for several days. It will then return to take another crack at the level that ot broke out of. And if the key level survives the retest, then it is a safe bet that the breakout was for real. But please don’t predict the possibility of breakouts as some traders are so fond of doing. This aint the lottery. Instead sit still and wait for the false break to take shape and then jump in like a lion hunting an antelope. Let’s take a look at an illustration below

Here we have an obvious pin bar sell signal at the key support resistance level. Of course this signal triggered a huge slalom surge by the bears. And you know what means? Lots of moola along the trend The trend of course fades out with choppy price action taken over..

The same situation occurs along the line of support. Again a pin bat price signal triggers a huge surge upward surge for the hills by the bulls. And again it’s an opportunity to pick up profits along the way. Unlike the bears, the bulls don’t run out of breath that fast.

Last but not least

Don’t Blow Up Your Trading Account

It’s as simple as that. Isn’t it? If the opportunities to make a trade arent visible, stay put. Or else your account will go up in flamess. If the waters are choppy and not in range mode, keep your money and go for a walk. You would be better off getting some air rather than overtrading because you can resist the urge to stare at your screen all day.

If your favorite pair is in choppy waters check some other charts so if you can find a strong trend or a good trading range. Otherwise don’t force the trade as my friend and fellow trader Hunter Ripple once said. If there is no trade then there is no trade

That’s s wrap for “Four Sure Ways of Trading Forex Sideways.” Hopefully you ;ve learnt a thing or two about trading forex sideway markets. Forex markets don’t trend all the time. At some point they go ijnto consolidation. And when that happens dont bother trading. But when you do decide to trade a market that is skidding sideways, make sure that all the conditions are present for you to trade. Or else your your trading account will be upset with you.

Til next time take care.

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That’s s a wrap for “Trade Against The Trend…And Your Trading Account Becomes A Black Hole.” I hope you now understand that trading against the trend can be dangerous to your trading account, not to mention your health. When you trade on both sides of the trend you give back all your hard-earned profits like you are giving away confetti.

So What should be your New Year’s Resolution? Follow the dominant trend and avoid the countertrend like the plague. Your trading account will be the happier for that if you follow the direction of the trend.

Til next time take care.

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If you

Trade Against The Trend…And Your Trading Account Becomes A Black Hole

Hello and welcome to another edition of the bulls vs the bears. Today I have another poignant message for you. Trade against the trend and your trading account becomes a black hole. This is not a joke. This serious. You absolutely do not want to turn into a gambler and hope against hope that somehow you fan make a profit going anti-clockwise. Your trading account will absolutely feel like your skull if you try that.

Look why do you want to trade against the trend when the trend is showing you the money? You will be absolutely nuts trying to go against the grain. I know it’s human nature to explore the unknown sometimes. But this is not Russian Roullete. This is Forex Trading. And forex trading is a business. And the best way to profit as a trader is to go with the trend. If you are a rookie trader listening in on this post, read my lips”DO NOT GO AGAINST THE TREND!” Just take the path of least resistance. As the popular saying goes,”The trend is your friend.” So don’t act as if the trend is your enemy

So we are going to take a look at a few examples of how you can make money trading the trend and how you could bleed money trading against the trend.

First up is

An Obvious Bearish Trend using GBPUSD pair

Let’s take close look at the bearish trend around 25th August on the left side of the trend, It’s pretty obvious that the bearish trend is the winner here. It’s basically screaming trade me. Look at the bearish trade signal at the top of the trend. I mean how can you go against the trend?

Let me let you in on a little secret. When traders trade trends, they move in the same direction. I can hear hear somebody asking “Why is that so?” Well it’s the least course of resistance. You follow the path that is most travelled. The last thing you want to do is go against the grain and blow up your account.

When a market trends it makes a titanic move in the direction of the market. But then it pulls back to its most recent average price(Look up We are moving Averages Parts I and II). With that in mind, you trade from value since trends tend to resume at the point of value. You then look for price action opportunities that are backed by a confluence of trend and the average price behind them.

Now let’s take a look at an illustration of the dangers of trading against the trend using the same GBPUSD

Take a close look at all the countertrades against both trends on the screen. There is absolutely no way you are going to make any money going against the grain Take a look at all those failed countertrend inside bar setups. It’s like trying to get in the way of a moving train when you try to trade against a stromg trend.

Don’t get so caught up in trying to trade against a strong trend that you put your account in harm’s way. You will definitely blow a huge crater in your trading account if you try to get in the way of a strong trend.

Now let’s take a close look at a clear trend using the USDCAD pair.

Here we see a nice strong uptrend glued to the channel on our right under the month of October. Not only do we see strong a trend direction, but we also see a value area that we can enter to a trade as far as price is concerned. This value area runs parallel with the strength of the uptrend.

See the numerous price action buying opportunies that the pin bars and inside bars present on this uptrend. It is pretty obvious the uptrend is the least course of resistance. Why would you want to against that? So looking for buy signals on this trend is the obvious choice, not trading bears on the downside.

Committing Suicide Trading Countertrend

However you’d be committing suicide if you so much as consider looking for a counter-trend signal on this chart. You see the the two long-tailed pin bars bearish pin bars? Even these two would have incurred for you a huge loss. The least you’d gain from these two is breakeven, at best. So when you see a strong trend, don’t fight it. Embrace it.

Next up is an

Obvious Downtrend Featuring the USDJPY pair

Take a look athe downtrend between 20th November and 4th December 2020. It’s pretty obvious isn’t it? You’d be crazy to go against that. So in this situation you’d be looking fo price action sell signals retraces back to the resistance level so you can trade parallel to the downtrend. Notice the pin bar signals forming following retraces within this falling market. This setup triggered this huge downward surge

Countertrend Pin Bars

Now take a look at the same chart and zoom in on the countertrend pin bars. You can see they have failed miserably. Anybody in his right mind will not even dare trading such lost causes. It makes no sense chasing bad money with good money. Try pursuing them and the only return you’d get is a huge hole in your trading account.

That’s s a wrap for “Trade Against The Trend…And Your Trading Account Becomes A Black Hole.” I hope you now understand that trading against the trend can be dangerous to your trading account, not to mention your health. When you trade on both sides of the trend you give back all your hard-earned profits like you are giving away confetti.

So What should be your New Year’s Resolution? Follow the dominant trend and avoid the countertrend like the plague. Your trading account will be the happier for that if you follow the direction of the trend.

Til next time take care.

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Three Perfect Tips You Can Use To Profit From Trading Inside Bars

Hello and welcome to another edition of the bulls vs the bears. Last time I showed you A Complete Breakdown of the Inside Bar and How to Trade it. Today we are going to learn about three perfect tips you can use to profit from trading inside bars. I’m sure you guys really enjoyed the breakdown on inside bars last time. Trading Inside Bars can be fun if you know understand how they function of course. Unfortunately too many traders do not under understand how inside bars work ,and consequently they end up bleeding money to the point where they pull out their hair in frustration. It doesn’t have to always be that way when you are trading the inside bar.

Let me let you in on a little secret. There is a very subtle side to to the inside bar. Knowing these subtle differences could be the difference between forex prosperity and forex poverty. I’m not saying that every inside bar trade is a guaranteed winner. But once you figure the nuances of trading the inside bar you put yourself in great posiion to make humongous profits. I’m not saying every trade is a sure bet. So long as you put yourself in the best position to make profits

So without further ado, let’s jump into the three perfect tips you can use to trade the Inside Bar.

First up is

Trade Inside Bars On Daily Chart Frame ONLY

When I first started trading I heard so much about the daily time frame. I was like “What’s the fuss about the Daily time frame? The one hour and four hour time frames is where it’s at.” Unfortunately for me I was losing so much money on the 1 hour and 4 hour time time frames it was ridiculous. So I said to myself” Let me try the daily time frame and see how it goes.” I’ve never looked back since. The daily chart frame is the only chart frame I trade on these days,

You see the daily chart frame is the strongest time frame you of all the time frames for inside bars. Let me show you a few reasons why I say so.

1.An inside bar on the daily time frame alerts you of possible time frames and that you need to be ready for a potential break out. An inside bar takes up more significance on a daily chart frame than on a lower frame, It cuts out all the sideways and choppy movements that you get on the 4 hour and 1 hour time frames. Rather you have one inside bar pattern or inside day pattern.

2. There are two many faulty inside bars on the lower time frames. Consequently they trigger false breaks you do not want to jump, especially if you are a rookie trader. Even worse they are of no value to you as a trader, which will cost you barrels of cash, not to mention peace of mind.

In alerting you of possible consolidation on the lower frames, the daily time frame saves you valuable cash and utter misery.

Avoid Multiple Inside Bars on Lower Time Frames

You have a huge cluster of inside bars on the lower time frames. Consequently you endp falling victim to the dreaded false break. This makes it doubly hard to trade inside bars on time frames because they are insignificant and they costing you valuable profits and time. You’d be better off spending all that time focusing on the daily time frame. Now let’s look at an illustrations of differences in trading inside bars on the 1 hour and daily chart frames

This is what the the 1 hr time frame looks like. Now who will want trade such a choppy mess? For starters it’s tough making any meaningful analysis of this mess. Not to mention the fact that you have so many failed inside bars staring you in the face. There is no way you can trade all of them. Come to think of it, trade them and see whether your trading account will not blow up in your face. Now let’s take a look at a daily chart

As you can see the price action on the daily is clean. You don’t have to scratch your head making trading decisions over choppy price action. You should be able to make your decisions and reign in your profits with ease with such a smooth pattern staring you in the face.

Last but not least is

Trade Inside Bars Bars With Daily Chart Trend

Not only should you trade inside bars on the daily chart. But you should trade daily inside bars with the daily chart trend. It’s the right thing to do. However, if you are harboring any crazy intentions of trading against the trend. DON’T EVEN TRY! You will blow a huge hole in your trading account if you do. I’m not saying it can’t be done. But unless you’ve ve been trading for ten years or more, You’d be better of trading inside bars with the daily chart trend. You should ONLY trade against the trend using key chart levels.

Inside bars are best traded as continuation patterns on the daily chart. Think of inside bars as breakout moves which provide great risk reward potential for getting on board trend markets after a brief period of consolidation. Let’s take a look at inside bars in daily trend using USDJPY.

Ladies and gentlemen here is a layout of inside bars in a daily trend. Take a close look at inside bars in bow\bearish and bullish trends. Inside bars work great in trending markets because they are continuation patterns. You don’t need to stress out analysing these patterns. The data is screaming “TRADE ME” at you. And when it does yell at you, you only need to oblige.

And last but not least:

Don’t Strangle Your Trade With a Tight Stop Loss

There is this this school of thought going around sayingyou place your stop loss just below or above the mother bar, high or low of an inside bar.”Well I’ve got some bad news for you. It doesn’t always work that way. Sometimes you ran the risk of strangling your trade with such a tight stop loss. You place your stop losses in places where they stand the best chance of not being whacked by sharp fluctuations in price.

I can hear somebody asking”Well, where is the best place to place a stop loss?” Well make sure your stop loss is further away from any key levels. This might mean you reducing your position size to accommodate a wider stop loss distance. Let’s take a look at an illustration using the EURUSD.

As you can see the theme of continuation is written all over this chart be it downtrend or uptrend. The breakout plays create risk reward opportunities if you play your cards right. Once the trend resumes after a brief pause your trade will be riding like a socket and racking up profits as well.

That’s s wrap for “Three Perfect Tips You Can Use To Profit From Trading Inside Bars”

Til next time take care.

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A Complete Breakdown of Inside Bar and How To Trade It

Hello and welcome to another edition of the bulls vs the bears. A while back I did a post on Trading The Inside Bar With Gusto. Today I am going to do a complete breakdown of the inside bar and how to trade it. Being the nice guy I thought to myself”Hmmm..How about doing breaking the inside bar down for those who are still struggling trying to trade the the insidd bar?” So basically we will be doing an introductory lesson on trading Inside Bar signals in terms of what it is, its anatomy, and how to trade the signals.

For those of you who are fairly new to the inside bar it’s fairly straight forward. It just shows a pause among among the major players as they try to contemplate their next move. Even more important the inside bar clues you in as to the next move of the major players. Think of the inside bar as another tool in your mastery of your trading strategy. And when you do master the inside bar it will most certainly help you prosper as a forex trader.

I guess the question burning on everybody’s mind is

What Is An Inside Bar?

Well an inside bar is a a pattern consisting of two components called the mother bar and the inside bar respectively. Of course the first bar in the pattern is the mother bar followed by the inside bar. It reminds me of a hen protecting its chicks . Now let’s see what the inside bar looks like in real life.

Ladies and gentlemen this is what the inside bar pattern looks like. Now as you can see the inside bars form in the middle of the mother bars or close to either the high or low of the trend . This pattern takes shape in both the bullish and the bearish trends. It doesnt really matter how these bars look so long as they are within high to low distance of the mother bar.

Now that we have gotten the definition out of the way let’s look at

Four Variations of The Inside Bar.

The first variation we are going to look at is

Double Inside Bar

The double inside bar consists of two bars within the mother bar. Sometimes you can sopt as many as thr33 to four inside bars within the same inside bar layout. when you see this many bars that tells you that the players are struggling to decide what their next move will be. The good news is these bars appear before the powerful trend moves take place. so just hang tight and wait for those moves to unbfold. Then you make your entry.

Next up is

Coiling Inside Bars

Coiling inside bars take shape when two or more inside bars are coiled up within one another. Picture a bicycle spring and how tight it looks. That’s what coiling inside springs look like. They coil up very tight like a spring. When this pattern develops it suggests the market is suffering from contraction. After a while the market will uncoil and burst into a powerful trend surge. Keep your eyes open for these surges as they present great profit opportunities

Next up is

Fakey Inside Bar Pattern

The fakey pattern is what you call an inside bar false break. It’s a false breakout from in inside bar pattern in that an doing a sharp reversal and going back the opposite directions. Rookie traders are the biggest,,casualties in this charade as they are tricked into believing a huge move is about to break. Of course they end up making the wronf move which will end in tears for a lot of them. Then again these false breaks drop valuable clues as to the next move of the markets

Last but not least is

Inside Bar/Pin Bar Combo

The Inside bar – pin bar combo is pretty much self explanatory. It’s a combination of an inside bar and a pin bar. Here you have an inside bar with pin bar showcasing its classic tail/shadow. Now as some of you may well know, the pin bar’s tail/shadow is tells us which direction the market is turning to next. Thus the inside bar doesnt just take a break. It comes with confluence as well. In others it’s equipped with other price factors. This makes it a very humongous price signal.

That’s it with the variations of the inside Bar. The next burning question on everybody’s mind is

How Do I trade Inside Bar Patterns?

You can trade Inside Bar Patterns two ways -either as a continuation signal or as a reversal signal. Now you an trade these patterns as continuation signals in the daily chart or as a reversal signal at key support and resistance levels. The best way to get the most out of inside bars on continuation levels is trading them on the daily charts. Someone is probably wondering”Why the daily charts?” Well, it’s fairly easier. Unlike the the other time frames you get less noise. Everything is crystal clear on the daily chart. Let’s take a look at a few examples shall we?

First

Trading Inside Bars as Continuation Patterns

As I said The most profitable way of trading an Inside bar is within a trending market or continuation move.

It’s much easier to trade and the trend is so clear that the odds can only be in your favour and nothing else. Often times the inside bar results into a breakout or continuation pattern depending on the current trend at the time. And when that pattern unfolds, it can only mean one thing – PROFITS!

Last but not least is:

Trading Inside Bars As Reversal Patterns

The graphic above is a classic example of a solid inside bar reversal. An inside bar forms at the level of resistance, suggesting a period of indecision among the major players. Obviously they are scared of moving any higher. However, see the bears take over in explosive fashion as they head downwards on the back of a price breakdown past the inside bar’s mother bar low. With that being said, it’s time to ring in the profits.

That’s s wrap for “A Complete Breakdown of Inside Bar and How To Trade It.” Hopefully you ar inspired and rearing to apply your knowledge you have gained about trading the inside bar. Next week we will learn how not to trade the inside bar.

Til next time take care.

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Take Your Profits And Head For The Exits

Hello an welcome to another edition of the bulls vs the bears. Today I have another message for you guys which is: Take your profits and head for the exits. I can hear someone saying..”Whatever happened to set forget and get on with life?” Sure I said that. And I ‘m in no way suggesting that you ditch set and forget. However, there comes a time in a forex trader’s life when he has to take his profits and head for the door.

Imagine you get a humongous profit because a strong trend lined up in your direction. However you of all people ought to know that these sightings are very rare. They are like shooting stars. Today you see them, the next time they disappear. So it stands to reason that you take your earnings and run like a deer. The whole purpose of this lesson is to show you how to take your profits and bolt when your profit target doesn’t quite pan out. So let’s begin.

Taking Profits On Huge Breakouts

Take a close look at the huge candlesticks in both the uptrend and downtrend. If you see such huge breakouts, having already gone long, take your profits and run for dear life. Because if you don’t you will lose all your money.

Now take a close look at candlesticks with their tails sticking out. That’s a consequence of price sustaining a rejection, And when that happens you lose out on your profits. So don’t wait too long on your profits. Take your profits and head for the hills.

Now let’s look at a pin bar buy signal at a bottom of a trading range

See the pin bar buy signal at the bottom of the line support. Now see the huge candlestick at the top of the range(line of resistance). The moment the candlestick hits the line of resistance you take your profits and run. Please do not get greedy here. Don’t plant this delusion in your head that the range will eventually breakout and you will make even bigger profits. Because if you sit behind your screen hoping for such an event your hard earned profits will evaporate into thin air. In fact you will be lucky if you will be lucky if you have any left at all.

So what’s the moral of the story? Don’t try to to be a smart Alec. Just take your profits and enjoy them with your wife and kids.

Now let’s look at putting a trailing stop in a storng clear uptrend using the EURJPY pair

Now here we have a strong uptrend backed by a clear breakout. Th When you have such a clear pattern staring at you in the face you’d be better putting a trailing stop after the breakout, The last thing you want is keep a trade still open in case the market does a sudden U-turn at the same level it just broke out of.

Now I can hear somebody asking”Why should I put a trail stop when I have a good thing going here?” Well the forex market is very inforgiving towards traders who think they can read the market’s mind. That same price can do a sudden whiplash on your trade, rendering your entry useless. Next thing you know you have a tsunami-sized black hole in your trading account.

That’s a wrap for “Take Your Profits And Head For The Exits.” You see there is nothing wrong with taking your profits and heading for the exits while your profits still have breath. Sure there is a time for set and forget when the risk/reward ratio is tremendous. But some times holding out for a dream profit target can blow up in your faces. The market changes like the weather sometimes, The last thing you want is a hurricane sweeping all your profits in one deadly swoop. You just have to adapt to market conditions such as the scenarios we’ve just described. This is requires great flexibility on your part if you want to accomplish this feat.

I can hear someone asking”Well How do I do this?” Well like a soldier going to war, come up with a plan which includes the various chart scenarios we just described. Your plan should incorporate how you are going to trade in scenarios such as trending, consolidation, rang-ebound, or sideways directions. Do this, and you will be way ahead of everybody else on the forex market

Til next time take care.

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Trading Breakouts Can Be Fun.But..They Can Also Ruin Your Trades

Hello and welcome to another edition of the bulls vs the bears. Today my message to you is this:Breakouts can be fun, But they can also ruin your trades. By that I mean trading breakouts can cause you to lose your trades. IF you are rookie trader, trade breakouts at your own peril. It is very tempting to get sucked in to trading on new lows(downtrend) and trading on new highs(uptrend) . Noq I’m not saying do not trade breakouts. Breakouts do possess great profit potential. Except that if you follow the herd, you will get gulped up by the market.

Sure it’s okay to trade with momentum. You may say to yourself”This trend is very hot. Let’s jump on the bandwagon here. Newsflash! Breakouts can force you into a whiplash it will make your head spin. Instead just wait for the market to pull back to the support/resistance area where you get more price signals lined up. There are some trades that make say”Hmmm..This trade has a million dollars written all over it. Then you jump in as if you just won the lottery only for the market to do a 360 on you. You are then looking like a deer caught in the headlights wondering”What happened here?” Well the market is unforgiven towwards rookies. So you need to contemplate carefully before you jump in.

So today I’m going to show you some real life examples of trades that can suck you in only for the market to whiplash into the opposite direction. You could lose your entire account on such trades. Sure it’s hard to ascertain where such mouse traps spring from spring from. But at least you can learn from the carnage these traps create and not repeat these mistakes again.

First Pic Please

This is a classic example of a failed breakout/false break at the key level via the GBPUSD pair. Just see how the bears break through the key support during the downtrend only for price to do a 360 and make an upward push. of course those overcome by greed are left standing there holding the bag with their tails between their legs.

Pic No 2

This is another example of a failed breakout attempt by the bears inside the channel vis the EURUSD pair. Basically price takes a plunge and recovers as illustrated by trendlines connecting September 1st and 21st highs and September 8 and September 25th lows. The bears anticipated slalom breakout fizzled out with the doji at the tip of the channel

This is the type of breakout that easily sucks in rookie traders who like to follow the herd. Once they get stumped, the pros turn in and whiplash price in the opposite direction. That of course will leave a black hole in your trading account every time.

Pic No 3

Here we see a clear false break above a key resistance level in the GBPUSD pair. Initially the bulls mount a strong push only to be repelled by the bears. Of course this causes price to create a sharp reversal. This strips so many amateur traders out there-especially those to looking to cash in early.

So now that we have ascertained how risky trading breakouts can be, The burning question on everybody’s mind is

What’s The Alternative To Trading Breakouts?

Well rumor has it that the best alternative to trading breakouts is retracements or pullbacks. This is where price temporarily drags back after a sustained trend period. It usually occurs at key levels and it is at this juncture where you find multiple opportunities for price entries.

Let’s take a look at a few examples

Pic 1

Here we see a classic example of a pull back in action visavis the GBPUSD pair with the help of moving averages. Notice the way the 13 day EMA line(Red Line) crosses the 21 day EMA(Green Line). This suggests a pull back, and,even more important, it suggests a price signal. Also it’s happening on the daily chart frame where you have a much higher higher chance of making making a solid profit. Plus, you don’t have to worry about false breakouts in this setup. It’s as clear as day.

Let’s look at another pullback example

Here we see another example of a pullback but this time in the downtrend. See the way the Red EMA crossed the green EMA. This signals another pullback, which of course means a signal to make your entry. Once Red EMA croses Green EMA it means the pullback has ended and that the downtrend has resumed. Pullbacks make for very valuable high probability setups. You’d do well to make that part of your trading plan.

Now let’s look at a pullback situation where the trend has confluence

Here we get confirmation that the downward trend has begun. Not only that but you have multiple signals along the key level . This phenomenon is popularly known as the power of confluence. The downward trend is confirmed by the moving average crossover and the sloping trend line. Initially price suffers a humiliating rejection at the 1.5750 level. In this setup just put on your hunter’s hat and wait for the bearish pin par to appear. This then confirms that the bears shift is over. You then make your entry when price dips just below the tips of the pin bar. This should bring you decent profits with little or no risk.

You see the power of confluence in this chart? With these multiple factors your odds of winning a trade increase by a hundred fold. By using a combination of a solid trend, support and resistance , and price action bars, You cut down risk and increase the probability of achieving huge profits.

If you want to know how moving averages work, look up We are Moving Averages Part I and Part II

That’s s wrap for “Trading Breakouts Can Be Fun. But..They Can Also Ruin Your Trades.” Breakouts can lead you into a ditch especially if you follow the herd blindly. Now I’m not saying you shouldn’t trade breakouts. I’d be the last person to ruin your fun. But you do need to tread with care when trading breakouts. Failure to do the right checks and you risk being eating alive by these breakouts.

Sure it’s only natural that you want to put in a trade because you strongly believe that the market is moving in the direction you want to trade in. However, you need a trading plan that allows you to take advantage of these breakouts instead of you being swallowed by these breakouts.

Til next time take care.

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Perfect Your Trading Strategy For Humongous Trading Profits

Hello and welcome to another edition of the bulls vs the bears. Today I have a simple message. If you want to achieve humongous profits as a forex trader, you need to choose a trading strategy and perfect it. You need to master the trading strategy like the back of your two hands.

Your trading plan must reflect the trading process to the point where every trade must turn into profits. For you tom accomplish this feat find a strategy that you are comfortable and stick to it exclusively. Master the strategy completely to t he point where it becomes a second language for you.

How Do You Accomplish This?

• By mastering fundamentals such trade signals, trade entry stop loss, trake profit, e.t.c
• Make sure you are not distracted by any silver bullet or holy grail strategies. By that I mean strategies that promise fast profits but rather deliver black holes.
• Believe in your strategy to the point where your strategy becomes a force of habit
• Think process first , money second. Concentrate on enjoying the trading process for the profits to start flowing like a river
• Even more important, make discipline and patience as your mantra when perfecting your strategy. You can’t afford to treat the process like Russian Roullette . You have to approach the process like a sharp shooter.

But I don’t Know Which Trading Strategy To Start With

How about getting started with the beloved pin bar chart pattern. Let’s see how the pin bar looks like using the EURUSD pair.

Here we see the bullish pin bar pattern on the left and the bearish pattern. When you trade either pattern, make sure you look out for strong pin bar singnals with long protruding tails. The tails should stick out from the price action nearby. The tails should be so obvious you can’t miss them.

Practice with the most obvious signals so you gain some confidence trading these patterns and give yourself the opportunity to win a trade. Of course you must develop a trading plan. For better affirmation, you can print out these chart patterns to help decide which one to choose make your trade entry. Although they may looks slightly different, just remember that the pin bar has a long protruding tail, and it must have confluence with a key level, dominant trend or both. Don’t make it look like rocket science.

Now let’s look at a few examples of pin bars in action using the AUDUSD pair

Here we have a strong pin bar signal along the line of support. These signals are so clear you can’t miss them.And they had confluence with the previous trend. The risk reward you get on jumping on these price signals is huge. Once you make your entry along the halfway point of the second pin bar after a retrace down the pin’s tail you are good to go.

These patterns take about a month to form. So just exercise a little patience for these patterns to take shape. Once these signals come into view, you pull the trigger.

Now let’s look at an illustration of a counter-trending signal using the EURAUD pair

Take a close at the line of support on the far left of the graphic. You see a counter-trending pin bar signal as indicated by the left arrow. The pin bar has its classic protruding tail in plain view. I mean talk about acting like a peacock here. When you see this long protruding tail, it’s time to take the trade.

Notice the third signal(Black signal) at the second support. We see a major bullish surge thanks to the initial protruding pin bar right next to the first full candle. After a brief retrace of the portruding pin bar the bulls go for the jugular. Once you make your entry using a 50% retrace you are like to realize a huge 1:4 reward. This will definitely be good news for your trading account.

Now even if you miss the trade, you are likely to get a second crack at the cherry when this signal shows up a week later. It doesnt happen all the time. But when you spot this signal again don’t waste time. It’s like a shooting star. If you miss it you are toast.

That’s s wrap for “Perfect Your Trading Strategy For Humongous Trading Profits.” If you want to make huge profits, focus on perfecting one forex trading strategy. Ignore the the forex information choking the internet and focus on mastering one forex trading strategy that will make your life easier. Because if you don’t you will be pulling your hair day in day out trying to make sense out of multiple forex trading strategies.

Master it to the point where you are literally dreaming about it in your sleep. So get cracking and learn one price entry signal at a time until you become a master of your own domain. Til then take care

Til next time take care.

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Wanna Get More Out of Trading Daily? Chart Frame…Try End Of Day Trades

Hello and welcome to another edition of the bulls vs the bears. Today my message is simple. If you want to get more out of trading the daily chart chart frame, try placing your trades at the end of the day. Your focus will be on closed candles not open ones.

Now I can hear somebody asking”How IS Trading At The End of The Day Going to Help Me?” It will definitely take your trading to another level. And it makes the trading process simple and straightforward. End of day trades accomplishes this feat several ways. First it cuts down your trading time which translates into a positive mindset. With this mindset you don’t need to stare at the screen all daya- a major addiction of a lot of traders. When you stare at the screen all day , you overthink , which makes you over-analyze and which eventually sends your money down the abyss.

Even more important end of day trading helps you with money management via the set and forget approach. With a solid money management plan you dont need to scratch your hair over your trades. Set your trades and get out of the way.

So what are we going to do? We are going to learn how to trade end of day session And how we are going to do this? By utilizing popular trading patterns that we have looked at before. We are going to look at how you can employ these patterns at the end of the day.

First up is

Inside Bar Pattern

The first pattern we are going to look at the inside bar pattern

This pattern looks perfect for an end of day trade. Doesn’t it? All you have to do is place your entry, take profit, and stop loss. And the market will do the rest. Just set and forget and go on vacation. By the time you get back you should see a handsome profit in your trading account.

Do you know what you just did. You solved the most difficult aspect of forex trading – trade management. Even more important, you took the emotions out of the process – a trade killer if you ask me.

Now let’s t look take another example of the inside bar using the GBPUSD pair

First thing we see here is the dreaded range that most traders don’t really care about. However, see the back-to back pin buy signals at the level of support. This is what you call confluence where you have multiple signals popping at the same time. This is perfect for an end of day trade.

With this trade you could make three times your risk. As I indicated earlier, just step away from your screen and let the market rack up the profits for you and out them on your bank account. This will open happen if you don’t over-think your trades, and you are not in a hurry to jump into the market.

And Finally

Fakey Pattern

Let’s look at another end of day trading example using the fakey pattern via the GBPUSD pair.

Here we see a fakey/pin bar combo forming in-line at the uptrend in the daily chart frame.. Place your take profit at the breakout of the inside bar or at the high of the pin bar and stop loss below the low of the mother bar. Do that and you make yourself a handsome profit.

The only hitch here is you have to wait ten days for this pattern to form. Sorry folks that;s the way the daily chart frame works. You need sit tight and watch things unfold.

That’s  a wrap for ”Wanna Get More Out of Trading Daily Chart Frame…Try End Of Day Trades. ” End of day trades will definitely do wonders for your forex trading account. But please don’t get the impression that end of day trades are a walk in the park. They are not. However, you’d be a whole better off trading end of day than spending your whole day searching for 15 minute scalps on the market. Who does that?

In utilizing end of day trades, you vanquish the small voice torturing you into taking those 15 minute scalps. You only take what the market offers you, depending on your trading edge of course. Even more important end of day trading teaches you self control. You don’t feel the urge to jump into the market just for the fun of it. I trade using the engulfed pattern. If it is not evident on the screen I don’t trade–Simple as that.

Take care til next time

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How To Profit From Trading Key Chart Levels

Hello and welcome to another edition of the bulls vs the bears. Today we are going to look at how to profit from trading key chart levels. Obviously when I say key chart levels I’m referring to support and resistance.

We are going to look at how to trade the price action occuring around the key chart levels. As you well know key chart levels show up in different scenarios. We will use these key chart levels together with basic price action strategies to create a high probability trading strategy.

First off:

How Do I Trade Support and Resistance in Trending Markets?

Trading the dominant trend is the most popular technique that traders like my self use to trade the markets. Any trader worth his salt will dedicate as much time to trend analysis and stick to simple price action strategies when trading the market that is trending. You look for price action signals forming near levels of support , a consequence of the ebb and flow of the market.

Let’s take a look at the graphic below

Here we see 4 months of price action data Notice how the key of support has been drawn. also look at how the various price action strategies have been set up via the inside bar pin bar, and fakey setups. You don’t need to use any fancy robots-just pure price action.

If you want to freshen up on trending markets look up Trade Trend with Price Action Analysis as the Weapon of Choice

Next up is:

How Do I Trade Support and Resistance in Range-Bound Markets?

Unfortunate markets don’t trend all the time. And when that happens go in consolidation. This means that the big players are taking a breather planning their next move. This is manifested in the manner the market move sideways. and when the market move sideways, it means the market is range-bound. Let’s look at a range bound market through the eyes of the USD/CHF pair.

Here we see the USD/CHF pair from 23RD January to August 1. Notice the period of consolidation from May to September. Two things happen in this pic. First a long-tailed pin bar formed showing a strong rejection inside of the range. Next we see a break of the pin bar which, of course sparks an upward break by the bears.

Be careful with trading ranges though. Ranges can be very unpredictable. If you don’t play your cards right you risk blowing a hole in your trading account. But if you keep a close look at the peripheries , you could catch some serious price signals at the key levels of support or resistance of the range.

If you want to know more about trading ranges, look up Forex Market Goes Sideways

Next up is:

How Do I Trade From Swing Points In Trending Markets?

In case some of you don’t know by now swing points are the highs and lows formed by the market. Look out for these as they make for great support and resistance. The good thing about swing points is that they dont require mutiple rejections of price to be considered a bona fide support or resistance level. Instead, the swing in the opposite direction is enough to create a key support or resistance level.

When you see price getting price etching towards a swing point , look out for possible price action setups around that point. Let me you in on two secrets. First a swing high acts as support in an uptrend while a swing low as resistance in a low trend. Let’s look at the illustration below.

Right in front of us is an illstration of swing points using the GBPJPY pair. Here we see price finding support around 17 July. This swing point is absolutely crucial as we see price action swirling around it at both support and resistance levels.

If you want to know more about swing points look up Let’s Do A Little Swing Trading

Next up is:

How Do I Trade Dynamic Support and Resistance in Trending Markets?

For those of you who don’t know dynamic support and resistance leves are levels where the market finds support without having to be at a horizontal support or resistance. I alway price changes at the speed of light at tehse levels because of the evolving nature of the market.

The best way to trend dynamic asupport and resistance levels in trending markets is exponential averages (EMA’sfor short). It’s the best method for analyzing and identifying dynamic support and resistance levels.

Why? Because they do a great job of catching crazy momentum switches in price action, while at the same time keeping an eye on long term price movements. Let’s take a good look at the 1 hr chart using the 20 EMA via the EURUSD pair

Notice the numerous times the price action touche the 20 EMA(The bluish line. This opens the way to numerous trade setups that you can chew on. If you want to know more about dynamic support and resistance levels, look up How To Locate Dynamic Support and Resistance Levels

How Do I Trade Event Area Support and Resistance Levels?

In case you guys have forgotten, an event area is a price level or zone where a price action signal forms followed by a humongous directional move or “event.” Let’s see how event areas are traded in the pic below

As you can see, the white arrows pointing downwards suggests price retracement after price bounced off the resistance ;levels. However take a close look at the huge upwards arrow at the line of resistance. Here we see a humongous break by the bulls at this level. And when you see such a pattern it’s time to make so much needed doe.

Even more important, keep an eye on this price signal for future entries when it touches this key level again. You dont want to miss out on another opportunity to ring in the cash.

For more information on price event areas look up A Closer Look at Price Event Zones and Support and Resistance Levels

That’s  a wrap for ”How To Profit From Trading Key Chart Levels ” As you can see, learning how to trade key levels is not that scary. All you have to do is analyze the market and gain enough lough as to how to identify key market levels and price action match ups.

Once you have these two components you have a huge advantage over other traders. You can combine these two weapons to form a high probability trading strategy that you can apply to the ever changing market conditions week in week out. These sets do work out in your favor when you constantly seek them out these confluent key levels

Take care til next time

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The Answer Is Right There On The Price Charts…No Need To Look Elsewhere

Hello and welcome to another edition of the bulls vs the bears. If you are struggling wondering where to look for trading opportunities, I’ve got a simple solution:The answer is right there on the price charts.The anwer is right here on the charts. You don’t need to look elsewhere.

The trick to this puzzle you need to pay attention to the market when it speaks. The Forex mn.arket market’s lingua franca(language) is price action, Not only must you price action fluently, you must also apply what the market is telling you devoid emotion but with stone cold efficiency.

You should be gobbling up price charts on a daily basis. You must eat drink and sleep price charts. Price charts have a sequence to their behaviour. What happened in the past will help you make sense of what is happening now and where the market is turning to next. I guess the question burning everybody’s mind is:

How Do I Hear What The Market Is Saying? And How Do I Apply It?

First off:

Market Conditions and Behavior

You first need to look at the most recent market conditions and behavior. The first thing you need to look out for is whether the market is trending or not. If the market is trending it should be good news because then you will make profits till the cows come home. However, if the market is not trending then the market is in consolidation(going sideways). It’s absolutely crucial that you understand this aspect right way because that will determine the direction of your trade and your general trading plan. Now let’s take a look at an illustration of a choppy market.

This is a classic illustration of a choppy pattern. See how price moves from choppy price action to a strong breakout. It then pulls back to the trading range midpoint before heading for the hills on the back of a strong uptrend. When you see such a setup it’s time to run all the way to the bank.

Now let’s take a look at another example.

Here is another example of a choppy market in action via the USDJPY pair. Unlike the the previous graphic, we dont see a breakout in this choppy market. Instead this consolidation is in freeze mode, the players are taking a breather trying to figure out what their next move is going to be.

If you thinking of putting in a order? Don’t bother. If you do, you are going to set your trading account on fire. There are no price signals flashing in this range. So why would you want to risk causing a huge crater in your acccount? Just keep your fingers off the keyboard and move on.

The next price action message you need to look out for is

How Price Is Behaving Around Key Chart Levels

You absolutely have to look out for how price is behaving around key chart levels. This is probably the most important signal of all the signals that you have to look out for. Sometime price defers to key levels they approach. Other times it takes on the attitude of” I’ll rip right through them.” You’d be better off trading markets that defer to key levels because that tells you that that relation will continue uninterrupted.

Once you carve out these key levels watch out for high probability signals to form at these levels. However, if price does not care for these levels, avoid them like the plague. Let’s look at an illustration

See how price defers to the key level at the uptrend. It looks almost perfect. Like I stated this pattern is the best place to trade. Make sure price gets along with the key levels it approaches. if not, avoid these patterns as if your life depended on it.

The next message you need to look out for is

False Breaks of Key Levels and Contrary Signals

You need to look out for false breaks of key levels and contrary signals. For those of you who have this misguided notion that when a trend stays permanently the same, you are sadly mistaken. You have to trade with a contrary mindset if you want to profit as a forex trader. Always have the mindset that the market is going to do a 360 on you. You need to look for signals that the market is about to head into the opposite direction. One such clue is the false break. Of course there is also the fakey pattern.

These two patterns are very popular among traders because they give strong hints as to what is going to happen next. Now let’s look at an illustration using the USDCAD pair.

Notice the false break through the pin candle at the line of support right next to the huge bullish candle. Eventually price breaks out in the opposite direction- downwards -via the bears.

Now this is a situation which fools a l lot of newbie traders. They immediately think it’s an upward trend only for a bearish pinbar to a wrench in the works. Just do not jump in the deep end immediately. Wait for things to unfold before you make your move. Or elst you could be staring at a huge crater in your account.

Failed Price Action Signals

Failed price signals are another message you should listen to when looking for price action signals. Now some of you are probably bristling like”Why would I want to be chasing after price action signals that have busted?” Well guess what, they are very strong signals in themselves.

Let drop a little hint. When you see a price action signal fail, that suggests that price may keep on moving in the same direction. Let’s take a look at an illustration

Take a close look at the failed price action signal in the form of the the fake bullish pin bar cased in a red square.The long wick sticking out suggests that the pattern is over. There is no need to make the process look like Einstein’s Law or relativity.

And don’t make the mistake of forcing a trade hoping against hope that the failed pin bar will make itself over. You do that and you will be laughing at the wrong side of your mouth.

And finally but not least

Event Areas and Fresh Profitable Price Signals

Event areas and fresh profitable price signals are two price action messages you must be on the look out for. When you have multiple price action signals flashing in the same area, You have an event area. When I sat fresh profitable price signals I mean price signals that have just formed. You need to look out for these messages as well as they could go a long way in influencing your profit margins. Let’s look at an illustration using the EURUSD pair.

You see all the the pin bars circled along the key levels? They represent the profitable price action signals that I was talking about. If you understand what the market is trying to tell you you should know it’s time to put in those market orders

That’s s wrap for “The Answer Is Right There On The Price Charts…No Need To Look Elsewhere.” What should be your trading approach? Two simple things – watch the price charts daily and make sense of the signals the charts are sending to you. In the words of a famous forex trader, You should”listen for it, map it, and interpret it.”

However, it doesn’t mean that you should be staring at your screen like a security guard scavenging for trades. Just pick specific times to check for your trading edge. And if your trading edge isnt present. You close for the day and try again tomorrow. Don’t force a trade that doesnt exist. But once the trade pops on your screen, just pull the trigger like a sharp shooter and enter the trade

Til next time take care.

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Trading The Daily Chart Time Frame Is The Route To Forex Prosperity

Hello and welcome to another edition of the bulls vs the bears. Today I have a news flash for you! Trading the the daily chart time frame is the route to forex prosperity The moment you mention daily charts, a lot of traders immediately hit the snooze button. They’re like “It’s too boring. You can’t get any trades.”

Newsflash! You couldnt be further from the truth. There are tons of trades in this time frame. You just need to be patient disciplined and have the mentality of a sharp shooter. You have much better chance of acquiring profits in the daily charts than the the lower frame charts. You see the lower time frames is full of nothing but noise, All you get is choppy patterns that are full of nothing but false alarms. I used to trade like that in the past and paid dearly with my trading account

Don’t be in a hurry to make quick profits. Just enjoy the trading process and the profits will take care of themselves Even more important don’t obsess over your trades when you incur losses. The best to get around this is to control your risk and not over-leveraging your trading acount.

You also need to be brave and patient if you want to succeed in holding your trades for long. Instead of reacting like a Rottweiler, act like a skilled patient trader with the mentality of a sharpshooter.

Now one excuse I keep hearing from traders for not trading the daily time frame is:

My Account Is Too Small to Trade The Daily Chart

New Flash! It’s not about the size of your trading account. It’s all about the position sizing. Just make sure your position size is not so big that it will end up blowing your account into smithereens. You need to disabuse your mind of thinking you are going to make quick and huge profits trading the 15 minute frame. It has nothing to do with get rih quic. You just need to get consistent profits. You are building qa business, not a casino roundtable.

Now some of you may be asking this question with a high amount of indifference

Why Should I Bother Trading The Daily Chart Time Frame?

First Off:

You Get More Clarity Trading Daily Charts

For starters you get more clarity trading the daily charts. Unlike the lower time frames, you dont get noise and false signals. Instead you a get a clear view of the daily charts free of noise and you are better able to hone your ability to read the daily charts both long term and short term.

Even more important trading the daily charts lends more accuracy and objectivity to your daily chart analysis. This objectivity becomes even more critical especially if you plan on venturing into the 1 hr and 4 hr time frames. However you’d be better off perfecting the daily time frame just to get a feel for the ebbs and flows of the market. And the only way to understand the ebbs and flows of the market is through the forex market’s lingua franca price action trading. As the saying goes, listen to what the forex market is saying and you are likely to figure out which direction the market is heading to next.

Higher Risk:Reward Ratio

Unlike the lower time frames the daily charts has a higher risk reward ratio. Sure, the amount you risk per trade is an individual decision. But the daily charts allows you to risk more money with your trades. Now I’m not saying break the bank by risking more per trade. What I’m saying is when you trade only three times a month you have more freedom to risk more on your trade. When you trade like a sharpshooter, you enter fewer trades a month than if you enter several trades a month trading like a gambler.

Just keep your discipline and don’t jump straight back into the market just because you lost a trade. When do you dive back into the market , the chances of you blowing up your account are quite massive.

Less Is More When Trading Daily Charts

Yes! Less is more when trading the daily charts. You need to understand and that the daily charts is all about quality of trades and not quantity of trades. The less you trade the better your chances of reaching the forex Promised Land. Two or three trades should should do it instead of 20-30 adrenalin – packed trades.

Think about how a tortoise sees life. It’s very slow and measured. and it’s never in a hurry. That’s how you should approach trading the daily charts. Patience should be your slogan when trading the daily charts

Now that we’ve gotten the heavy lifting out of the way let’s see what a typical daily chart looks like using the USDCAD pair

Ladies and gentlemen this is what the daily chart looks like . It starts from one corner of the chart to the other side. This pattern took several months to form. See how spotless it looks? It is free of nasty -looking sideway patterns which will suck you in to make trades that don’t exist and blow up your trading account in the process.

See how well defined the trend looks? You could easily create two areas of support in this trend. The moral of the story here is just stay put. Put on your sharpshooter’s hat and wait for the trend to form and then you make your entry. And you dont need to trade the daily pattern daily. You only need three trades a month to make your cash register to ring very loud. So just hang tight and let the market come to you.

That’s a wrap for “Trading The Daily Chart Time Frame Is The Best Route To Forex Prosperity.” If you want peace and happiness as a forex trader, the daily chart time frame is your best option. In fact a stress -free trading experience should be your overall objective when trading the daily chart. If you see your trading edge on the screen, you enter your trade. If not? you take a walk to clear your head.

So next time you trade dont wast your time scavenging for trades in the bushes of the lower frames. Because not only will you miss out on juicy trades in the daily chart frame, but you will be blowing your account in the process. Just take your hands off the market, study how the market operates and do absolutely nothing. Put in your market order and take a walk while the profits roll in.

Til next time take care.

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Hold Your Trades For A Week Or More And Your Profits Will Bulge

Hello and welcome to another editio of the bulls vs the bears. Today I have a very simple suggestion for you: Hold your trades for a week or more and your profits will bulge You will thank me for this later. A lot of traders prematurely head for the exits after a few hours instead of letting a trade run for two weeks and gaining a handsome profit You need tons of patience, discipline and self-control if you want to hold your trades for ages.

Let me let you in on something I have discovered on my journey as a forex trader. The foundation of success as a forex trader lies in holding your trades for long without interference and letting the market rack up the pips which then converts into profits for you. Just sit back and watch how long it takes for the price signals to play out.

To succeed as a long distance trader, make use of the daily chart and wide losses to avoid being stopped out as fast as you entered your trade. So all we are going to do today is learn how to hold our trades long enough for long term trading prosperity using price action chart illustrations

First Off:

Hold The Trade For At Least Three Weeks

The maximum threshold for holding a trade is 1-3 weeks. Now some of you are probably like “You have got to be crazy. You want me to blow uo my account.?” That’s because you’ve never held a trade for that long before. If you want to get more out of your trades this type of tiem frame is the appropriate time frame to utilize. Let me explain with the following time picures starting with

Pin Bars Forming At Key Level of Support

Here we see a nice set of pin bars forming at the key levels of support. With the first pin bar we see price take a major surge , Now usually that takes at least 6 days to form if you want to make a huge profit. The next pin bar takes much longer to take shape. It usually takes at least two weeks to form. You can apply the 50% retrace strategy and then wait for the bulls to surge even further to the mountains. This should be part of your trading plan and stick to it. Our next illustration

Pin Bars In A Downward Trend

Here we see a pin bar set up in the USDJPY pair. We see a bunch of pin bars caught in a downtrend. However, notice at the line of resistance how the trend is moving sideways. This goes on for about days before the bears eventually break out of the sideways trap. And with that comes a handsome profit, not to mention your cash register ringing very loud.

Just make sure the sideways movement of the market does not confuse you to the point where you incur major losses. Because that’s what exactly f going to happen if you don’t get it right.

Next up is:

Use Wide Stop Losses and Let The Trades Flow Uninterrupted

I f you wan to experience substantial profits from your trades use wide stop losses and let the trades run uninterrupted. Do not meddle with the trades. Giving your trade an extra 50 pips could be the difference between a humongous profit and a nuclear-sized loss. This is because a lot of trades are taken at the level of support after a pullback within the trend.

Unfortunately we don’t have the crystal ball yo to predict how far the market will pull back. So you will be better served giving your trade some much needed oxygyen to avoid your stop loss being obliterated. Also by increasing the stop loss distance you extend the amount of time you need to hold your trade.

Some currency pairs such as the EURUSD pair average about 200 pips a week. So if your target for the three weeks is 600 pips, I’d say hang real tight until price hits your take profit target. Try to force a move and your account could suffer a major meltdown.

There is an important fact you need to keep in mind about wide stop losses. They buy your trade enough time to afford you the opportunity to rack up the profits consistently. This should be the main objective of every trader. Let’s look at an example of wide stop losses in action

Right in front of us is a daily pin bar set up. On the far left side we see a nice bullish trend with consecutive pin bars in the mix. However as you can see the market then veers sideways for a few days before shooting further upwards again. The danger in this scenario is that your stop loss could easily get shot to pieces before it surges further up

Some of you are probably asking “Well How Do I avoid such a calamity? Like a mentioned earlier, Give your stop loss enough distance and you have yourself a hefty profit. But please do not get greedy just so you can give yourself a huge position size. Do that and you become a lamb being led to the slaughter by the market.

Let’s look at another example of a wide stop loss in action

Right in front of us is a pin bar set up using the USDCAD pair. We are going to zoom in on the bearish pin bar signals along the line of resistance. The best place to place your wide stop jest bekow the level and not at the pin bar high. Place the stop anywhere else and your trading position and your trading account will be screaming “EMERGENCY!”

Notice where the market is going sideways in the middle of the resistance area? That occurred when a price entry was made behind a 50% retrace setup. Price then hits the pin high before the bears took over the show. Now instead of staring at your screen for 3 weeks waiting to see whether your cash register has rung or not, how about setting the set and forget option and take stroll outside while your trade automatically makes money for you? You can’t go wrong with this solution.

Patience And Discipline Is The Only Way Out

Patience and discipline is the only way out if you want to succeed in holding your trades. Just stick to your trading plan and you cant go wrong. Apply a gambler’s mentality and you create a huge crater in your trading account.

Usually the best trades take about a week, sometimes longer to take shape. Let’s see an illustration below

Here we price initially taking a dip and all of a sudden the bulls swing price right back to to the level of resistance. The bears then take over to form a bearish signal. Instead of settling for a small profit the next day, how about holding the trade an extra six days and allow price to hit the next available support level and earn a handsome profit? You can then buy the Ferrari you have been dreaming about.

For more information on holding

That’s a wrap for “Hold Your Trades For A Week Or More And Your Profits Will Bulge.” You need to to think of time as a significant component of trading and not some abstract concept. Every time you enter a trade, give the trade the oxygen it needs to rack up the profits for you. Otherwise you will suffer a lifetime of losses culminating into hair pulling depression.

Don’t be in a hurry to make quick profits. Just enjoy the trading process and the profits will take care of themselves Even more important don’t obsess over your trades when you incur losses. The best to get around this is to control your risk and not over-leveraging your trading acount.

You also need to be brave and patient if you want to succeed in holding your trades for long. Instead of reacting like a Rottweiler, act like a skilled patient trader with the mentality of a sharpshooter.

Til next time take care.

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How Not To Make The Forex Trading Process Complicated

Hello and welcome to another edition of the bulls vs the bears. Today we are going to learn how to not to make the forex trading process complicated. In in other words we are going to try to keep the trading process simple.

Let me tell you one simple but brutal truth about the forex trade. Naked(Please get your mind out of the gutter) price action data is the way to go go not a fancy programmed indicator.  I’m sure some of you are like”You’ve said this so many times. Don’t you get tired?” But it’s the cold reality. The forex ,market is not some static behemoth.  It is a very dynamic platform that can change at the speed of light- well, sometimes. Unlike the indicator it is driven by human beings with blood and emotions flowing through their veins. These   are characteristics the indicator doesn’t have. It is emotionless and stoic and it  cant react to the sudden U-turn of a volatile forex market.

Basically if you want to prosper as a forex trader, just focus on the candlestick patterns on your screen.  The market is way too unpredictable to be turned over by a piece of code. It’s like Floyd Mayweather going up against Mike Tyson.

I guess the question  is will be:

How Do I Keep It Simple?

Well, the answer is very simple. Look at the price action on your price charts. All the information you need to make your trading decisions is right in front of you. Not only is price action trading an art , it’s also a skill as well. Once you figure this out you will be miles ahead of those struggling traders looking  for the hottest gizmo out there. Even worse, they will be hemorrhaging  money through these toys while you are ringing the cash register through your profits on the price charts.

Learning how to recognize price patterns on the price charts also helps you makes sense  of the  forex market. For starters you are able to make sense of the daily movements of the market, be it trending or consolidation. With that in mind you can then create a set of rules  devoid of emotion to help you make the right trading decisions.

Let’s take a look at a clean chart and a messy chart –  starting with the clean chart

See how clean- cut the data looks? You have both downtrend and uptrend nicely defined. You have the resistance and support   spelt out correctly. Even more important you don’t have those fancy indicators crowding out the space on the screen as  we are going to find out in the messy chart,

Speaking of which, here comes the messy indicator

Now who wants to deal with this mess. You have all manner of indicators  crashing the chart here.  It looks like half chart half Atlantic Ocean out here. You can’ tell which is which. Now if I have to deal with this mess on the four hour time frame I’d  get a massive headache,

The moral of this story? Just keep it simple.

For more information on how to trade free of indicators look out How To Trade Price Action Free of Indicators Parts I and II

That’s a wrap for “How Not To Make The Forex Trading Process Complicated.”  Hope you now understand that you  need to keeps simple when trading  on the forex market. and that is relying solely on the price chart patterns on the screen and not some fancy indicator.

If you want to be profitable just stick to  Keep It Simple and you will never go wrong. The last thing you want to do is to pull your hair out over indicators that will simply bring you grief. All the information is right in front of you. What else do you need?

Til next time take care.

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If you’re looking to open a live trading account Sign Up With EasyMarkets

How To Find The Perfect High Probability Trade

Hello and welcome to another edition of the bulls vs the bears.  I know  a while back we touched on How To Spot High Probability Trades and Run All  The Way to the Bank. But how about we learn how to find the perfect high probability trade?  For those who have no idea what I’m talking about, I suggest you read the post I just mentioned before you join today’s class.

You absolutely want to create an edge when you enter a trade  on the market. I can hear somebody  muttering under his breath saying “Hmmm…How do I do this?” Just pick a trade that has a high probability of giving you a decent profit. The moment you see an obvious pattern your brain should scream ‘BULL’S EYE.” That’s what I call your trading edge. That candlestick pattern should be so obvious that you dont need to think twice about entering the trade. If the conditions aren’t present just dont trade.

So basically  we are going to learn various ways fo finding the perfect high probability trade So first off:

You Need to know How to use Support and Resistance Levels

One way of finding the perfect high probability trade is   knowing how to analyze support and resistance levels. Let me give you a simple tip for trading support and resistance levels.  If a resistance level holds, it means the bears are overwhelming the bulls. And if the reverse happens, the bulls have the bears number.

If you  see an obvious resistance level, it can only mean one thing. That the bears are  looking to go short(or put in orders to sell).  And if there is a reverse scenario at the level of support nobody has to tell you that the bulls have put in their market orders to go long. Neither level can   break until one party overruns the other. So for level of resistance to  be breached the the bulls must destroy the bears. And for the reverse to happen at the line of support the bears must clear out the bulls. Let’s take a look at an example

Here the bears are resisting the bulls with all their might. The yellow marking suggests that the level or resistance is holding nicely.Once that happens the bulls run out of gas and the bears will take over proceeding and head for the bottom of the hill.

Next up:

Mark Important Levels

Sure you need to know how to trade support and resistance levels. But you should mark the most important levels.Why? Because everybody is watching those levels like hawks. So you need to sharpen your tools in this regard. Please do not make the mistake of  going intraday (looking at 1hr 4 hr time frames) or else you will be trading from a position of weakness.

One thing you need to understand is that high probability trades are long term trades. You’re talking about entering trades that will last for days, weeks, sometimes months, not to mention rake in huge profits as well. . You’d be better off looking at the daily, weekly or monthly time frames. Let’s look at an illustration of  Gold facing facing resistance at the resistance level

The yellow markings represent the the important levels that I mentioned earlier. You need to be aware of these areas as they are going to be closely watched by other traders also. The red arrows point to to these marked areas. Just make sure when marking important levels, that these  are the levels you want to locate your trades. You do not want to mark multiple levels just for the fun of it. Mark the levels you want to place your trades and once you mark those levels you place your  take profit and stop loss orders.

That’s a wrap for “How To Find The Perfect High Probability Trade.” High probability trading is more than just entering trades. You need a flawless mindset and meticulous preparation. Not only will this strategy save you precious time, but you can easily recognize these trades because you know they are from daily levels.

As they say price action always rules. Just find trades that increase your chances of making pofits and your  trade will be all the confirmation you need.  The best place to put this into practice is your demo account. It’s the best lab there is as far as putting this strategy into practice goes.  You then start looking for high probability signals at the key levels.

Til next time take care.

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How To Let Forex Trades Run Their Course

Hello and welcome to another edition of the bulls vs the bears. Today we are going to learn how to let forex trades run their course. We are going to learn how to let the market do the heavy lifting for you instead of you manually exiting the markets and hurting your chances of making a decent profit.

Do you know why forex traders struggle  to make a profit? No, it’s not lack of knowledge nor trading skill, semi-empty trading accounts, terrible risk management, not negative mindset, It is rather them  shooting themselves in the foot. You see when you exit your account before your stop loss or take  profit hits, you are hurting your chances of  making a  solid profit. Instead of exiting the market prematurely how about letting the market hit your stop loss and your take profits?It will make a life a whole lot stress-free for you.

So  all we are going to do is to learn how to avoid shooting yourself in the foot  when trading on the market.

First of:

Never Close Your Trades Manually

One way of not trading like a deer caught in the headlights is NEVER close your trades manually. If you exit prematurely from the trade you are basically telling the whole. You see forex trading is all about winning to maximize  lost trades. Sure you are going to lose some trades, But it doesn’t mean that you have to jump out with your tail caught between your legs.

Let me give you a nice illustration. Let’s say you enter a trade on a demo account with the market chopping sideways for a week stuck in limbo. Next the market makes a  sharp turn stopping you out for a humongous loss. The difference here is that with a demo account you can afford to to take a loss that might  turn into a huge win. Next week this same trade comes your way  and hits your profit target by the end of the week. So instead of taking a humongous loss you take a  huge win simply by lying in wait like a sharp shooter.

I can hear somebody saying”What’s your point?” Well my point is let the market do the heavy lifting for you instead of you exiting your trade as if your pants are on fire. You cant control time in the forex trade. It has its own schedule. You just have to wait in line while it prepares to launch. I know you want to make your profits right away, but the forex market  plays to its own drummer.  You might have to sit tight for three weeks when trading live. That’s how trades set themselves up sometimes. Are you willing to wait that long? That’s for you to find out.

Just remember this. If a trade doesn’t smash your stop loss, then  your trade has more room to breath and you have the opportunity to rack up the profits.  It may take a breather(consolidate) for two weeks and then take off running again and hand you more profits.

Let’s look at a few examples of  letting the market work for you as against emotionally exiting trades

This is a classic illustration of exiting a trade prematurely and leaving money on the table.  A trader takes of running  at the site of a diminishing  pin bar(as indicated by the small red arrow). However, see the huge upward trend that ensues after the emotional exit. That’s too much money to leave on the table. If this trading account were human, I can only imagine the insults it would be firing the trader’s way. It pays to just let the trade play out.

Next example please

Here we have an illustration of the popular set and forget strategy.  This strategy cures the habit of running with your tail between your legs the moment your brain screams “TROUBLE!” Based on your trading plan you make your entry set your sop loss and profit targets and take a walk outside the house. With this strategy, you can afford to  breath in fresh outside. By the time you get home , your profits should be waiting for you in your trading account.

However,  are three exceptions to this rule

• When there is a sudden price reversal. This should be a clear sign to you to run for the  hills
• The price chart keeps changing – Don’t forget that price charts are not static and so thing change.  Pay attention to what the charts are telling you
• When your price signal  misfires when the market reverses or closes below or above the price pattern.

Finally we get to look at situations where it’s best to run for the hills.

First example please

Right in front of us is an  4 hour chart. Here we have a reversal situation after price attacked the previous key level numerous times. Unfortunately the support line refuses to yield and when that happens, now will be a good time to head for the exit.

That’s a wrap for “How To Let Forex Trades Run Their Course.” Do your trades a huge favour by not jumping off the bus too soon.   Letting the trades run their course increases your chnces of racking up  decent profits.

No one is saying you wont experience losses – they will come. But  dont take volountary losses by  making premature exits. One way of solving this habit is to review your isk per trade so that you are not emotionally frazzled when price hits your stop loss. You need to decide how much you can afford to part with. And you if you are not sure about your stop loss placement look up How To Place A Stop Loss To A Tee. And if you are stuck on how to place a profit look up A Few Rules on How To Take Profits From Forex Trades

Til next time take care.

Open Live  Forex Trading Account 

If you’re looking to open a live trading account  Sign Up With EasyMarkets

How To Profit From Trading Breakouts Step By Step

Hello and welcome to another edition of the bulls vs the bears. Today we are going to learn how to profit from trading breakouts step by step. First I am going to let you in on a little secret. If you want to prosper as a forex trader, you need to stack in the odds in your favor. This is because you are not always to be 100% spot on with your trades However, with a solid to risk to reward ratio, you can still make healthy profits.

Sure, some of you are saying to yourself “You are not making any sense.” But you have to know how to spot a great trading opportunity. And when you do you take advantage of the opportunity through your trading plan. You did put together your trading plan. Did you? Anyways you can spot some of these great trading opportunities when trading breakouts. In today’s lesson we are going to look at some of the benefits of trading  breakouts. I guess a burning question some of you are asking is:

What Are Forex Breakouts?

Well forex breakouts are situations which occur when price break outs of a key level, courtesy of either the bulls or the bears.  A very close look at price behavior on the charts suggests that price tends to stick to specific levels. When price hits a key level only to do a 360, this illustrates the strength and resilience of that key level. Keep a close eye on when price returns to touch the key level again. It could spark a breakout or a major rejection.

There are times when price may hit the same level with gleeful regularity. When that happens you may find yourself saying”This level is as tough as a pit bull.” But price eventually wins over that key level once that key level caves in. That’s when the breakout commences. I can hear another person with another question asking:

Why Should We Trade Forex Breakouts?

Well  forex breakouts present amazing trading opportunities.When breakouts occur they spark new price moves and trends.  And when you spot a breakout, you’d do well to get in on the action to take advantage of a juicy trend. This is because a lot of these breakouts are sparked by momentum and so you’d do well to maximize these opportunities when they show up on the charts. And for this reason breakout trading is very popular among forex traders.

Another burning question I hear someone asking  is:

At Which Key Levels Do Breakouts Occur?

Well breakouts are known to occur in the following:

• Support Or Resistance
• Time highs or lows
• Trend Lines
• Price Channels
• Moving Averages
• Chart Patterns
• Fibonacci Levels
• Pivot Points

Breakouts move prices so quickly because major players are watching these key levels like hawks. So when one side breaks through the losing side has to save face by covering their losing positions. It is this act of desperation that triggers the sharp price movements.

Now it is your job as traders to spot these  high probability breakout opportunities.Unfortunately these breakout opportunities  can be a bit vague sometimes.  For instance support resistance lines drawn at potential breakout points should be considered event areas rather than fixed lines.

When trading a breakout, you’d do well to exercise great discretion to minimize false signals and fakeouts.  However, DO NOT connect the bottom ends of the price action with a straight line. I’m not saying the trend doesn’t exit. It’s just that the trend should not be considered as being contained by a single thin line.

Instead the trend should be viewed as a zone. If price does cut through the upward trend line it doesn’t mean the trend has run out of gas. Sure we have to be mindful of a potential trend reversal. But remember that price does cut through a trend line sometimes without price suffering a reversal.  Price suffers dynamic fluctuations, causing minimal breaches through the key levels. This rule is not exclusive to trend lines only. In fact it applies to all levels. Just make sure to identify the real breakouts and filter the fakeouts as much as possible.

Another burning question is:

How Do We Identify The Psychological Levels?

When you see price conforming to the same area repeatedly It can only mean one thing. That a psychological area is in existence . Take the lowest and highest level of price around that level and label the distance between the two lines as a support/resistance area. If you see one the wick of  one candlestick go beyond the key level, it’s not part of the psychological area. Let’s look at an illustration of a breakout through a support area using the GBPUSD pair.

Here is a 4 hr chart for the GBPUSD pair. Notice how the bears head down the slope after the bulls run out of steam in the uptrend. Once price reaches a particular level price starts to move sideways, creating a consolidation. This is where both  the bears and the bulls are taking a breather to figure out their next move.

Notice the few bottoms that have been created. The blue rectangle represents the area around the lower wicks of  the candles which make up the support area. If you really want cash in on breakouts it’s best to lie low like a hunter while a candle close beyond the support/resistance area confirms the breakout.    this scenario is nicely illustrated in the bearish breakout as  a candle close confirms the breakout. Once confirmation takes place, the bears kick off  their downward slope. Let’s take a look at another example

Here is the daily chart for the USD/JPY pair.  See how price has formed a descending triangle. Now descending triangles that show price contraction which, you guessed it, leads to a major breakout, reuslting in a new price movement. This means that price could go in either direction as a result of the breakout.

In light od this situation watch like a hawk for  possible clues in both support and resistance levels. See how triangles have been framed in the iupper and lower levels of this triangle. This tirangles have been drawn to ascertain the exact areas the support and resistance levels are likely to cover.  A look at the lower side of the triangle suggests that there is a candlestick going deep into the support area. If there was just a single line indicating support, the wick might have set a trap thinking there was a bearish breakout.   Let’s take a look at another example.

Here is the chart for the USD/JPY pair. See how price has formed a descending triangle. Just so you know, a descending triangle shows price consolidation, which leads to an eventual break out, and then creates a new price direction. The strange thing about this pattern is that it’s hard to tell where the direction is headed. This means the breakout could send price in any direction

In light of this situation, watch both support and resistance levels like a hawk for potential price signals.  Any time you sniff a potential breakout, you jump in like a lion chasing his prey.  You see how triangles  have been created in the upper and lower triangles? This way we know which part of the triangles the support and resistance levels are likely to touch.

Take a close look  lower side of the triangle and check the candlestick going deep into the support area. Had there been just a single line symbolizing  support, the wick would set a nice trap  for you and made you believe a breakout by the bears was imminent.

I

Notice in the red circle the location if the breakout to the upside. Aslo see the strong momentum on the breakout as illustrated by the green marabazu candles.  Once the bulls break through the upper level of the triangle it retraces back to test an already battered resistance area which has now converted into a support level.  This scenario is another important confirmation signal which you need to take note of.

One question that must be burning reader minds might be:

How Can I Tell A Real Break Out From A Fake Breakout?

Well a real breakout only occurs when a pair closes a candle beyond a particular level. This way you get a more reliable breakout signal which you can use to make your entry. Let’s look at an illustration using the USD/JPY pair

Here we have a descending triangle with upper resistance and support areas. See how the rectangles resist the bottoms of the price. The lower rectangle’s location is based on the first and second bottom of the triangle. The triangle contains the upper parts  of the price. The only exception is the pin bar rejection candle which is illustrated by its long tail. That’s what you call a fake breakout. However, the candle fails to close with its full body above the resistance area.And when this happens it is classified as a false breakout.

A second false breakout takes place immediately after the first one. The last bottom of the pric goes below the support area with its candle wick. Now when you see such a formation nobody has to tell you that’s a pin bar formation. It is also known as a  hammer pattern which then ricochets off the support level. Just like the first scenario  we ll disregard this signal since the candle failed to close below the support area.

So the pin bar formation pushes the bulls further up the hill, Next thing we know,  a candle in the form of a Marabazou  closes above the resistance level. Now that’s what you call a valid breakout signal. This should earn you at least 300 pips.

Look up How To Profit From Trading False Breakouts and Fakeouts

Now that we can tell a real breakout from a fake breakout  The most appropriate question should be:

How  Do I Confirm Breakouts?

There are fours ways of confirming breakouts. Let’s look at each method one by one

Breakout in Progress

You see how price breaks through the resistance area? When  a candles closes above the resistance area, consider that a breakout.

 

Here we see the bulls continuing with their surge only to run  out of steam and let the bears take over. This scenario creates  the top.  What you should look for is what is called a fractal formation.  In this formation  you have a higher high(HH) with two bars to the left of the formation and lower highs(LH) with two bars to the right of the formation with lower highs(LH).  The reverse applies to a bottom.

Price Retrace To Broken Resistance Area

 

Here we see price retracing to an already breached support level with the intention of retesting the level again. Price succeeds in breaching the support area, causing an upward ricochet. When this happens, it suggests a strong support level.

Top Breaks

Here we get strong confirmation of the bulls continuing their surge towards the hills. This is a perfect time to put in your entry.

You can also apply this confirmation while trading range consolidations. You have a breakout in a chart pattern and expect  the size of price movement to be equal to the size of the chart formation.

And finally the coup de grace

How Do I Take Profit When Trading Breakouts

You can start with swing low and high analysis or candlestick pattern analysis. However one popular technique making the forex rounds these days is  Moving Averages. One nice advantage of using moving averages is that you can hold on to your trading position until a candle closes beyond the moving average.

Let’s look at an example using the AUD/USD pair

The pink line represents a 34 day Simple Moving Average(SMA for short).  It’s perfect for trading during trending conditions.

You see the blue  triangle to our left? It represents  a support  area that has been struck three times by price.  The red circle shows the candle breaking through and closing beyond the support area. How about we use this breakout signal to go short(sell)? The bears start hurtling down right afterwards. You see the numerous times prices attempts to crash through the 34 DAY SMA? Somehow price manages to hold off price effortlessly keeping the trade alive for a very long time.

Price eventually closes a candle above the 34 day SMA. This is your queue to take your profits and run for dear life. You could make a cool 300 pips using this entry and exit strategy.

For More information on Moving Averages look up We are Moving Averages Part I and II

That’s  a wrap for How To Profit From Trading Breakouts Step By Step.” With solid price action analysis you should have no problem profiting from trading breakouts. You can also use chart pattern analysis and moving averages to take your profits and head for the exit. You can never go wrong with these two two techniques

Til next time take care.

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How To Take Advantage of Second Chance Trading Opportunities in Price Event Areas

Hello and welcome to another edition of the bulls vs the bears vs the bears. Today we are going to learn how to take advantage of trading opportunities in Price Event Areas. And I will start with a simple message. The market always retraces its steps.

Some of you are probably like “What is he talking about?” Well picture this scenario. The market retraces to a level started from only to hit a brick wall before  launching another strong move. What I’m trying to say is the market always finds its way back to where it started from. In other words, it never forgets where  a major move originated. And you know what, this scenario happens more often that you would care to know. Not only are these second chance opportunities regular occurrences but they also present high probability opportunities – not to mention high reward to risk benefits.

So guess what we’re going to do? We are going to look at a few pictorial illustrations of this powerful high probability technique.

Let’s take a look at Example 1

Here we see a confluence of situations happening here. We have  key levels being established at both support and resistance. Notice how  old support becomes new resistance and vice versa. The big moves below these areas is what causes these event areas.

Notice the three arrows on the screen. They represent price hitting  the key levels These hits first result in bullish pin bars at the line of support and eventually bearish pin bars at the line of resistance. You need to understand that these  forays take place. when the  market reverses. Why? Because it has taken note of where the initial move started from. And when you spot such a reversal, you better jump in like a sharp shooter.

Now not only can you trade pin bar signals  at either key level but you can put a limit order at the test area  at both levels. So at the level of support you put a stop loss just below the level of support. Whereas at the level of resistance you place your stop loss  just above the the line.

Next to Example 2

Now the next example covers how to use an event area with or with out a price action signal as your event area. Now do you see the bullish pin bar next to the bearish pin bar towards towards the far left corner?This forms the event area as a consequence of the strong move that followed. This area would most definitely come in handy in subsequent retests.

Now see the bullish pin bar next to the shaded level of support. That’s definitely a buy signal since it faked out and rejected through the event, creating much needed momentum for the bulls. And as you can see, the bulls are enjoying a nice ride up the mountain. Now see the retrace in the middle of the shaded area. Here you could a limited order or stop loss near the event area. OF course that wont bother the bulls as they enjoy their climb upwards.

Now on to Example 3

Here we have an event area given us a hint of a potential price signal. Notice the big move at the 1.667 level, This suggests the market has taken note of this hot event area A long-tailed pin bar has created this price action signal and the move below it has certified it as an event area. See how the market drifted from that level as price sold lower from the pin The event area experiences a retest, leading to a retest before the market pushed above the event area. Now as the market retraces back down to the event area, nobody has to tell you that this is an event area and that you need to take not of that.

You can do two things here. You place your stop loss near the 1.6700 -1.6670 area. Or you put your hunter’s hat on and wait patiently to see if a buy signal will take place.  As you can see a gorgeous long -tailed pin bar has taken shape and, upon this formation, the bulls push for the mountains. Now let’s look at another example of a price event area giving us a clue of a price signal

Notice the two pin bars forming an event area at the 0.8410. Then we see a a major price retracement taking place  in January of 2014. Your best option is to draw this key resistance level  and keep watch as price converges on this line. As you lie in wait watch out for the price signal for confirmation of  a possible move below this area.

See how the market plunges all the way down to the key support around the 0.8080 mark. This happens after the market runs out of steam  below that event area in January 14th. And see how price gives  props to the key support level. It’s its way of saying “I’ll be back”

For information on second chance trading look up How to Get a Second Crack at Missed Trading Signals

That’s  a wrap for ”How To Take Advantage of Second Chance Trading Opportunities in Price Event Areas ” . I hope you have gotten a full grasp of key levels and event areas. It’s pretty obvious that the market never forgets where event areas started from. Just mark these areas on your price charts and when the market retraces to these areas expect a  nice high risk/reward situation.

Take care til next time

Open Live  Forex Trading Account 

If you’re looking to open a live trading account Sign Up With EasyMarkets 

How to Smile All the Way To The Bank Trading Pullbacks In a Trend

Hello and welcome to another edition of the bulls vs the bears. Today we are going to learn how to smile a little bit. We are going to learn how to smile all the to the bank trading pullbacks in a trend. Trading pullbacks in a trend is one trading strategy that has stood the test of time. I can imagine somebody asking”Well, what’s so special about trading the pullback? Well just like any other strategy you make your entry in the market after confirming the direction of the trend. This way you don’t make your entry on a crazy whim and risk the market doing a nasty 360 on you.

If you want to successfully  trade the pullback you need to cultivate the mentality of a sharpshooter. Just like a sharpshooter, you wait for hours if not days for the  trade setup to take shape before pulling the trigger. Even more important you need to identify the point where the retracement move is likely to end. Because if you miss it, you miss out on a lot of cash.

So before we dive into how to trade the pullback  we are going to answer a few questions starting with:

What’s The Whole Idea Behind The PullBack Strategy?

Well the whole idea behind the pullback strategy is to buy low during the uptrend and sell high during the downtrend. You put your stop losscloser to your entry instead of placing your order in the direction of the trend.

Now before we get into illustrations of trading the pullback, there is a burning question that needs answered. And it is:

Why is The Trend The Trader’s Best Friend?

I’m sure most of you have heard the famous forex”The Trend Is Your Best Friend.” Newsflash!The trend is your only friend until it runs out of gas.

Anyways back to the main question. You see while most of the major forex players have access to all the current forex information, the forex market is pretty much in consolidation mode. Forex player pretty much take a breather trying to figure out their next moves. However things get very interesting when press releases about economic fundamentals are released. If the data differs from that of the forex market, expect to see significant price movements. Why? that’s because the forex market is trying to make sense of the new information to find a new alignment.

Now once price establishes a trend by pushing price up or down, traders start taking their profits and head for the exit. Their mindset is  price cannot for any higher or lower than it is now or they just want to save their hard earned cash. Better safe than sorry. Right?Anyways regardless of the traders, motives, they affect the trade’s momentum, causing the pullbacks that we see on the market.

There are two things you need to know about  pullbacks. First off they show up at a previous consolidation zone or pivot point on the price action chart. Second pullbacks test a previous support and resistance level. Now a lot of forex traders place their orders around this support and resistance area since they’ve seen these levels convert into pivot zones.

Consequently when a pullback of the trend touches these price levels, accompanied by market orders, the market sparks a resumption of the trend(Getting the picture now?). If the opposite happens, both support and resistance levels get breached, resulting in a deadly trend reversal.

If you are getting started as a trader I suggest you kick off with trading pullbacks rather venturing in the unknown with reverse trends. I assure you will be eaten alive trading countertrends. The good thing about trading pullbacks is that even if the price goes beyond your entry You get a second crack at a missed signal. As you get comfortable trading pullbacks you can now make the transition to more complex strategies to complement your pullback trading.

Now that we’ve identified why the trend  let’s get into how to trade pullbacka The first step is to trading pullbacks is:

Identify The Trend

Of course you should be able to identify the trend if you want to perfect the art of trading pullbacks. If the price on the left is lower than the price on the right and creating higher highs and higher lows, you have yourself an uptrend. You can’t  miss it. Y However, if the price on the left is higher than that of the right you have yourself a downtrend. You can’t miss either of the two.  can also employ the use of moving averages to confirm a trend when a crossover is in effect. You can also use the crossover to confirm a pullback resuming the prevailing trend. Let’s look at an illustration using the GBPUSD pair.

The green line suggests the bulls are powering the GBP USD pair upwards. However, the addition of two moving averages  colored in red(13 EMA and 21 EMA)  confirmthe temporary momentum in the market.

Notice how the red EMA crosses the green EMA. That’s the pullback we’ve been talking about. However, the GBP ends and the uptrend resumes his journey when the red EMA crosses back above the green EMA(as indicated by the red arrow).

Now let’s look at an illustration of trading the pullback in the  downtrend  again using moving averages

We see a similar scenario in the downtrend. Just like the uptrend, red EMA crosses above the green EMA, signalling a pullback. As soon as  red EMA crosses below green EMA, it signals the end of the GBUSD pullback and the resumption of the downtrend.

Unfortunately there is one major stumbling block when using crossovers. You see, crossovers only take shape if the pullback momentum is strong, as was the case in the first scenario. The trend then resumes, leaving you acting like a deer stuck in the headlights. You start wondering whether whether to enter the market or not, which shouldn’t be the case especially if you have a solid trading edge.

Even worse, the EMA starts to lag as an indicator. Such that by the time it generatesthe signal,the market may have you buy and moved in the opposite direction of the prevailing trend.

Consequently the risk to reward ration of your trade also takes a substantial hit. In that case, you’d be better off trying to identify a potential reversal area during a pullback and using better price action analysis to place your trades.

For more information on moving averages look up We Moving Averages Parts I and II

Next up is

Identify Potential Pullback Reversal Area

Another way of trading the pullback in a prevailing trend is identifying a potential pullback reversal area. If you are familiar with support and resistance analysis you would know that old resistance turns into new support and  old support turns into new resistance. Let’s take a look at an illustration using the GBPUSD pair

Initially GBPUSD run into strong resistance at the 1.5750 mark twice. Once price breaks through this level we witness the first pullback finding solid support at this level.. These old support levels are a convenient place to place your limit orders on the side of the prevailing trend.

Just place  your limit order a few pips above the old resistance, and you should earn yourself a decen trisk to reward ratio in the ensuing breakout. This only works if the pullback doesn’t penetrate below the pivot line.

Now let’s look at another illustration of potential pullback reversal zones using the Fibonacci retracement levels.

As you can see  Fibonacci retracement levels are also  very useful in identifying  potential pullback reversal areas.  Here we draw two Fibonacci retracement levels on the same uptrend at different levels using two different colors. The green colored retracement levels identify the first swing point while the red color retracement level spots the second swing point.

Notice how price pulled back to the 23.6 Fibonacci level after the first upsurge. Price then pulls back to the 38.2 retracement level after the second upswing. Price then resumes its upward climb.  When you make use of the Fibonacci tool whenever price carves a new high during aan uptrend, and a new low during the downtrend you will find that price defers to the retracement levels. Also Fibonacci levels act as support and resistance levels in disguise. You can also find confluence signals from both support and resistance levels and a Fibonacci resistance levels. And when you find these signals you have yourself a high probability setup.

For more information Fibonacci retracements look up Lighting Up Candlesticks with Fibonacci Retracements

And Finally:

Best Strategy For Entering The Market After A Pullback

One recommended strategy for entering the market after a pullback is the use of price action patterns such as a pin bar or engulfing patterns. When you find these two patterns near a previous support or resistance, or near a moving average, that is confirmation that the pullback is ending and the trend is about to resume, Let’s take a look at an illustration using the GBPUSD pair.

Here the moving average and the downward trendline tell us of an ongoing downtrend. Once that ‘s confirmed we then see strong resistance at the 1.5750 level as the GBPUSD pair get rejected a few times. Please do not jump into the lion’s den blindly. Just wait  for the bearish pin bar to make its appearance to tell you that the pullback has run out of steam.

The pin bar makes its entry when prices breaches below the low of the pin bar. And when that happens expect to make decent profits with minimum risk and fuss.

Understand that when trading pullbacks you are making use of the power of confluence and increasing your odds of making a profit.A combination of existing trend support and resistance, and price action patterns, cuts down your risk and increases your profits in the process

For more information on trading pullbacks  look up Trading The Pullback With Panache

That’s  a wrap for ” How to Smile All the Way To The Bank Trading Pullbacks In a Trend”  Trading pullbacks with a multiplicity of factors sets you up to trade high. However you need to a clearly defined trading trading strategy that identifies your trading edge.

Your  trading edge outlines the circumstances under which you will  enter the market. Instead of jumping into the deep end just wait for confirmation after identifying a trend and a potential reversal zone.When you sit and wait you are in absolute control of your trading situation. You decide where to place your stop loss and where to exit the trade. Do this, and you will be smiling all the way to the bank

Til next time take care

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How To Cultivate The Right Mindset For Forex Trading

Hello and welcome to another edition of the bull vs the bears. Today We are going to talk about having the right mindset for forex trading.  Inn short we will be looking into the psychology of forex trading.

If anybody ever tells you that prosperity in the forex market depends on your forex strategy , Ask that person” What have you been smoking?” Yes a solid forex strategy helps but that’s partly the story. you see success as a forex trader largely depends on having the correct trading mindset, your thought process and the way you respond to the movement of the forex markets. If  you go about chasing after the hottest trading bot or fancy indicator you are going to be sorely disappointed You should rather be focusing on cultivating a positive mindset and managing your trades and emotions properly. If you fail to do these two things you will just be chasing the shadows of the market and you will hemorrhage  a ton of money too.

The first question we need to ask ourself is:

Why Do Most Forex Traders Lose Money?

The answer is very simple. Most forex traders have this weird fantasy of making millions overnight.T  Consequently they  lose  all their money, leaving a nuclear-sized crater in their trading accounts. This mindset comes about as a result of unbearable pressure the put on themselves to  make these huge profits. And when you start out trading this way, you react with your emotions instead of thinking logically. Naturally youb end up blowing your trading account.

The next question you need to ask yourself is

What Emotions Should You Avoid While Trading?

Here are some toxic emotions you need to avoid like  the plague while trading.

First off:

Greed

If you act like a greedy price you will in all likelihood lose your money. The greed comes in when you don’t take your profits  Don’t make th costly mistake of not taking the profits because you think  the trade is going to run forever in your favor. The forex market  can do a 360 on you at any time. That’s why   the take profit option is there for you to make the exit when you price hits your target.

Another habit you should avoid is adding to your trading position simply because the market has moved in your favor. You only add to your trading position if it’s founded on price action logic. Anything else is just pure greed. Of course risking too much on one trade is also born out of greed. Too much greed will most certainly blow up your account.

Next up is :

Fear

Fear can hit you two ways. First it can hit you if you are just entering the forex market for the first time and have not yet developed a trading strategy on which you place your trades. Even worse, fear can also grip you when you lose successive trades or when you  sustain a loss so large that you suffer a humongous emotional breakdown, h

Now I can hear someone asking”How do I overcome those demons lingering in my head?”First of make sure  you decide how much you can afford to part company with in the event that you lose a trade. This is very important because the losses are going to happen. Just make sure you get that through your head. Once you get that sorted out you are able to move on when you lose a trade. There is one thing you need to understand about fear. Fear causes you to miss out on great trading opportunities. If  you want to take advantage of these trading opportunities, get rid of those demons in your head.

Revenge

How many times have you said to yourself”I’m going to get back at you guys for blowing up my trade?” Listen,  don’t blame it on the forex market. The thing is there are no guarantees that every trade that you enter in will be a winning trade. This why you need to develop a trading edge. If your trading edge doesn’t exist don’t trade. It’s a simple formula most traders just don’t seem to apply. Now don’t ask me why because I have no idea either.

Also revenge is also borne out of a need to jump back into the market to make  for what you lost on the market. Of course this will result into a loss more humongous than the previous loss, a loss largely based on emotional rather than logical trading.

Next up is:

Euphoria

Dont get me wrong! I have nothing against Euphoria. In fact euphoria is a good thing. But it can also work against you especially when you make a huge profit or you chalk consecutive winning trades. Overconfidence kicks in and all of a sudden you become swollen headed , thinking that you are the biggest thing since corn bread. Then all of a sudden, you experience back to back losses  and you are like “Hey what’s going on here.”

Of course you are tempted to jump  back into the market to make up for your losses(See a pattern developing here?). That’s your emotions going into whiplash mode after suffering those humongous  losses. You are so overconfident you fail to see the red flags  teling you that any trade can be lost. Like I mentioned earlier if you have your high probability trading edge, you should be able to make a fair amount of profit in the long term. Just make sure you apply discipline and patience. To borrow a line of a m song by legendary R&B group Midnight Star, Don’t force it. Just chill out and let it flow.

Now that we’ve gotten the emotional cancers out of the way, it’s off to the question of the day. Which is

How Do I cultivate The Right Trading Mindset?

The first thing you need to do is:

Know Your Trading Edge and Master It

You need to know your trading edge like the back of your hand. Your trading edge is your set of conditions that have to be present on the market for you to part with your money. That gives you that mental edge over the other traders. You can’t be sitting there waiting for the market to part the the Red sea before you make your entry.

Here is a very simple  piece of advice a veteran trader gave me  a few months ago.  She simply said “If your trading edge is not present on the market don’t trade.” It’s as simple as that.

Next up is:

Manage Your Risk Properly

If you value your cash you’d do well to manage your risk properly. If you do not control your risk on all your trades emotions take over your brain. And when that happens you know disaster starts knocking on your door. What’s so scary about emotional trading is that you are don’t even realize your emotions are kicking in. It’s like  an adrenaline flood. You’re just gambling instead of making use of  a well thought out trading strategy.

So how do you avoid trading emotionally? Only risk money you can afford to part company with per each trade.  Go into the trade with the mindset that you could lose on a given trade given what you know about the forex market. When  you get that sorted in your mind you won’t cry over spilt milk that often.

Next up is

Do Not Over-Trade

I cannnot stress this enough. over-trading will most certainly destroy your trading account. Like I mentioned a few minutes ago, only trade when your trading edge is present. Don’t trade when you feel like it or when you are only 50% sure your trading edge is present on the market. If your mind starts wavering, the market will most certainly make you pay for your uncertainty.

Once your emotions kick in they are hard to stop. It’s like an onrushing flood. Just apply  logic and your emotions will leave you alone.

Get Yourself Organized

If you want to prosper as a forex trader you absolutely have to get yourself organized. You need to develop a trading plan and apply religiously. Treat t forex trading as a business instead of a Las Vegas Casino. There should be a method to every trade that you place on the market. Even more important, stay calm. Don’t get carried away with your emotions.  Every trade must be thought out before you make your entry. Once you accomplish that, the demons will stay out of your way.

That’s  a wrap for ”How To Cultivate The Right Mindset For Forex Trading .”  You absolutely need  a solid mindset to succeed as a forex trader. You cannot approach forex trading with a gambler’s mentality or else you’ll lose heavily. Forex trading is a business just like any other enterprise. You must be calculating in all your trades. You must  be purposeful with every trade rather letting the  chips fall where they may. It could be the difference between prosperity and poverty.

Til next time take care

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Six Retracement Entry Types You Must Know For Your Own Good

Hello and welcome to another edition of the bulls vs the bears. Last time we looked at five support and resistance types you absolutely must know Today we are going  take a look at six retracement entry types  you have to know for your own good. It’s absolutely important that you know these powerful patterns. Why? Because they are like shooting stars. IF you miss them, you may never see them again.

If you truly are a forex trader you should have come across the term retracement entry, Retracement entries are absolutely so important it will be in your best interests to take advantage of these powerful chart patterns. But if you haven’t come across retracement  patterns don’t worry. By  the end of this post your understanding of these patterns would have been so illuminating that there is no way you are going to pass up on profiting from these entries. I guess the question most of you are dying to ask is:

What is a Retracement Pattern?

Well  a retracement pattern is   when price pulls back on a recent move, be it up or down. Ever found  your in a situation where you’ve lost keys and had to retrace your steps to establish where you last saw them? It’s the ame concept here in that the retracement entry is the reversal of a recent price move.

 Why are Retracements Important?

Well they represent the greatest opportunity ever to enter the market at a decent price. Even more importand retracement entries make room for the all important stop loss, better risk reward and much more. A retrace entry is more conservatiove compared to your typical market entry and is a much safer bet.

So your objective as a forex trader is get the best entry price and manage your risk as best as you can. At the same time time you must also aim towards humongous returns. The retracement entry will most certainly help you accomplish these tree objective. However, let me sound a note of caution. There are pros and cont so tusing these retracement entries. So we’ll look at both sides starting with the

Pros of Retracement Trading

High Probability Trades

One exciting benefit of trading retracements is the possibility of catching high probability signals. These high probability signals  occurr right after the end of  theretracement entries. You absolutely have to take advantage of these high probability signals because they can go for weeks sometimes months if you get the direction right.

Markets usually  go back to the average price over and over again. This becomes much clearer after you have looked at the price charts for a few minutes. So when you see the retrace repeating itself over and over again,  your mind should tell you”This looks like a high probability signal. Get ready to make your entry.”

Flexible Stop Loss Placement

Retracement trades allows  for flexible stop loss placement.  Just make sure you place the stop loss as far away as possible from any where in the chart that is likely to suffer a humongous hit. If you want your piece of mind keep your stop loss away from areas such as key levels, moving averages, or  pin bar high or low. Keeping your stop placement further away from these even areas will give your trade a greater chance of sending profits in your direction.

Improved Risk Rewards

Probably the best part of retracement trading is that you  get improved risk rewards.  with risk rewards you can place a tighter stop loss as you get closer to a key level or a pin bar 50% level. If you place a 100 pip stop loss and a 200 pip profit target, you can turn it into a 50  pip stop and 250 pip profit. How about that?

However, if you are entertaining plans of increasing your risk reward. how about using a standard stop loss instead of a tighter stop loss. With a standard loss in this scenario, you give your trade more oxygyen to breath instead of  hanging a tight stop loss noose around your neck. In this case a 100 pip stop loss and a 200  pip  profit target  could translate into a 200 pip stop loss and a 250 pip profit target. I can hear somebody asking “How come? Well that’s because your standard stop loss  gives the retrace entry the oxygyen it needed to run in your direction due to the price pulling back  compared to you making your entry at a terrible price. Had you entered with a terrible price, you would have suffered a nuclear-sized loss.Re

Now  let’s get to the dreaded cons of Retraced Trading. Start with

Missing Out On Trades

One annoying fact about waiting for a retracement is that while you wait, a good trade getsaway. This can get on your last nerve, not to mention challenge your trading mindset. Then again missing out on juicy trades may not necessarily be a bad thing. At least it’s a whole lot better than over-trading. I can hear somebody with a thick frown on his face  asking”Are you crazy?”

Not only is retracement trading doubly frustrating , but it takes incredible focus to stalk sit and wait for that high probability signal to show up. However, if you master sitting and waiting long enough you will be well ahead of the losing pack. So regardless of  the entry method you are deploying, you must cultivate the discipline in order to prosper as a fore trader.

Placing A Stop Loss Wrongly Can Get You Knocked Out Of A Trade

The last thing you want to do is place your stop loss at the wrong place. Do that and you will  get knocked out Mike Tyson style out of a trade. What makes it so painful is that you are absolutely spot on about this trade. But because you decided to put a tight noose around your stop loss you got blown off the bridge.There is a solution to this problem. Just learn to wait for retracements or pull backs because not only will you find a high probability signal when you wait, but you can put your stop loss at a safer spot on the market.

I know I know. Getting your stop loss knocked out of a trade can downright sap your enthusiasm. Not only that but  the knockout can take you out of your trade before the trade even gets started. Fortunately the retracement trade shows you the way out by allowing you to put the stop loss at a safer if not wider spot and allows you to make some much needed cash in the process.

You need to understand that when a market retraces or pulls back, it’s basically telling you”Put your stop loss at a place where it’s less likely to suffer a cold blooded knockout.” Now most retracements occur at support and resistance levels. So you’d be better off placing your stop loss below that level to avoid the Mike Tyson left hook knock out I mentioned earlier.

Less Trades In Occurrence

Wanna know why  you don’t see more of market retracements on the charts? That’s because the  forex market  does not  retrace that much. Normally when a retracement occurs, a pullback follows suit. Unfortunately that is not always the case. Consequently  the number of trades drop considerably. So what  you get is the market creating minimal retracements. This suggests that opportunities to trade in this scenario are very slim.

Of course this will make any trader pull his hair out. But you must keep your discipline or else you end up in the losing pack of naive traders. If you are able to maintain your composure you will be laughing all the way to the bank. Please note that just because there are a few disadvantages to trading retracements does not mean you shouldn’t do retracement trading. The pros definitely outweigh the cons. So  knock yourself out with the  retracements.

Okay enough of the depressing cons!Let’s get down to more exciting stuff such as:

Examples of Different  Types of Retracements

Let’s take a lake a look at some examples of retracement types so we get a clear idea of what they look like when we come face to face with them on the charts.

Starting with:

Retrace Entry Without Price Action Signal

On the left side of the pic are retracements without a price action signal in an uptrend. The sky blue shaded areas represent the retracements. In each of these shaded areas you have price retracing or pulling back to the key levles as shown in the chart. We dont see any obvious price signals, But we can see that price  barely pushing aove these levels.

If you are smart you on a tie sensing  humongous risk reward opportunities. That’s assuming you get in on a tight stop loss

Retrace to Key Level With Price Action Confluence

Herr you have considerable action happening along all the key levels.   You also have three price action signals forming along these levels.  Now these signals came about as a result of price retracing up or down to key levels on the chart(labelled thick green).

How do we anticipate these signals? Just wait for price to pull back and then watch the price signals take shape along the key levels. This is probably the highest probability trade out there. Looked up Something Called Price Confluence.  It will most certainly add to your understanding of this tutorial.

Next up is

50% Area Retracements

Now the 50% retracement is a very popular occurence on forex charts. Here we have price retracing 50% of it advancement, as indicated by the 50% zone. Watch out for these pull backs to these 50% areas as they he perfect platform for price to break through

Consequently price moves back in the direction of the initial move. Like I said earlier, 50% doesnt happen often. But they are a very useful to have in your trading tool box.

Next up is

Retrace of Signal Bar or Signal Area

Here we’ll be looking for a 50% pin bar retrace. This is slightly different from what we covered in the last section. In this scenario, this often occurs along long-tailed pin bars where price retraces halfway towards its march form high to low of the signal bar. This gives you the opportunity to enter at a stronger price, equipped with a standard or tighter stop loss.

We’ll look at two examples of this scenario

Here  we see the various risk reward levels. Notice how each risk reward level is attained by waiting for the retrace and entering at the pin bar’s 50% level(or half the size of the pin bar). This should be your approach with this type of retracement.

Let’s take a look at example 2

Here you attain the 2r profit margin by waiting for the retrace and entering at the fakey pattern’s 50% area as indicated by the red arrow.

For more information on risk rewards, look up The Phenomenon of Risk Rewards in Forex Trading

And Finally

Retracement Back To Price Event Area Or Prior Price Signal

Now this is a high probability area to look for trades- the type of trades that run for weeks.  As you can see price retraces back to an existing area where a bullish pin bar forms. It then forms a bearish pin bar before the bears start a major sell-off breaking through the resistance level.

For more information price event areas, look up Price Event Zones and Support and Resistance Levels

That’s  a wrap for ”Six Retracement Entry Types You Must Know For Your Own Good .” I hope you have a solid grasp of what retracement trading is all about. This post should give you a solid foundation and provide you extra tools to with which to work with in your trading routine week in week out.

Til next time take care

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Five Support and Resistance Types You Absolutely Must Know

Hello and welcome to another episode of the the bulls vs the bears. I know we’ve already covered  support and resistance levels in the past. But today we are going to look at five support and resistance types you absolutely must know .The forex market can be every unpredictable. It goes up and down, and sometimes it veers sideways.

Some of you may think ‘ hmmm..support and resistance is too complicated. Well support and resistance levels is the backbone of price action analysis.. And they help form the basis for understanding the forex market. Through price action trading, support and resistance levels help us decide where we are going to place our stop loss and take profit targets. More importantly, support markets helps us understand three things:What;s happening on the market, what has happened on the market, and what is going to happen on the market.

So what are we going to do?We are going to look at how to use the seven support and resistance levels.

First off:

Swings Highs and Lows

One support and resistance level that you absolutely must know  is the traditional swing highs and lows.  You find these levels by zooming in to a longer time frame such as the weekly chart or even monthly chart.  It’s been said you get a broader view of the market and the flash points within the market. What you want to do is simply identify obvious levels where price either reverse higher or lower or lower and draw horizontal lines at them.

Mind you, these lines don’t have to be perfect. They may either intersect candlesticks or be mere event zones.  You absolutely have to do this when analyzing any chart. That should be the first step on your analysis itinerary. Let’s take a look at an illustration using the GBP/USD pair

This is the bird’s eye view that I was referring to. See the entire cocktail here – support and resistance levels, trends, and sideway markets. They immediately jump out at you in this time frame. You cant miss them.

Now let’s take a look at the daily  chart(or time frame) to get a clearer picture

Here you see short term levels that you don’t see in the weekly chart. As you can see price finds support at 1.4000 level. Take a look at the two  huge  bullish candlesticks.  The first one has a huge shadow and the second one resembles a very bullish reverse candle. The buyers keep pushing for the hills.  The previous day’s candle looks huge to set a strong tone in the day’s trade.

The buyers now have the option of taking a breather(consolidate ) and  create another huge candle and go long in this trade. This should cause price to surge further upwards and hit the resistance barrier around the 1.27500 level. So as you can see there are shor term levels in the daily chart that you don’t see in the weekly chart.

Next up is:

Swing Point Level In Trends

Swing point levels in trends reminds me of this popular forex saying. And it goes like this?”Old support becomes new support, and old resistance becomes new resistance.”  This phrase refers to the scenario where the market creates higher highs and higher lows or lower highs and lower lows.

If  I were you, I’d take note of the formation of these landmarks.  Some one is probably asking “Why should I do that?” Well the market breaks up or down through these levels, that will be your cue  trade temporary retracements also known as pullbacks back to these levels. With pullbacks you are dealing with temporary reversal of the prevailing trend, whether it’s charging up or nosediving down. When you see these landmarks form, get your trade ready.

Now let’s take a look at this phenomenon using the GBP/USD PAIR.

This is the classic illustration of the swing phenomenon we were talking about. You have resistance turning into support. Here GBPUSD pair twice run into strong resistance along the 1.750 mark twice. Once price breaks through this level we see the first pullback along the level of support.

Also these old support and resistance levels provide the perfect opportunity to place your limit orders on either side of the trend. You could place a  buy limit order above the old resistance to align yourself in the direction of the breakout with a handsome risk to reward ratio so long as the pullback does not penetrate below the pivot line.

Next up is:

Swing Point Levels in Containment and Risk Management

Swing point levels are very useful as far as containment and risk management goes.  You can look to buy or sell at swing points even if they are not part of  a trend. One such instance is when the market goes into consolidation or the market goes sideways.Just use your most recent swing high or low as your entry point.

Let’s look at an an illustration of swing point levels using the EURUSD pair

The image  above shows a sideways market stuck between the support and resistance  levels. This happens after price broke through the support(formerly resistance) at the bottom end of the chart. The additional support level in the middle of the range . Look to buy at the level of support and sell at the level of resistance wherever you see those swing points. And you use these swing points as your profit targets.

Next up is:

Dynamic Support and Resistance Levels

Dynamic support and resistance levels are probably the most exciting patterns of all the support and resistance levels.  They can pull back and find support or resistance without the need to stay horizontalThey change from period to period. I have this saying that dynamic support and resistance levels travel at the speed of light in that changes on the charts happen at lightning speed.

One tool that epitomizes dynamic support and resistance levels is the one and only moving averages. They help smooth out price fluctuations by helping you distinguish between price noise and actual trend direction When we mention moving average we are referring to the average price of a currency pair for a specific number of periods.  Let’s see what dynamic support and resistance levels look like

See those squiggly lines? They reflect  the moving averages. They reflect specific periods on the charts, One popular tool used to measure moving averages is exponential moving average(EMA for short. This moving average focuses on the most recent trading data.

See those three EMA tolls in different colors in the bottom right corner? They are three of the most popular EMA’s for measuring moving averages. 200 EMA looks at trading data covering 200 days, 100 EMA  looks at 100 days of trading while 50 EMA touches on  50 days of trading data.

Now the 200 EMA is considered the most popular moving average. I can hear somebody asking “Why should I care?” Well they say the 200 EMA is where all the action is as far as trading activity is. And the small red circles reflect the way price reacts when the EMA’s  approaches it. Sometimes price may steer clear of the 200 EMA. And when that happens it’s best to switch to a higher time frame to get a clear picture of where the price is in relation to the 200 EMA.

For more information on moving averages look up We’re Moving  Averages Part I and  II

Next up is

Trading Range Support and Resistance Levels

Trading range(or sideway markets) support and resistance levels offer numerous high probability trades if you keep your eyes open for these opportunities. The trading range is just price bouncing between two paralle levels on the markets. Just keep an eye out for the trading range and then look out for price signals at those levels.

This is a much better option than just buying on a support breakout or sell on a resistance breakout. Because the last thing you want is to suffer continuos whiplash trying to buy or sell at these breakout levels. Just get confirmation through the signals that a breakout has taken place before you start trading them. Let’s take a look at what life on a trading range support and resistance levels look like

Here we have a ranging market with four sell opportunities at resistance level and two buy opportunities at the support level. Just place your stop loss orders just above the resistance level and below the level of support. Please don;t even try going long at resistance or short at the support. You’ll burn your trading account that way.

Notice the way price has broken through the lower support line and the upper resistance line. This creates false breakout signals only to return to the trading range. All this action is in the 5 minute time frame, and you want to forget that in a hurry. Focus on the long term time frames such as the h4 or daily.

For more information on trading ranges look up Forex Market Goes Sideways

That’s a wrap for “ Six Support and Resistance Types You Absolutely Must Know.” I hope  you ‘ve understood how the above types of support and resistance levels work. Basically you use support and resistance levels to do the following: as indications of the state of the market, decide which levels to buy or sell from,  how to define risk, and as a basis to understand what the market has done, what it’s doing, and what it’s about to do next.

When you combine a clear understanding of support and resistance levels together with price action and market trends you have what is known as T.L.S – Trend, Level, and Support.

Til next time take care.

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How To Master The Metatrader Platform Placing Different Types of Trades

Hello and welcome to another edition of the bulls vs the bears.  A while back we did a two part series on Metarader 4 – Part I andPart II. This time we are going to dig into how to really master the master the metatrader platform. In case some of you don’t know, Metatrader is the one and only platform for forex traders. Not only that metatrader is the  most popular trading platform in the industry.

If you are a rookie trader it will be in your best interests to read this post. However, if you are an experienced trader it wont hurt to refresh your memory by reading this post also. So basically we are going to learn how to use different trade entry order types  and how to  set up the perfect trade.

First off:

Market Execution and Pending Orders

There are two categories of order types in the forex trading business. They are market execution and pending orders. Let me break these two categories down gently starting with:

Market Execution

Market execution is an order which is executed at the  next available market price. So the moment you place your order, your order is filled at whatever price is available at the time you place your order.

Pending Order

A pending order is where you place an order that will be filled at a later time after price moves up or down to the price level where you’ve set the order at. Pending orders include limit orders and stop orders.  Let me break these two terms down so you understand.

Limit orders  are placed to buy below the market price or sell above the market price. Let’s say the EURUSD pair is trading at 1.3200 and you want to sell it if it reaches 1.3250. You can fill a request for a sell limit order if prices touches 1.3250 it registers as a sell or ‘short. So the limit sell  order is placed above the current price.

However, if you want to buy the EURUSD pair at 1.3050 and the market is trading at 1.3100, you places your limit buy order at 1.3050. If the price hits that level, your order will be registered as long. In other words, your market order is placed BELOW market price.

and finally:

Stop Entry Order

A stop entry order is placed above or below the current price. For example if you want to go(or trade) long , but you want to make your entry on a breakout of a resistance area, you place your buy stop just above the resistance area. And if price touches your buy stop order, your buy stop is activated.

However, it’s the complete opposite when placing a sell stop order. You place you sell stop just below the resistance area. When price touches your sell stop order, your order gets activated.

Stop Loss Order

A stop loss order is paced for the purposes of preventing further losses when price moves beyond your specified price level. I can hear somebody asking”Why a stop loss order?” Well the stop loss allows you to control your risk and limit losses.  This order stays activated until you decided to tweak or cancel your stop loss order.

Now that we are done with the market orders, let touch on

Long vs Short

When you say you are going long, it basically means you want to buy the market. You want the market price to rise so that you sell back your trading position at a higher price.  I can hear somebody asking”Well, what does this mean?” Basically you will be buying the first currency and then selling the second. so if you buy the EURUSD pair and the euro gains strength relative to the dollar, you got yourself a profitable trade.

The scenario is slightly different when going short.  When you go short you want to sell you want the market to dip so you can buy back your trading position at a lower price than you traded it for. So you will buy the first currency in the pair and sell the second. If you sell the GBPUSD pair and the British pound is weak relative to the dollar, you stand to make a healthy profit.

Now that we’ve gotten the explanations out of the way, I guess the question on everybody’s mind is:

How Do I Place market order in Metatrader?

Let’s say we want to place a trade for the AUDUSD pair. We are looking to  buy at the most current price because we believe price is going high.

To execute the market order, first click  on the ‘New Order’ button. You should see it in the top going left. When you click it produces the pop up right in front of you.  Once the pop uup, pops on your screen you then select  ‘Market Execution’ under ‘Type.’  After selecting ‘market execution, you then select  ‘Buy by Market'(labelled in pink’ since you want to buy. If you  want to sell, you select ‘Sell by Market.'(labelled in sky blue)

I need to sound off a few warnings though. First off, select the Volume of trade before selecting market execution. By that I mean the number of lots you are trading. Failure to do that and your request will be rejected outright.

Second, market orders are risky and dangerous than most orders. I can hear somebody”But you just asked us to select”Market Execution.” Sure I did. However, The price you selected for your market order may not necessarily be the price prevailing on the market.

Next up is:

How do I place A Stop Order?

Basically you want to enter the market as  price moves up or down into your preferred price. If you enter price on a buy stop entry order you anticipate price to move higher. In that case you place your  buy stop above current price. If price move in your direction, it will fill your buy stop order.

Also make sure your stop order is bigger than the current spread your are trading. It cannot be within the spread. Let’s say the price of EUR/USD  is 1,1240/22, it should be  outside of the current price spread. Most MT4 platforms have a distance of 20 pips. And if the market is closed, forget it. You can’t place your order after office hours.

Let’s take a look at an illustration of how a stop order is done

First you select  ‘New Order in order in order to execute the  stop order. Immediately the popup window for your entry  shows up on  your screen. Let’s take a look at this popup screen in our next graphic

This is what the popup window looks like when you hit the ‘New Order’ button.  Make sure you set your order to ‘Pending Order’. You then select ‘Buy Stop’ and then set the price for the trade you want to enter in. Just make sure its above the current price and outside the spread.

But what if you want to sell? Just select ‘Sell Stop’ and  place your order below the current market price and outside the spread.

Next up is:

How Do I Place A Limit Order?

Well you use  a limit order when you you plan on making a retracement entry into the market. Say you want to sell at resistance because of a strong downtrend, and you want to join that trend on   temporary strength(or pullback). You can then choose to place a limit order at resistance, so long as price is below that level. If price rotates to that level, your limit order gets filled.

Let’s first take a look at sell limit order in action using the EURJPY pair

Here we place a sell limit order along the level of resistance.  Now why are we doing this? We are doing this because we anticipate a lower move if price got back up to the key level at the 130.152 level. If price moved up to that level, then your sell limit order will be filled, and you can take the profit without hassle.

Now let’s see how to fill sell limit  order on MT4

Just like any other order you click ‘New Order.”

Right after you you click ‘New Order, this pop up window shows up on  your screen. First you set the order ‘Type to “Pending Order.” Next you select ‘Sell Limit’ and then set our entry price. Just make sure the entry price is above the current price.

But what if you want to do a buy limit? You select ‘Buy Limit’, which is the next order after ;Sell Limit’ on the menu. Just make sure the  price for the buy limit order is below the current price, in anticipation that the price will pull back to it hit your order, and climb  even higher up the charts.

And Finally:

How Do I Place Stop Losses and Profit Targets on MetaTrader 4?

Some of you may not like doing this but you really need to set stop losses. Failure to do that and you will end up creating a nuclear-sized crater in your trading account. In the same vein you al wan to set a take profit because the last thing you want is the market  U-turning on your trading position and you losing  all your hard-earned profits. So how do this?

First off:

Select ‘ New Order’

And then you fill in your stop loss and take profit orders. If you are selling, you click ‘Sell’. And if you are buying you click ‘Buy. So whenever you want to place a trade, Don’t forget to fill your stop loss and take profit. Failure to do that and you will be digging your own grave.

Before you enter your trade, do me a favor. Make sure you have selected your currency and your trading volume before hitting the sell or buy buttons. We don’t  want to be laughing at the wrong ends of our mouth do we?

That’s a wrap for “How To Master The Metatrader Platform Placing Different Types of Trades.”  I hope you’ve learnt that there are so many different trades you can place on metatrader 4. If you want to know how to set up Metatrader4, look up Metatrader4 Part I – How to Download Metatrader 4 and Set It Up For Price Action Trading

Til next time take care.

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If you’re looking to open a live trading account  Sign Up With EasyMarkets

Three Forex Trading Strategies You Can Take To The Bank

Hello and welcome to another edition of the bulls vs the bears. Today we’ll look at three forex trading strategies you can take to the bank. Sometimes you sit there thing about your trading strategies and a question pops in your head saying”Which three trading strategies would you I bank my money on to get me to the promised land?

This is pretty much what we are going to do. We are going to look at three trading strategies that, if we trade regularly will bring us a ton of profits. Even more important, they are strategies you should be able to recognize like the speed of light without thinking twice about it. So onward:

First Off:

Market Entry

One prerequisite for success  as a forex trader is to get your market entry right. The price action pattern must br so obvious that you can’t miss it. If you ‘re not sure of which price action pattern to choose, let me help you out.

You can get started with the  long-tailed pin bar pattern.  The long-tailed pin bar is a pin bar with a difference. Not to be confused with its sibling the pin bar, the long-tailed pin bar attracts a lot of attention with its conspicuously long tail. It looks so conspicuous that there is no way you can miss it. Now let’s take a look at an example using the USDCAD pair

Now this is what the long-tailed pin bars look like up close and personal at the end of the bullish trend just before the bears take over. The long tail  sticks out from the surrounding pin bars. It looks so obvious and conspicuous that there is no way you can miss this one.

It has a small, or skinny body and a longer wick ,hence the nickname, long tailed-pin bar(The ‘Small Body’label’ says it all).  When on a bullish trend the long tail of the pin bar  sticks out from the top  like a tower. However if it were on a bearish trend,the long tail will stick out from the bottom.You’d think it was doing a head stand.

Let’s look at another example of a long-tailed pin bar – this time a bullish long tail

Here is a bullish long-tailed pin bar(as indicated by the blue arrow) formed at the bottom of the uptrend around the line of support.  The ,moment you see a long-tailed pin bar pop up on your screen just place your buy order at the tip of the tail. Do that and you should make yourself a decent profit.

Next let’s take a look at pin bars in the pull back strategy.

The pin bar in the pull back strategy offers numerous opportunities to enter trades. Notice  the clear entry Three Forex Trading Strategies You Can Take To The Bank in the uptrend withing the parallel channel. Pay close attention to the pullback within the pin bars. Their long tails are very much in evidence  When that happens you  make your entry.

So if you’re looking for a trading setup you can run with for the rest of your life  go with long -tailed pin bars and pin bars.

If you want to know more about long-tailed pin bars look up Long Tailed-Pin Bar – A Pin Bar With A Difference.

If you want to know more about pin bars  look up How to Prosper From Trading The Pin Bar

Next us is:

Money Management

Sure trade entries are important. But you’d be crazy to ignore the money management side of things. As a matter of money management is the most important aspect of forex trading.  Your future prosperity  rides on how well you manage your trades. Failure to take care of your trades could result in a huge crater in your account.

When  I talk about money management, I’m referring to  position sizing and risk reward.  You need to get these two component spot on if you want to thrive as a forex trader.

In case you have forgotten position is the number of lots you choose to trade. In other words position sizing is the size of the the position you choose to trade on the market. Now why is position sizing so crucial? Because this determines how much money you have chose to risk; the larger your position, the more money you are willing to risk. So keep note of that.

There is another reason why position sizing is  important. It’s has to do with properly adjusting your 1R risk per trade. It is absolutely crucial that you get this aspect right.  Failure to do that and your account becomes history.

Let’s take a look at at an illustration of position  sizing/risk reward in action using the EURUSD pair.

You see how the the risk reward ratio has been laid out at every key level. You have the stop loss placed at the first key level of support. As you can see, profit targets have been set with different ratio levels from R/R1:1 all the way up to R/R1:3.

The trick here is adjusting your risk per trade. You should give your trades enough oxygyen to withstand any sudden 360  U-turns by the market.

Now let’s  look at how to plot the risk reward ratio for a downtrend  using the Fibonacci tool using the USDSD(Singapore Dollar) pair. The neat thing thing about this tool is that it helps you predict how the price will go, and then exits the trade before price retraces.

Here is how it’s done:

1. Identify a trending market
2. Draw the Fibonacci extension tool from the swing high to swing low
3. Set your target profits at the 127, 138, or 162 extension (depending on how conservative or aggressive you are)

Use the same set of rules for the uptrend.

And Finally:

Daily Time Frames and High Probability

Probability the most profitable of the three trading strategies is daily time frames and high probability. Not only are you focus on trading the daily frames but you are looking  to trade high probability setups. With these setups, you are not looking trade 100 trades every week. But rather you are looking for a few profit blockbusters that can bring you huge profits in the long term.

Even more important, these setups help you to  keep your emotions in check. And you shed the habit of over-trading – The biggest killer of most traders  trading accounts.

Now let’s take a look at a daily time frame chart in action

Now notice the pin bar  entries at the key level of support. You can enter this trade. Let it run for a few weeks, go on vacation and come back to see a huge profit nicely tucked in your trading account.

Daily trading saves you from staring at your screen all day  scavenging for trades. And it tames your massive impulses when you feel a strong urge to stare at your screen all day. Even more important you have a better chance at prosperity long term. It’s a no-brainer.

That’s a wrap for “Three Forex Trading Strategies You Can Take To The Bank.”  The aforementioned strategies are the best ways to approach your trading day in day out. These strategies have proved to be reliable over the years and will serve you well for years to come.

Til next time take care.

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What Separates Price Action Event Zones From Support and Resistance Levels?

Hello and welcome to another edition of the bulls vs the bears. Today we are going to find out what separates price action event zones from support and resistance levels. Now you need to know price action even zones and support/resistance levels like the back of your hand. Now do I really have to go into what support and resistance levels are? I;m sure most of you know what these two levels are. If not, click here.

For your information, price event areas have been part of forex trading jargon for a quite while. It’s only recently that it’s being introduced into the forex trading main stream. So to avoid further confusion, I’m going to define what these two tools are. And then I’m going to dig deep into what separates these two wonderful tools.

First off:

What’s A Price Action Event Area?

Well, a price action event area is a critical horizontal area on a price chart where a price signal formed. In this same price action event area, you’ll also find a major trend move(uptrend or downtrend)  or sideways range taken shape. These event areas are popularly know as hotspots on the price charts. You should watch these hotspots like a hawk in case in case they retrace(or pull back). If price happens to to touch these event zones, you can be sure the major players will start considering their options. Now let’s take a look at a price event area through the eyes of a pin bar signal.

Ladies and gentlemen.  Laying in front of you is an illustration of the price event area  through the eyes of a pin bar buy signal. The grey shaded ares represent both support and resistant areas.  The arrows pointing downwards suggest price retracing after price bounced off both support and resistance levels. Now take look at the bulls blasting through the level of resistance thanks to a pin bar formation at the level of support.

Keep a close watch on the  arrows pointing downwards  at the line of resistance. The line of support converts into a line of resistance, and the bulls break through this key level and head for the mountains on the back of another pin bar formation. And when this happens, just rack up all the profits along this trail. Understand one thing about price event areas. When you miss out on a price signal, don’t panic. Just wait for price to retrace in the same event area and then you make your move.

Next up is:

Support and Resistance Areas

I’m sure most of you know by now that support and resistance areas are static horizontal levels that are drawn across the price chart. Let’s take a look at support and resistance levels.

Ladies and gentlemen, this is an illustration of support/resistance levels, using the EURUSD pair. These are standard support and resistance levels drawn across highs and lows.

However, there are instances where the support and resistance lines are a more elaborate and longer in length than this example here, So don’t hit the panic button just yet. Now let’s look at support/resistance levels   a daily chart time frame, using the AUDUSD pair.

Ladies and gentlemen, here is another illustration of support/resistance levels using the daily chart time frame. Unlike the previous example, you don’t see any an event area in evidence on this chart. However, price event areas reflect a major price occurrence at the support/resistance levels. Plus, event areas carry a higher premium than support/resistance areas.

Now to the question du jour(of the day):

What  Separates Price Event Areas From Support and Resistance Areas?

This may sound crazy to some of you. But every even zone is a support resistance area, but not every support and resistance area is a price event zone. This begs the next question:

How Do I Tell The Difference?

You see in a price event zone, a price signal suggests a huge breakout from a consolidation area or key level. Let’s take a look at an illustration using the power of confluence.

Ladies and gentlemen, right in front of you is an illustration of a price event area using the AUDUSD pair. The black circled numbers and the red arrows represent price signals long the key levels.

The price signals spark major breakouts at both support and resistance levels. And when  such an occurrence takes place, nobody has to tell you that you are looking at a price event area. If you want to find out more about multiple price signals look up Something Called Confluence.

Now let’s use the CADJPY pair to ascertain why support/resistance is not a price event area.

If you look at the price chart you’ll see that there is no sustained consolidation before the breakout. Even worse, there is no evidence of a price signal triggering the breakouts in either the support or resistance levels. Even worse, we don’t see any price signal triggering a breakout  at neither the support nor the the resistance levels. S you  see why I say the support and resistance levels

That’s a wrap for “A Closer Look At Price Action Event Zones And Support & Resistance Levels.” As you can see price action event zones and Support/resistant levels help you understand the  overall dynamics of the formation of a trade. This give and go between the price signal/entry and the market conditions give rise to the high probability opportunities. Til next time  take care.

Til next time take care.

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How To Find The Best Trade Entry For Maximum Profits

Hello and welcome to another edition of the bulls vs the bears. Today we are going to find out how to find the best trade entry for maximum profits. Basically we are looking for lower risk and higher reward. Ask most people what their ideal low low risk and high reward is and they’ll say”A massive stop loss and massive profits.” But then somebody will retort saying”Yea. That’s easy for you to say.”

Sure these sublime trade situations are hard to find. They are like shooting stars. You find them today , and that’s it. But I’m hear to tell you that it’s possible to spot these sublime sightings. You just need to do a little digging. So without wasting much time, I’m going to show you two ways you can spot the best trade entry. And then I’ll show you a few illustrations of how to spot these trades.

Look For Obvious Price Signals

Look Obvious price signals. These signals should so obvious that  you can’t miss them. T  Most will tell you that the best time frame to spot these price signals is the daily chart frame. Because that is where all the excitement is. Do this over and over again, and you will get the hang of it.

Next up

Look for Factors of Confluence That Confirm The Price Signal

The next step is to look for factors of confluence that confirm the price signal. Basically you spot the signal, and then go back to another time frame and check to see if  the signal aligns with other key levels or has formed thanks to a pullback within a  trend, or that there is another factor of confluence in the chart.

Basically you want to find as much supporting evidence if you want to find the perfect trading point. Because the last thing you want to o do is to increase the risk:reward potential  just to satisfy your restless urge. Just stay within your trading plan and you should be good to go. Like I said last time, greed kills.

I will let you in on a little secret. You may not find the perfect entry out there, but you can definitely find trades that carry a lot of confluence(or weight) behind them.

Now that we’ve gotten the meat out of the way, Let’s get into some examples

First is a clear example of a pin bar sell signal at the line of resistance. Pay close attention to the way the pin bar’s tail sticks out at the top. This obviously suggests a major price reversal, and it also tells you that price might be dropping pretty soon. This is pretty obvious it’s ridiculous.

Now next look at the illustration of confluence in the next pic

Right in front of us are three factors of confluence ina EURAUD graphic. This was a consequence of two zones acting as both support and resistance. If you ask me they give enough grounds to warrant a trade entry. Once again, see the way pin bar tail jut out at each of the three zones. That’s because of major pullbacks in each of the three areas.

Now these price signals are so obvious you can miss them. And when you get the entry right, expect to see a spectacular downward slalom run, as is the case at the line of resistance. See  the way the  bears just barge  through the resistance barrier like it’s stolen something from them. And when that happens it can only mean one thing – humongous profits.

Now let’s look at another example illustrating an entry tweak and potential risk rewards

Ladies and gentlemen, we are going to look try to tweak our entry and improve on the risk reward potential on the trade. It’s going to be tough entering on the 50% retrace as price has barely touched the the first level of support at the bottom. The good news is you can still enter on the retrace of the pin(as indicated by the red arrow on the “Buy Entry”) and place your stop above the pin high(as indicated by the red diagonal line). Do this and you have yourself a strong stop loss and a decent profit.

We can see the same pattern at the RR2(Risk Reward) level. Stop loss is placed above the pin bar and entry is made just around the the third line of support. This sets the stage for a huge profit binge.

Finally let’s look at a bearish pin bar illustration whose profit potential is not so obvious

Here you see a long – tailed pin  bar followed by a strong bearish pattern. These   bars formed after price broke and closed under this level previously. Now it wont be so obvious  since they don’t immediately scream “SELL US.” But the strong momentum behind the sell off should pretty much tell you it’s time to put in your sell order.

That’s a wrap for “How To Find The Best Trade Entry For Maximum Profits.” The main thing you should take away from this lesson the best trades form, backed by supporting factors better known as factors of confluence. With a little practice and knowledge of what you are looking for, this will be a cake walk for you.

Just look out for an intersection of a signal and  a key level. Or it could even be the intersection of a key  level and  a trend. Just trade like a  sharp shooter and wait for the right pieces to fit. Once the flash bulb in your head  goes off,  just pull the trigger and enter your trade.

Til next time take care.

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How to Manage Your Forex Money Like A Pro

Hello and welcome to another edition of the bulls vs the bears. Last time we touched on How To Manage Trades The Right Way.  Today  we are going to touch on how to  manage your forex money like a pro using risk reward and position sizing. The one thing you do not want to do as a trader is get so hooked on a trade that you don’t think it can fail. Then you end up leveraging so huge on a trade, which sets your trading account for a nuclear-sized blow up.

All it takes is one such tsunami to cause a huge crater in your trading account.  And when that happens you  resort to emotional trading instead of logical trading. Rather than relying on your trading plan, you fall back on your emotions by jumping back into the market in a desperate attempt to make up for your losses.  That’s suicide if you ask me. You need to have a clear understanding of risk reward and position sizing. Since I’m a pretty nice guy I’m going to show you a few tips on how to perfect these two scenarios:

First off:

Think in Probabilities

Risk Reward and Position Sizing is all about probabilities. It’s a complete waste of time searching for a silver bullet trading system that will take you the Promised Land of prosperity. Look, if you want to prosper as a forex trader, you need to understand how risk reward and position sizing works. You need to perceive each trade as a probability. That it has a reasonable chance of making you a profit. When you see forex trades this way, prosperity will find you very quickly and easily. In so doing, you will see the market  more objectively instead of developing the mindset of a Las Vegas gambler.

Let me let you in on a little secret. Successful forex traders view  the forex market as the implementation of their trading edge. By trading edge I’m referring to the prevailing conditions for their trades to help them make a profit. With that in mind, you then decide on how you are going to minimize the risk on the trade while at the same time, same time maximizing your reward(in this case profits). With the power of risk reward and position at your disposal, you are able to manage your risk on each trade.

Even more importantly, you  ditch your gambler’s hat and wear the cap of a logical and disciplined trader. When you view the market this way, you will be better equipped to put a cap  on your emotions because you know the possible risk and reward scenario before you enter the trade. With this information at your disposable, you don’t need to stare at your screen all day waiting for your profit to materialize. Instead  you utilize  the set and forget strategy. I can hear somebody asking”What the heck is that”? Well you set your take profit and stop loss and leave the market to work for you.

Just leave the house and chill for a bit so that by the time you get back  home, your profit is already in your trading account. Even more important you are able to keep your emotions and sanity  in check.

Now that we’ve got the bones out of the way, let’s get to the meat of the issue- Starting with:

Risk To Reward

It’s no secret that anytime you contemplate entering a trade, think about the risk to reward ratio. Let’s say you find a good trade setup, you first decide how much risk you will put on the trade. In other words, decide how much you can afford to part with. Risk management should be top of your priority risk. You should think risk management first, reward(profits) later. Not only are you a professional forex trader, you are also a risk manager. You need to treat forex trading as a business. Once you  realize the importance of risk management you can then concentrate on being the best forex trader that you want to be. The rewards will take care of themselves.

Now let’s take a look at risk to reward in action using a pin bar setup below

Ladies and gentlemen, here is the pin bar setup. we s As some of you probably know the pin bar setup is one candlestick representing a sharp reversal or a strong price reversal It’s attributes are: along tail(popularly known as shadow or wick. And the area between the open and close of the candle is known as the full body.

Here we a bullish uptrend forming at the far left corner. I’m sure some of you who are familiar with the pin bar setup are saying to yourselves” Hmmmm…..this sure looks like a profitable setup.” However, think risk management first, rewards later. You first find the safest place to place your stop loss so you minimize the possibility of taking a nuclear-sized hit. Even more importantly, you want to give your trade more room to breath while you maximize your risk to ratio rewards.

In that case you place your stop loss just below the long tail of the pin bar. You only do this at the end of the downtrend. Anything beyond that and your trade is toast. The whole idea is to leave enough room beyond the long tail to avoid getting caught in the stop run. Now I can hear someone asking” Enough of the risk. How do I figure out my reward?”

Well it depends on the mood the market is in. As you can see, the market started on the uptrend. If you play your cards right, you could  twice or even triple the risk. The bench mark ratio that most traders use is 1:2. In some cases most traders go as high as 1:3.

So basically this is an example of the  risk reward setups that occur on the market regularly. Like I mentioned earleir,  take care of your risk management and the rewards will take care of themselves.

If you want to know more about trading the pin bar look up How To Prosper From Trading The Pin Bar

Last but not least is:

Position Sizing

Somebody once said that position sizing is the glue that hold risk reward scenarios together. You know what,  he is absolutely right. The whole premise of position sizing is to fit your position size to to fit your stop loss. Let’s say you risk $100 after after spotting a delicious trade setup.  Except that the most  logical spot to place your stop loss is 200 pips away. In that case you reduce your position size to  accommodate your stop loss, So if you are trading a $1 a pip you will slash it to  .50 cents a pip. So your calculation would be .50 x 200=100.

Let’s take a look at an illustration using the AUDUSD pair.

Here you risk $100 but the sto loss is 109 pips further up because the safest spot for the stop loss is just below the pin bar. So you divide the risk amount by the stop  loss(100/109), which gives .917.

That’s how position sizing is done. All you are doing is adjusting your lot size to accommodate the stop loss distance that gives you the best chance of making a decent profit. Anything opposite this formula is nothing but GREED. In this case greed will end up killing you. I dare add that position sizing combined with risk reward scenarios gives us the  set and forget strategy I mentioned earlier. It sets your mind at ease and makes you objective and logical. Each trade you enter in is simply an execution of your trading edge. So there is no need for you to risk more than you should. And  you can use this same trading edge on as may trades as possible. You don’t need to be hung up on one trade. That’s suicidal.

If you  need help calculating your position size, consider using a  position size calculator. It will help speed up things for you.

If you want to know more about  position sizing look up Risk Management and Position Sizing- The Most Important Lesson in Money Management You Will Ever Learn

That’s a wrap for “How to Manage Your Forex Money Like A Pro.” If you want to prosper as a forex trader, then you better manage your trading cash properly. Forex trading is a business. And just like any other business, you need to look after your cash properly.  You don’t leverage all your money on one trade and risk blowing your trading account. Just apply the right position size and risk to reward ratio and you will be laughing all the way to the bank.

Til next time take care.

Open Live  Forex Trading Account 

If you’re looking to open a live trading account  Sign Up With EasyMarkets

How to Manage Forex Trades The Right Way

Hello and welcome to another edition of the bulls vs the bears. Today we are going to look at how to manage forex trades the right way. Basically we are going to look at “Forex  Trade Management 101.”

Forex Trade Management has become the elephant in the room as far as forex traders are concerned. It’s not something traders like talking about. Now don’t ask me why. I have no idea. But I’ll tell you this. Fore trade management is absolutely essential for any forex trader. It’s the difference between exponential growth and your trading account taking a humongous hit.

Once your trade entry goes live, you have to  to play manager.  Unfortunately a lot of traders simply ignore this simple admonition. And when you do that it’s only a matter of time before you hit the self-destruct button. What looks like a winnable trade setup could turn into a losing cause if you manage your trade properly. It’s the nature of the beast.

So without wasting much time we are going to learn a few  forex trade management tips you can put to use in future trades.

Make Sure You Take 100% of  Your Winnings

You want to make sure you take  100% of your winnings.  Some of  you are “Of course I’ll take the profits. Why would I leave them on the table?”. Point  taken. However, you need to  take these all your winnings to cover your losses in future trades in case the market does an unexpected 360 on you. And so, you must be consistently making winning trades. Or else, you will find yourself in a hole on your trades.

Let’s say you lose a trade at 3% risk. With multiple profits from previous winnings, you can use them to absorb your  losses. Someone is probably asking”How do we do that? By using the breakeven option. If used properly, you can generate even bigger profits.  I hear somebody asking this question”What happens if I take 50% at the first profit target? I move my stop loss to break even, only to be stopped at break even?

Let’s look at this illustration in the graphic below

Ladies and gentlemen this is a classic illustration of a breakeven situation. As  I stated, 50% profit is  taken at  target one. But the rest of the trading position gets  stopped out at break even point. If  let’s say 3% was risked for the trade  you’ll end up with 1.5 % profit.

On the surface of things someone may say”That’s not too bad. However, things become a little hairy when you make a loss on the very next trade and lose another 3%. Next thing you know, you are  hemorrhaging money. That’s why it’s absolutely crucial that you make full profits regularly on your trades so you can absorb huge losses from these trades. Even more important, it helps in your overall risk reward strategy.

Next  We’ll learn how to manage trades the right way using a sell position and a buy position. Let’s start with: the

Stop Loss in Buy Position

Make sure your stop loss is at the tip of the downtrend. If you want to move your stop loss further up, make sure the pattern is higher than the current stop loss. You absolutely must not move your stop loss when you are in a buy position. Let’s look at an illustration

Ladies and gentlemen, this is the uptrend for the Eur/USD pair. As you can see the initial stop loss is placed at the tip of the down pattern along the line of support,. Now let’s look at the next chart to see the break even situation

 

This time the stop loss has moved higher up at break even point around the line of

resistance. Once either the profit target or stop loss is hit, the trade is completed and

the profit or loss will reflect in your account balance.

Last but not least is:

Stop Loss in Sell Position

If you find yourself in a sell position, you move your stop loss to the tip of every new pattern. If you want to move your stop loss to breakeven make double sure that the pattern is lower than the stop loss. Let’s take a look at the illustrations below.

 

 

This is an illustration of the breakeven situation using the the same EUR/USD pair. As you can see the stop loss has been placed at the tip of the pattern at the line of resistance. Now let’s look at the break even situation.

As you can see  the stop loss has  been relocated to the  new breakeven point at the line of support. And just like the buy scenario, once the profit target or stop loss is hit, you will make a profit or incur a loss. Of course, either of these scenarios will reflect in your trading account.

For information on trade management, look up What Next After Entering A Forex Trade?

That’s a wrap for “How To Manage Forex Trades The Right Way.” It’s absolutely crucial that you have a trade management policy when you trade. Failure to do that could bring you eternal misery, not to mention, a nuclear-sized crater in your trading account. If you utilize your breakeven policy properly you could make yourself a handsome profit and save yourself a humongous headache.

Til next time take care.

Open Live  Forex Trading Account 

If you’re looking to open a live trading account  Sign Up With EasyMarkets

 

A Few Stop Loss and Take Profit Strategies You Can Take To The Bank

Hello and welcometo another edition of the bulls vs the bears. Last time we tried to Get The Hang of Using Sop Loss and Take Profit in Forex Trading. Today we are going to jazz things up a little. We are going to learn a few stop loss and take profit strategies that you can take to the bank.

We are going to learn about some popular price action strategies and where to place your stops in these trading strategies Like I alluded in our last lesson, your prosperity as a forex trader is dependent on whether you use a stop loss or take profit. Failure to do those, and your Forex trading account could take a nuclear hit, the size of the Grand Canyon. So we’ll get thing started with the stop loss strategies First off:

Pin Bar  Stop Loss and Take Profit Placement

The pin bar is a very popular trading strategy representing a strong rejection and reversal price. The attributes of the pin bar are as follows: a long upper or lower tail, wick, or shadow, and a smaller body or real body.

Now I can hear someone saying”Yeah Yeah! I know all all that? But where do I place my stop loss?” Well the logical place to place your stop loss above or below the longer candlewick of the pin bar. For the trade to be successful, you should leave some breathing room between the entry level and the end  long candlestick. If price goes beyond the longer candle, the trade becomes a bust.

For take profit you  you close the trade when the candlestick breaks the line of support.

Let’s look at an illustration of the pin bar stop placement and take profit placement.

Right  in front of us is the the stop loss and take profit in the pin bar set up.  On the bullish side  the stop loss is placed just below  the long tip of the pin bar. While the on the bearish side the pin bar is is placed at the tip as suggested by the red arrow. So if you see such set ups in the pin bar , you know what to do.

Wanna learn more about the pin bar? Look up How To Prosper from Trading the Pin Bar

Next up is:

Inside Bar Stop  and Take Profit Placement

If you know the inside bar as well as I do. you’d know that it’s a high probability strategy with huge rewards. Naturally as a high probability trade, you dont need that many stop losses. The inside bar setup is better traded in the daily frame and in strong trending markets-especially where the potential for strong breakouts exists;

Now the inside bar itself is tucked in front the preceding candle, popularly known as the mother bar. The inside bar typically has a higher low(HL) and lower high(LH). In smaller time frames it shapes like a triangle.

Now I can hear someone saying”Ok. We’ve heard all that. Now how about the stop loss and take profit  placement?” Well, rumour   has it that you place your stop loss just below  the mother or lower high(LH) depending on whether you are going long or short. As for the take profit, you buy when the  candles break the key areas,  be it line of support or line of resistance. Let’s look at an illustration of the inside bar strategy

Now here is a bullish layout of the inside bar pattern. As you can see the stop loss is placed at the bottom the inside bar as indicated by circle. If it were a bearish set up you’d have placed it at the top of the inside bar. With the take profit, the buy order is placed after it breaks the line support as indicated by the green arrow. So when you see this inside bar set up you know what to do.

Now let’s look at the bearish set up.

Ladies and gentlemen this is a bearish set up of the Inside Bar Pattern. As you can see the stop loss is placed on the high(top) of the mother bar. While the take profit is placed just as the bearish candle breaks the line of resistance.  So when you see this set up you know what to do.

Wanna know more about the Inside Bar pattern? Look up Trading The Inside Bar With Gusto

That’s a wrap for “A Few Stop Loss and Take Profit Strategies You Can Take To The Bank.” As I said in the last post, Every trade you enter has the potential of making you a profit or blowing your account into the ozone. With that in mind you need to weigh the risk of the trade as well as its potential reward. So if you want to be a profitable forex  trader, make use of your stop loss and take profit orders.

Til next time take care.

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If you’re looking to open a live trading account  Sign Up With EasyMarkets

How To Get The Hang of Using Stop Loss and Take Profit in Forex Trading

Hello and welcome to another edition of the bulls vs the bears. A thousand apologies for not updating the blog for so long. I experienced a few technical hitches with my blog right after uploading the first post. But thankfully that has been solved. Hopefully it wont happen again.

Now onward to today’s lesson. Today we ‘re going to learn how to get the hang of using stop loss and take profit orders  in forex trading. Basically I’m going to explain how to place a stop loss and a take profit when trading forex.  It is absolutely crucial that you know how to set a stop loss and take profit as a forex trader. IF you cant do this, you are doomed.

I get the question you need to be asking is:

What is Stop Loss and Take Profit?

Well stop loss is a simple order you send to your broker to limit your losses on an open trade. Think about this request as damage control to save your trading account from going up in smoke. On the other hand take profit is an order you send to your broker to close your trading position when price hits your profit target. Basically you want to head for the exits once you price hits your profit target. Let’s take a look at an illustration of stop loss and take profit loss in both buy and sell scenarios-starting with the buy scenario.

Ladies an gentlemen this is what the stop loss and take profit look like in a buy situation. With a buy trade the stop loss is placed just below the entry price. So that if price dips and hits your stop loss you incur a loss. The important point here is you decide how much money you can afford to lose and you are saving your account from going up in smoke.

The take profit is pretty obvious. As you can see  take profit is is placed above the entry price. Once price hits your take profit target, you make your profit and head for the exit.

Now let’s look at the stop loss/take profit in the sell scenario

Ladies and gentlemen, this is what  the stop loss/take profit in the buy trade looks like. Unlike the buy scenario, the stop loss is placed just above the entry place. While the the take profit is placed below the entry price. If the price rises and hits your stop loss you incur a loss. And just like the price scenario, the stop loss is there to save your account from going up in smoke.

The take profit is the complete opposite. When price drops and hits your take profit target, you make an instant profit-no questions asked. And when you make your profit, your profit is instantly recorded in your account. You don’t need to stick around to find out.

I guess the next question that is burning on everybody’s mind is:

How Do I Place Stop Loss and Take Profit Orders on MT4?

That’s fairly straight forward. First you open your order entry box  by pressing F9 or using the right click option. Next you select “Trading and “New Order.”

Immediately the MT4 dialog box pops on your screen as shown above. You then go ahead and fill the parameters for your stop loss and take profit orders.   If you want to sell, you click “Sell By Market.” And if you want buy you click”Buy by Market.”

Wanna learn more about stop loss and take profit? Look up How To Place A Stop Loss To A Tee and   A Few Rules On Taking Profits From Forex Trades

That’s a wrap for “How To Get The Hang of Using Stop Loss and Take Profit in Forex.”You’d be absolutely insane if you don’t  factor stop loss and take profit  in your trading decisions.  You need to treat forex trading as a business.

Every trade you enter has the potential of making you a profit or blowing your account into the ozone. With that in mind you need to weigh the risk of the trade as well as its potential reward. So if you want to be a profitable forex  trader, make use of your stop loss and take profit orders.

Til next time take care.

Open Live  Forex Trading Account 

If you’re looking to open a live trading account Sign Up With EasyMarkets

The Most Effective Way To Prosper As A Forex Trader

Hello and welcome to the New Year’s edition of  the bulls vs the bears. This week we are going to find out the most effective way to prosper as a forex trader. If you don’t know by now forex trading is  about patience. You need to lie in wait like a crocodile and  allow the right trade to pop up on your screen.

This trading approach should be the cornerstone of your trading strategy. Come to think of it, it should be part and parcel of your trading edge. If you perfect it like the back of your hand, it should edge ever so closer to being a prosperous forex trader. I guess the burning question on everybody’s mind is:

What Is The Most Effective Way To Prosper As A Forex Trader?

Simple. Don’t jump head first  into the market. Instead lay low for a retrace, pull back or a complete break in the market. Now I can hear someone asking “How is laying low like a crocodile supposed to help me as a forex trader?” Well there are three ways laying low like a crocodile can help you as a forex trader.

1)Laying low like  a crocodile helps you get a tighter stop loss which then allows you breathing space to cash in on a trade by upping your risk reward. Not only that but allows you to increase and trade on a bigger position without risking much money.

2) Laying low also saves your stop loss from being blown to bits-Assuming your stop loss is put in a safer spot.  In so doing  You give your trade more oxygen to breath. So that instead of incurring a loss on a trade you are in a position to make a healthy profit on a trade. And you can afford to take significant risks based on your risk/ratio. It will most certainly do your trading account a whole lot of good.

3) Laying low also give you the option of holding out on trades you are not sure of and reluctant to take a chance on. In such a scenario, you can put in a stop loss. Better safe than sorry. Isn’t it? Even more important, you eliminate the  possibility of  a stop out(or your stop loss being smashed). That should afford you a good night sleep don’t you think?

Now let’s look at a few  pictorial examples.

Ladies and gentlemen, here is a classic example for waiting for the  right trade using the EUR/USD pair. Here you are entering a trade you are absolutely sure about. As you can see waiting for the right trade  increases the risk reward on the trade. The 3:1 risk ratio at the  resistance level illustrates my point here. Notice the placement of the stop loss 50 pips below the entry price. This increases the likelihood of a huge risk reward.

Now on to the next graphic

This is a classic illustration of entering a trade on a hot trend.  Here you see pin bar signals forming after pullback at support and resistance levels. It’s what you call confluence of factors. After pullback then the uptrend continues. This will be the perfect opportunity to make your move,

That’s a wrap for The Most Effective Way To Prosper As A Forex Trader”.” Yes it’s possible to profit from breakouts and breakouts. The whole  idea behind being effective trading is to get a hot entry and to get safer stop losses. This helps you escape market uncertainty and gives your trades more  time to rack up the profits.

Even more important, your trades have to be part of your trading plan. It must be part of your trading armor. You can’t go to war devoid of weapons. Can you?

Til next time take care.

Open Live  Forex Trading Account 

If you’re looking to open a live trading account  Sign Up With EasyMarkets

How to Profit From Trading False Breakouts and Fakeouts

Hello and welcome to another edition of the bulls vs the bears. Today we are going to learn how to profit from trading false breakouts and fakeouts. You see trading breakouts is  a very profitable strategy. Only that sometimes breakouts do not quite materialize,a and instead do a nasty about turn on you, causing your trading position and your trading account to go out in smoke,

The good news is you can anticipate what’s happening and react like like a marksman to this type of situation. You can be profitable with false breakouts and fakeouts if you know what you are doing. So we’ll take a close look at what false breakouts and fakeouts really are and  how to trade them.

But before we go on I suggest you read up on How to Trade and Crush the False Break and How to Trade the Fakey Pattern . Failure to d that and you will be scratching your hair this entire lesson. First off:

What are  False Breakouts?

False breakouts are sightings where price breaks through a key level, and then suddenly does a sharp change in direction. What’s so crazy about this scenario is that traders, desperate to make a quick buck are sucked into the direction of the initial breakout. Then when price goes into sudden reverse, it triggers a series of stop orders by these gullible traders. Of course it completely turns their day upside down.

The entry of these gullible traders puts further pressure on price, It is this reaction that results into the false break.  Now let’s see an illustration of the false break and reversal in action.

Ladies and gentlemen, here is an illustration of a false break using via the GBP/USD pair. The pattern marked in blue is the inverted Head and Shoulders pattern. The neck line, marked in magenta is considered the signal line. Notice the upside breakout(marked in red) through the neckline. This breakout confirms the formation of the Inverted Head and Shoulders pattern and suggests the bulls are about to take off. Unfortunately price quickly repulses the bulls advance.

This causes price to sharply reverse and set the bears on a wild slalom the size of the Head and Shoulders pattern.

How Powerful is  the Fakeout Pattern?

Let me tell you that the fakeout pattern is vert powerful. When you have been faked out by a breakout, you will realize that the profit opportunities are substantial. All you need is the sharp eyes of a marksman for you to take advantage of the trading opportunities.

If you find a false break on the upside, just put in a sell order on the assumption that a pullback is about to happen. If a false break is on the downside, then expect the bulls to to do a pullback. Of course this creates a long trading opportunity. And you will be crazy if you don’t take advantage of this bullish opportunity.

Sounds simple right? However there is one exception. Like mentioned earlier, you must be able to tell the difference between a fakeout and a real breakout, Failure to do that and you will be gnashing your teeth and pulling your hair all day. The best way to do this by studying previous patterns on your charts. Once you muster this, it should be like riding a bike for you.

How Do I Identify False Breakout Patterns?

Now this is the deadliest aspect of trading breakouts. Failure to identify a false breakout properly and you will lose a lot of cash.  There may be times when you completely misread the price action for a false break and price returns to the initial  breakout point. Next thing you know  price confirms the initial breakout and follows the direction of the initial breakout. It’s happened to me quite a lot. I know what  I’m talking about.

First of, keep an eye on the volume of trading. Real breakouts are usually characterized by a strong trading volume in the direction of the breakout. IF there is no trading present during the breakout, don’t bother putting in an order. If you do, you will burn all your fingers.  Let’s look at an illustration using  the GBP/JPY pair

Here is an illustration of an actual breakout in its pomp.   The volume indicator at the bottom of the chart  shows high trading volumes(as indicated by the green arrow) at the time of the breakout. See how price follows the direction of the break after the breakout.  With such a high volume the opportunity to trade the trendline break to the downside is quite significant.

Now let’s look at an illustration of a fakeout pattern in action using the GBP/USD pair.

Ladies and gentlemen, here is an illustration of a fakeout pattern in action(As indicated by the red circle). It shows resistance at $14700. After numerous retests of that level, price eventually closes above the $1.4700. Nobody needs to tell you you need to put in a buy order here.

Unfortunately the Volume Indicator does not give us much to work with here. Sure we price do a sharp reversal. However that leads to a fakeout setup-something none of us want. When the Volume Indicator is not helping   just switch time frames  to see if there is any evidence of a breakout or fakeout. It’s very possible there is a pullback which is not evident on  the initial time frame.

When to Enter Fakeout Trades?

Timing is everything when entering fakeout trades. When you spot a low volume of trade , don’t enter until price returns to test the initial level. But if price returns with a higher momentum, then it’s like to be a false breakout.If the bulls break through on a low volume, put in a sell order on a bearish pullback.

The key level takes many forms. It could be a horizontal support or resistance level, a diagonal trend line, or a price channel, pivot point, chart pattern, candle pattern, e.t.c.

Placing Stop Loss on Breakouts

Like we said earlier, a real breakout pattern can easily pose as a fakeout pattern test a level, and follow in the direction of the breakout. In light of this, you’d do well to protect your trade with a stop loss

. I can hear someone asking”Where do I place the stop loss?” Well, you will want to place your stop loss on the opposite side of the breakout. Let’s take a look at the illustration using the same GBP/USD pai we used earlier.

As you can see the stop loss is placed nicely on the opposite side of the breakout. The price is likely to do a sharp reversal anyways,. So you might as well make the stop loss tight. Once price breaches the key level, it’s confirmation that the breakout is legitimate.

Entry Point When Trading Fakeouts

Timing is everything when trading fakeouts. It could be the difference between the difference between prosperity and poverty. You only enter the market when the trading volume leading to the  breakout   is very low and the price has returned to test the key level in question. But if price’s retest of the key level occurs with a high momentum, compared to the break, then it’s a fakeout.

If the bulls break the key level on a low volume of trading, you just pull in a sell order on a bearish pullback. The pull back could come in many variations; it could be a horizontal support/resistance level, a trend line, a price channel, a Fibonacci level,a pivot point, a chart pattern, a candle pattern, e.t.c.

How to Place a Stop Loss on Fake Breakouts

You need to get your risk management spot on when trading fakeouts. Why? Because prices tend to be very unpredictable in these area. Like I said a a break can pose as a fakeout, test the key level, and then follow the path of the original breakout. With that in mind, always your trading position with a stop loss. I can hear someone asking”Where do I place the stop loss?” The best spot to place the stop loss is on the opposite side of the initial breakout. Let’s take a look at this scenario using the GBP/USD pair. with the previous chart.

This is the same chart we used previously. Except that a nice spot has been prepared for the stop loss. Since the price is likely to do  a sharp 360 after the fakeout, make sure the stop loss is very tight so you avoid a major crash on your trading position. Because once price breaks this level, that will be confirmation that the breakout is valid.

That’s a wrap for  Some Costly mistakes You Should Avoid Like The Plague As A Forex Trader”.” Just make sure you you cut down to the barest minimum the above mistakes that you make. There is no such thing as a perfect trader. You are learning all the time. The trick is no to keep making trhe same mistakes over and over again. Even more important, you ate constantly learning as a forex trader. Just look for ways to be a efficient as a forex trader.

No Need For Targets in Fakeout Trading

You don’t need to set specific targets in fakeout trading. When you spot a fakeout you just measure the formation  size and apply it from the opposite side of the formation, starting from the extreme end. When the trading volume on the fakeout  drops, you should see the volume pickup during the pullback.

So long as the trading volume is high just hold your trade for as long as possible. The moment then volume drops just close your trade take your profits and head for the exit. Now let’s take a look at a few examples of what we’ve been talking about thus far.

Here we have the H1 chart of the GBP/USD pair.  Below the chart we have the Volume Indicator.  We have a bullish trade  posing as a false breakout and a reversal. Notice the strong support being whacked several times at 1,2790. Suddenly a bearish candle closes below the support level. When this happens you’re like “Hmmm I could put out a sell order here.”

Not so fast cowboy!Take a close look at the trading volume leading to the breakout. It does scream “FAKEOUT!”Why? because there is a steady drop in the trading volume. This makes the breakout suspect. And when you have a dubious breakout, you guessed it, you have a false breakout.

Now notice the huge rejection by the bulls in the engulfing pattern.  This is the perfect opportunity to put in a buy order. Just make sure the price increase is very sharp for you to make your entry. Of course you have to protect your trade with the stop loss we discussed earlier. Just place your stop loss in the engulfing pattern.

Luckily for us the price increase creates the pullback we’ve been anticipating all this while. See how the Volume Indicator is reading huge trading action? This suggests price is moving to the upside. Afterwards trading volume drops, resulting in price losing steam.  And when that happens, close the trade, take your profits and run like your life is at stake.

Now let’s take a look at another example.

We have the H1 charT of the USD/JPY PAIR. Only this time we are using the popular Rising Wedge pattern.(marked in pink.) Now the Rising Wedge is a result of a correction appearing while the bears were in charge.   As the  wedge takes  shape we see a drop in trading volume. This is because the Rising wdge is more consolidated. The players are taking a break to consider their next move.

However, we see price slicing the wedge through the upper level. Consider that as a possible false break. We also see an increase in trade volume  during the bulls break. Treat that with a grain of salt as this suggests a false breakout. Why? Because it has bearish potential written all over it. A  bearish doji shows up after the break. Of course a  doji has indecision or reversal written all over it,

With this information at your disposal, consider putting in an entry at the close of  the doji  candle. Put in your Stop Order above the High created by the potential false breakout, In  so doing you protect your trade in case the bulls take over.

See how price spikes sharply when  the bears take over after the pullback?  Also the Volume indicator records high trading traffic from the downside rest as the bears run out of gas.

After a long while, the trading volume begins to drop. That should tell you that price is running out of gas. Now will be a good time to take your profits and run(as indicated by the arrow).

That’s a wrap for “How to Profit From Trading False Breakouts and Fakeouts .” Yes it’s possible to profit from breakouts and breakouts. But  you need to anticipate these unfolding events well if you want to your cash register to ring. Sometimes what seems to be a breakout might turn out to be false, causing you to lie flat on your face.

Just don’t be in a hurry to jump into the market yet. Just wait for confirmation, with your volume indicator as your guide. If the trading volume leading to the breakout is high, jump in. If the volume is low, hold your horses.

Til next time take care.

Open Live  Forex Trading Account 

If you’re looking to open a live trading account sign up with EasyMarkets.

How to Trade and Cash in on Wedge Chart Patterns

Hello and welcome to another edition of the bulls vs the bears. Last time we touched on How To Ring In The Profits Trading The Head And Shoulders Pattern.This week we continue our series on trading chart patterns by looking at how to trade and cash in on wedge chart patterns. Now wedge patterns are continuous or reversal patterns where traders are contemplating their next move at the end of a trend. When you see this this information, it means traders are thinking about where to drive the currency pair to next.

So  when you see a wedge chart pattern it means forex traders are contemplating on where next to drive  price. Wedge chart patterns could be either continuous or reversal patterns.

What  are we going to do?  Of course we’ll look at a few  wedge patterns. And then w are going to learn how to trade them.

First  off:

Rising Wedge

A rising wedge takes shape when price takes a breather between  support’s upward slope and resistance lines. In plain  English, price goes into consolidation between these two lines.  You will find that the support slope is steeper than the support lines. In this setup you have lows forming faster than highs. This leads to the wedge-like formation that we’re talking about.

When price consolidates be ready for a spectacular breakout. This breakout  could end up at either the top or the bottom. if the rising wedge forms after the bulls shift ends(or end of  uptrend), it means the bears shift is about to start. In other words a reversal pattern is about to commence. However, if a rising trend forms during the downtrend, it means  a continuation of the move. In other words the bears are still running the show. Regardless’, the formation of this pattern can only mean one thing –  Get your orders ready.

Let’s take a look at the price action in a rising wedge pattern

Ladies and gentlemen, here is a rising wedge formed at a end of an uptrend. Notice  how price action is forming new highs, but at a slower pace compared to the lows.

Now let’s watch price breaking to the downside in the next graphic

Ladies and gentlemen,  the bears have have broken to the downside. When this happens, it means it’s time to go short. In other words, put in your sell order. The bears have broken through the trend line, meaning get ready for the beginning of a down trend,

Like we discusses in the last lesson, the price movement after the breakout is the same size as the height of the wedge pattern,

Now let’s look at the rising wege pattern in the bearish continuation signal

Price descends from the downtrend.And then it goes into consolidation, resulting into higher highs and even higher lows(Would you believe?)  Now let’s see price break down to the downside

Now price has broken at the downside. But the bears are like”Who cares? We’re still moving down the slope. That’s why it’s called the a continuation signal. And the bearish move is  the same size as that  of the height of the formation. Anh when that shapes up, it’s time to sell.

Last but not the least is:

Falling Wedge

Just like the rising wedge, the falling wedge acts as a reversal or continuation signal. The reversal signal is formed at the end of the bears shift(downtrend), suggesting that the bulls are about to start their shift. In other words un uptrend is about to commence.

The continuation signal is formed at the uptrend. This means the bulls continue their upward surge. Mind you, unlike the rising wedge, the falling wedge is a bullish pattern, Let’s take a look at the price action in the falling wedge pattern

Here the falling wedge is in reverse mode. Notice the creation of lower highs and lower lows as a consequence of this reverse signal. This comes about at the end of the bears shift(downtrend).

Also, see how the highs’ trendline is steeper than the lows, trendline. Now let’s see the  highly anticipated breakout by the bulls.

The bulls launch a humongous surge for the hills after breaking breaking above the top of the wedge.The surge is equal to the height of the formation -as indicated by the vertical line. The surge upwards is the same size as that of the height of the formation.

Now let’s look at  where the falling wedge acts as a continuation signal

Here price pauses briefly(or consolidates) after a strong push. This simply means that traders are recouping to consider their next move.  It also looks like price is raring for one last surge. Which direction will it go?Let’s find out in the next graphic\

See price break to the top side and head for the mountain. If you are smart. you can place a buy order above the falling trend line connecting the highs. You should be able to  grab some much needed cash along the way. You can take your profits at the height of the formation, as indicated by the blue line.

If you want more profits, just lock down a portion of your profits at the height of the formation. You close down part of your trading position and let the rest of your trading position ride with the trend.

For more information on  highs and lows look up Trade Trends With Price Action Analysis as Your Weapon of Choice

IF you want to know more about trend lines, look up look up How to Cash In Drawing and Trading Trend Lines

That’s a wrap for “How to Trade and Cash in on Wedge Chart Patterns.”  Wedges signal a  time out in the current trend. The forex traders are basically deciding which direction to take the currency pair. Wedge patterns could  be either continuation or reversal patterns.

Next time  we will look at how to us e rectangle patterns to trade breakouts

Til next time take care

Open Live  Forex Trading Account 

If you’re looking to open a live trading account  Sign Up With EasyMarkets

How To Ring In The Profits Trading The Head and Shoulders Pattern

Hello and welome to another edition of the bulls vs the bears. Last time we kicked of our series on trading patterns by touching on How To Make the Most Out of Double Tops and Double Bottom Chart Patterns.  Today we are going to learn how to ring in the cash trading the head and shoulders pattern. The head and shoulders  pattern is a reversal occurrence that is spotted in the uptrend. – i.e when the bulls are in full steam.

Now I can imagine somebody asking”Why the Head and Shoulders Pattern?”Well, the pattern resembles a head and a pair of shoulders. The pattern kicks off with a high(Shoulder) on the chart. Price then creates a 2nd high(Head), even higher than the the first high. The bulls are definitely on a high. And it sure ain’t  cocaine-induced. Guess what happens next? A third high(Shoulder) pops up on the chart. But this is a little lower than the second high, and it  is on the same level as the first high.

So the long and short of this pattern is this. You have a peak(shoulder) followed by a higher peak(head) and then by a lower peak(shoulder). This adds up two one head and two shoulders

You then draw a neckline connecting the lowest points for the two troughs. Fortunately the slope of this neckline  can be up or down. When the slope is down, a strong price signal is created.  let’s see an illustration of the price action on the head and shoulders pattern

Ladies and gentlemen, here is the head and shoulders pattern in its majesty. The head is the second peak and highest point in the chart pattern.  Notice how the two shoulders form peaks, but not exceeding the height of the head.

Now I can hear someone  saying”Where do I place my  sell order”? First place your sell order below the neckline. You then measure your profit target by measuring the highest point of the head to the neckline. This distance covers how far the bears will head down the slope. Let’s take a look at the price action

As you can see   the the  bears  launch a huge spectacular breakout  below  neckline  at slalom speed. The size of their breakout is similar to that of the distance between the head and the neckline. Now some of you may be saying “Hmmm…I wish this breakout lasts for ever.” Well, if only wishes were horses. Just don’t be greedy. Take your profits and run for dear life.

Now let’s look at the flip side.

Inverse Head and Shoulders

Inverse head and shoulders  is another head and shoulders pattern. Except that this pattern is upside down. This formation takes shape after a long period of bearish domination. In other words the bulls take over after the bears run out of steam.

Here you have a valley(shoulder) followed by a lower valley(head), and then a higher valley. In other words, you have a higher trough, a lower trough and another higher trough.

Let’s take a look at how the price action plays out.

As you can see, this is just like the traditional head and shoulders. Except that it’s flipped upside down. With that in mind, you place your order to buy above the neckline.

And just like the head and shoulders pattern you calculate  the profit target by measuring the high point of the head to the neckline. You’re measuring the the extent of the bears’ breakout after it cracks the neckline.

Let’s take a look at the bulls breaking through the neckline.

There you have it! Price, represented by the bulls , has blasted through the neckline and is heading towards your profit targets. So once the bullish convoy hits your take profit target, take your profits and run for dear life

However, you can use trade management techniques to lock in some profits and still keep  your trading position open in case price continues in your trading direction.

For more information on  trade management look up Expand Your Winning Position

That’s a wrap for “How To Ring In The Profits Trading The Head and Shoulders Pattern.”  You can catch the head and shoulders pattern in the uptrend after the  bears have been  dominating for long periods. Once the bears run out of steam, then the bulls take over.

On the flip side you  have the  inverse head and shoulders which you can catch in the downtrend after a period of domination by the bulls. Once the bulls run out of steam, the bears take over.

Next time  we will look at how to trade wedge chart patterns.

Til next time take care

Open Live  Forex Trading Account 

If you’re looking to open a live trading account Sign Up With EasyMarkets

How To Make The Most Out of Double Top and Double Bottom Chart Patterns

Hello and welcome to another edition of the bulls vs the bears.  A while back we did a two part series on  How To Trade Chart Patterns Like A Sniffer Dog Parts I and II This time we are going to look individually at these trading patterns. We will start with a popular pattern called the double top and bottom  pattern.

We are going to learn how to make the most out of  the double top and bottom pattern, In other words we are going to learn how to trade the double top and bottom.

First of::

What is a Double Top? 

A double top is a reversal pattern that forms after a protracted  bullish trend.. The tops, also known as peaks take shape when price hits  an unbreakable level-or a level that can be broken. after hitting this level, price ricochets slight but  turns around to test the resolve of this barrier once again. If price ricochets off this level again you have a double top.

Let’s see an illustration of this price action.

Ladies and gentlemen here is what a double top looks like. If you look up top you see two peaks forming courtesy of a strong surge by the bulls. See how the second top was held at bay by the high of the first stop. This should tell you right away  that a reversal is about to take effect.Why? well, the bulls’ surge upwards is running out of gas.

So with that in mind you place your stop loss  just below the neckline.  This is because we expect the bulls to do a reversal of their upward surge. Now let’s see whether the reversal does  takes place.

See There you have it! The reversal does take place. As we stated earlier, price breaches the neckline, triggering a bearish slalom down the slopes. This is easy pickins as far as profits goes.

Also notice how similar in height the downward surge is to the double top formation. Use that information in setting your target profits.

Next up is:

Double Bottom Formation

Just like the Double  Top formation, the double bottom formation is also a  trend reversal. But here should be looking to long instead of short. This because these formations come about after  a long period of dominance by the bears during their surge downwards.

In simple English these formations take shape after an extended downward trend. Now let’s see an illustration  of the double top in the price action below.

Ladies and gentlemen here is how the double bottom pattern looks like.  As you can see two valleys have formed because the bears have reached the end of the road. The bearish downtrend has fast run out of gas.

See how the second bottom failed to crack the first bottom.  That means the bearish shift is almost over, and the bullish shift is about to begin. In other words get ready for a bullish reversal.

Now let’s see whether the bullish reversal does occur.

Voila! The bulls do take over the next shift! Price cracks the neckline , triggering a major surge up the hill. See how the price push is the same height as the double bottom formation? Just like the double top setup, you use the height  information in setting your target profits.

That’s a wrap for “How To Make The Most Out of Double Top and Double Bottom Chart Patterns. ” Double top and double bottoms are reversal patterns that you can easily run to the bank with. The precise entry and exit points that these two patterns create make them user-friendly for forex traders.

All you have to do is identify these patterns and run up your cash register. It’s that simple. Next time we will look at Trading  the Head and Shoulders Pattern.

Til next time take care

Open Live  Forex Trading Account 

If you’re looking to open a live trading account  Sign Up With EasyMarkets

How To Trade and Profit from Forex Chart Pattern Chaos

Hello and welcome to another edition of the bulls vs the bears. Today we are going to learn  how to take advantage of forex chart pattern chaos. We are basically going to learn how to trade and profit from forex chart pattern failures.

Sometimes chart patterns can be very unpredictable. . You see a chart pattern that has huge profit potential written all over it.  You put in your trade order only for the trade pattern to do a massive U-Turn, leaving  your trading position exposed to a massive loss. That’s what forex chart pattern chaos is all about.  So we’ll define what  forex chart pattern chaos is all about and then we’ll touch on how to trade and profit from the ensuing chaos.

But first off:

What is Forex  Chart Pattern Chaos?

Forex chart pattern chaos  transpires when a specific chart pattern fails to take shape as expected. Consequently,price action does a fakeout instead of going according to plan. This in turn triggers an avalanche of stop orders from traders to salvage their trading positions. Fortunately for sometimes, out of this chaos comes  great opportunities to make profits.

Let’s take  a look at an illustration of a chaotic chart  pattern

Ladies and gentlemen, this is a  Double Bottom chart pattern as indicated by the W-shaped  blue lines. The magenta-colored line forms the neck line of the chart pattern. That line acts as a confirmation signal to make a trade.

See  how the price breaks the neck line in the green circle. Nobody hast to tell you that the bulls  are taken over from the bears. Unfortunately the price action makes that dreaded unexpected U-Turn, triggering a bearish fight back. Consequetly traders will be taken unawares by this sudden turn of events. No to mention the fact that they will be forced to activate their stop loss orders.

Your ability to grasp why chart pattern chaos occurs on the charts is absolutely crucial if you want to profit from their collapse. The gospel truth is that chaotic patterns don’t just happen in a vacuum. There is something bigger at work. In some instances, one chaotic pattern transforms into a definite pattern. If you were paying attention you’d notice that the collapsed Double Top Pattern  evolved into an Expanded Triangle.

Let’s take a look at the price action.

Now the upper and lower level of the Expanded Triangle represent the actual chart pattern. Sure the now to be decimated Double Top pattern(in blue) is the confirmation signal. But, like we stated earlier we see  price turn out  to create another bottom on the  lower level.

If you  are looking at the black horizontal support you should be saying”hmmm.. This area could come in handy in future.”Why?because when price breaches the lower side of the triangle, there is every reason to believe that a downward push by the bears is highly likely. And as you can obviously see, the triangle lives up to expectation after the bearish breakout.

Now the question on everybody’s mind is:

How Do I  Enter  A Chaotic Pattern Trade?

First things first. Identify the point of collapse. Usually you should spot a weak break and cut through, then a quick return to the breakout point. Then the price action returns to the key level of the pattern backed by stronger momentum as compared to that of the  initial breakout. And when this happens you have a chaotic chart setup.

The long and short is make your entry only when price action breaks out and closes beyond the original breakout  but only in the opposite direction

Next up is:

How Do I Place My Stop Loss In A Chaotic Pattern?

Just place your stop loss at the key level, previously used as the trigger for the previous  chart pattern before it collapsed.

How Do I Take Profit In The Midst of Chaos?

First off, check whether the price action will transform in to another pattern. If that takes places then you simply follow the take profit rules for that pattern. However if the failed pattern remains the same, then do yourself a favor and quietly make your exit.

When the previous collapsed pattern  remains the  , you then apply price action analysis to make your exit. Patterns such as channel breakouts, ascending triangle patterns, candlestick patterns. e.t.c. come to mind. However, when the currency starts stalling,  be on the lookout for possible reversal signals. Also keep a close eye on swing highs and lows for fire exit opportunities.

Now let’s take a look at an illustration of both the stop loss and  take profit using the USDCHF pair

Ladies and gentlemen here is an H4 chart featuring the USDCHF pair.  This is a classic example of how  to take advantage of chaotic patterns and make amazing profits from the carnage.

The image begins with a tight range ,  a consequence of a price drop. The range is represented by the black lines. Then out of nowhere the range breaks through the lower level, tricking everybody into believing that  the bears will kickstart a bearish trend. Boy are people going to have egg thrown all over their faces.  Because three periods later, the CHF slips back into the black channel through the  upper level, backed by strong momentum. Ironically this false impression creates a high probability signal after the USDCHF pair fail to breach the lower level.

You can place your buy order as indicated by the green circle. You then place your stop loss below the lowest part of the range. The stop loss area is indicated by the red horizontal line below the lower part of the range. The ranges crashes the confirmation area but collapses. It then does a u-U-Turn or makes a reverse.

The bulls then take over to start their bullish trend. see how the CHF creates a Rising Wedge pattern in the process. This will be great news for the bears as the Rising Wedge is know to have  a strong bearish disposition. Head for the exits the moment the price action breaks down the Rising Wedge. Expect a trendline breakout to coincide with the wedge breakout as well.

There is extreme disappointment among everybody  as the Rising Wedge fails to break out of the downside as everybody anticipated.  This pattern failure should favor the bulls as they are now in a strong position to rack up the profits. With that in mind the bulls take full advantage of their new found strength as they climb up the hills. Of course this creates a strong bullish run.

However, the Rising Wedge pulls a fast one on everybody when it fails to penetrate the downside. The silver lining in all of this is that the Rising Wedge’s failure does not create confirmation of a bearish takeover. So there is need to close the trade. This is what you’d call a non-confirmed pattern because the bulls are still in control of the bullish trend.

The bulls then resume their trend after the brief rejection. Buoyed by the non-confirmation information, price then creates a huge bullish push, creating an Ascending Triangle(as indicated by the yellow lines. With this new found momentum, the ascending triangle breaks the trend line from the side.

At this point in time, don’t be in a hurry to close the trade. Instead keep your cool until the yellow triangle pushes downward. That will be your queue to head for the exit.

Almost immediately,  price action what looks like another 360 by trying  to push upwards. Unfortunately price is unable to push through the trend line, signalling the end of the bulls’ advance. Even worse, the bears takeover at the end of the chart is your queue to exit with your cash pronto!

So basically the graphic shows three chaotic patterns. Two of these patterns were confirmed but eventually fizzled out, One of these non-confirmed patterns also helped us recognize the potential direction of the trend.

For more information on trading patterns, look up How To Trade Chart Patterns Like a Sniffer Dog Parts I and II

That’s a wrap for “How To Trade and profit from Forex Chart Pattern Chaos ” Some like to call it failed patterns as well. Basically these patterns look like profit potential but end up costing you profits by doing a complete reverse.

But luckily you can  trade and profit from the chaos. All you have to do is identify the origins of the chaos and then enter the market when you spot a breakout at a key level in the opposite direction of the trend.

Till next time take care.

Open Live  Forex Trading Account 

If you’re looking to open a live forex trading account Sign Up With EasyMarkets

How To Profit From Position Trading In The Long Term

Hello and welcome to another edition of the bulls vs the bears. How would you like to take 1 or 2 trades and rack up profits ranging from a week to several months. This is where position trading comes in. We are going to learn how to profit from position trading in the long term.

Unlike day trading position trading takes a long term view. See, with position trading, you can hold your  trading positions anywhere from a few weeks to a year. You don’t need to stare at your PC screen all day. you enter your trade, and  take a chill pill as your trading position racks up the profits. What we’re going to do is define what position trading is  and  we’ll look at tools you could use to help you profit as a position trader.

First off:

What is Position Trading?

Position trading is an investment method where a forex trader prime focus is on long term price movement. You don’t need to to take a truckload of trades in this scenario. You only take a handful of trades within the calendar year, but you have the option of tweaking them every now and then depending on what mood the market is in.

Now since you are in these trades for the long haul, you need to have a deep knowledge of fundamental factors that can influence price movements over the long term. By fundamental factors I am referring to social political and economic forces that may affect the supply and demand of a currency. Not only that, but your knowledge of technical analysis should be such that you should be able enter and exit trading positions at the right moments during the long haul.

In short, you need to know macro-economic data like the back of your hand. And your trade entries should be premised on sound fundamental analysis  backed by sound technical analysis to time your trades to perfection.

What  Are The Best Technical Tools For Forex Trade Positioning?

First:

Trend Lines

In case you don’t know already, trend lines are very effective tools that can help a forex trader identify trading opportunities on the charts. Price action and trends  make a lot more sense on longer time frame charts such as the daily and the weekly charts. With that in mind, you could use trend line analysis to gain valuable insight into the forex market and ascertain where the trend is heading based on prevailing price action.

Next up is:

Support and Resistance

Support and Resistance Levels also play a pivotal role in  position trading. When price action breaches a major support or resistance level, the next logical step, it just surges  higher towards the next available resistance level.  This surge takes place in case there is an upside break or price drops to the next lower support level in case of a downside break.

Next up is:

Moving Averages

Moving averages  are also valuable in identifying long term trades. They measure the average price over a specified number of time periods. The weighted volume and exponential increase mean very little. Your focus is the number of periods of the long term moving average.

Long term price action is more comfortable with the 50 and 200  period moving averages. However, keep an eye on the 100 and 500 moving average periods for possible  clues. Let’s take a look at the price action in a position trading setup

Ladies and gentlemen, there lies a position trade on the weekly USD/JPY chart. As you can see a Double Bottom chart pattern pops up as a result of a breach of a huge bearish trend by the USD/JPY pair.So for the next 5 months the currency pair enjoy some dominance, chalking 20% gains in the process.

Now 20% in the scheme of things is quite huge. Why? Because this move came on the back of an unleveraged position. Even  two thirds of such a move adds up to 70% on a 5 :1 risk/ratio. Even more you’d incur less transactional costs in the form of broker spreads and commissions- unlike day traders, who give away chunks of their profits to transactional costs.

For more information look up We Are Moving Averages I and II

Now let’s look at  the Macroeconomic  factors that I touched on earlier

First:

Inflation Rates

Inflation sure influences a country’s  currency. High inflation results in the increase in the price of goods and services. Consequently, people’s appetite for goods and services takes a dip, resulting in the economy catching a cold. Even worse, the country’s currency drops in value compared to other stable economies.

Low inflation is good news for a country’s currency. When this happens demands for goods and services surges up, and the currency also increases in value compared to other stable currencies. Not to mention the fact that demand for the currency also increases.

Next is:

Interest Rates

Central banks are an interesting bunch. Their job  is to tweak interest rates to keep the engine of their domestic economies running, which, in turn encourages competition.  As we all know, there is a correlation between interest rates, inflation and currency rates. As such, policy makers have the thankless task of keeping all three elements at peace with each other. This balancing act can be trick sometimes.

Someone is probably asking”How so?” Well, for instance, high interest rates can trigger huge interest inn foreign investments. Under normal circumstances this should cause a shot in the arm of a country’s economy. Even better, investors feel encouraged to pour their money into a country’s economy courtesy of the favorable interest rates of that country.

However, high interest raters can also trigger inflation; This can cause a country’s economy to overheat.. To make matters worse it makes goods and services more expensive. And when goods and services are expensive, it blunts your competitive edge.

Trade Balance of Payments

If you don’t know trade balance of payments let me tell you right now. Trade balance of payments simply  means the difference between gross imports and gross exports. IF a country exhibits a negative balance, its imports more than it exports. This of course creates a huge deficit which sends the country scampering to look for cash to pay her lenders. The country’s currency suffers in the process as it value takes a tumble.

On the flip side, if a country’s balance of payments is positive, its exports are more than it imports. The country’s economy  passes with a clean bill of health and all concerned can breath a huge sigh of relief.

Even more important is:

Economic and Political Stability

Investors take the economic performance of a country into serious consideration when deciding to invest in a country’s currency. IF a country’s economy is unstable it may cause political instability. They see such a country as an unattractive place to invest

However, if a country’s economy performs better,  investors are more inclined to  put their money where their mouth is. This then triggers a demand for that country’s currency, which of course results in a appreciation in value.

A classic example is the UK voting to stay out of Europe. It’s Brexit referendum split the country right down the middle. Consequently the pound crashed to a 32 year low against the Dollar. Let’s take a look at the price action that ensued as a result of this crash

Ladies and gentlemen, this is the GBP/USD chart after the BREXIT fiasco. Many investors abandoned the dollar  and looked fo other currencies and assets such as gold to invest their money in.

Fortunately the Pound rebounded slowly against the dollar to end strongly in 2017. The moral of the story here is that investors mood can change rapidly. And it’s the job of the position trader to  to capitalize on these mood swings when the opportunity presents themselves.

Now here a few position trading tips that will help you make informed decisions while you contemplate on your trades.

Study Economic Data Seriously

Your trading forecast should be founded on fundamental and macroeconomic data.  You then confirm your fundamental data with price action analysis. Don’t forget to keep an eye on events around the world and look weaknesses in these economies and pounce when the opportunities present themselves.

Use Daily and Weekly Charts Religiously

The Daily and weekly charts are perfect for position trading. The daily chart gives you a  few months to a year tom work with while the weekly chart gives you one to 5 years of price action.

Be sure to use the same roadmap when making your trade entries. You do not want to fall into the trap where you take a long term position based on a weekly setup, which only runs for a few months. But then you open a 240 minute chart only to discover an opposing price signal and run for the exit in a few days.

So basically you open with a position trading strategy only to fall into a swing trading trap. Avoid this mouse trap as much as possible if you don’t want to see your money go up in smoke.

Don’t Pull Your Hair Out Over Market Volatility

You don’t need to pull your hair out over market volatility. It’s the nature of the beast. IT’s natural that    market trends do not  always touch a trend line. As a matter of fact, you may get get faked out by false breaks sometimes. It happens. So get used to it.

How do you de-stress over this? Change your chart setting from a candle chart to  a line chart and plot a trend  line using the line chart.  I hear someone saying”Now Why will I want to do that?”Because  a line chart is founded on closing prices so all the price increases and loud noise you see on the candlestick charts can be cut down to a minimum.

Keep Your Eye On Strong Breakout Confirmation

Please do not just jump straight into a trade. Wait for price confirmation of a breakout about to happen-who cares where it’s happening on a  trendline key support, e.t.c? When price eventually breaks a key level on a chart, just hold your horses and let the price buildup plays itself out.

The most likely thing to happen is  price doing a U-turn and re-breaching  the initial level. If price manages to breach the initial level the n you will have reason to enter your trade with a favorable risk to ratio situation.

Make Very Good Use Of Moving Averages

You can’t do without those moving averages. They are absolutely indispensable. Keep your eye on moving averages of the 50, 100,  and 200 variety. Some even suggest the 500 moving average.

Why these averages?They are the most popular and psychologically influential among the big financial institutions. Although there are multiple variations of these moving averages, I suggest you stick with the Simple Moving Average(SMA). It’s straightforward and less stressful.

An Illustration Of Forex Trading Position Trading Strategy

Let’s take a look at another illustration of position trading in its full pump using  the Russian annexation of the Crimea

Now in case you some of you have forgotten Russia illegally captured the Crimean peninsula from Ukraine. This caused the European Union to hit Russia with hefty sanctions in 2014, the likes of which it had never experienced. Or course the Russian ruble went into a tailspin as a result  of those sanctions.

Let’s see how these sanctions affected the price action.

Ladies and gentlemen, here is how the sanctions affected  the Ruble. The Ruble takes a huge 50% plunge against the ruble.

If you are a trader you will be salivating at such a long term opportunity. How will you have taken advantage of such a sumptuous opportunity? Let’s take a look at the price action in the next chart

As a consequence of the EU sanctions on Russia the EUR/RUBLE pair break through the 51.00 resistance level. This heralds the last big surge from mid MArch 2014 when the Russians charged into the Crimean Peninsula. And it happens right after the price action has soared above the the 100, 200, and 500 Simple Moving Averages.

After the 51.00 breakout event, forges a top at the 55.0 area(as indicated by the blue horizontal line). See how price does a U-Turn to touch the previously broken 51.00 area to re-test its resolve. A huge  ricochet takes place causing a breach of the blue horizontal line.

Now if you are long term trader you will be besides yourself with excitement. You should be saying “Hmmm….This definitely a bullish trade that I can make a truckload of cash from. The price confirmation signal  for this trade is too loud to ignore.”

So, what do you do? You  buy the EUR/RUBLE pair at 56.00 Rubles to the dollar, assuming the ruble tumbles further. You then place your stop order on the swing bottom indicated on the chart

Now notice how the price action touches the ruble touches the area at 97.00 rubles. This by the qway is 40 rubles more than your entry price. The candle in this area represents a price bubble triggered by   high price volatility. This candle closes at a low, creating a huge upper candlewick. And if you don’t know by now the bulls dominance is coming to an end.

In view of this high turbulence you may want to exit with part of your profits. You ‘re probably thinking” Wait a minute! The Russian economic and political problems don’t show any sign of ending anytime soon.”

In that case wait for a complete breakout  through the orange bullish trend. As you can see the bears have  take over, creating a bottom at the 71.00 level. In that case exit your trade once price breaks at that level.

Lastly see how price breaks at the 100 SMA period. You could have closed your trade prior to this event. It’s alright. You can still close out the remainder of your  remaining trading positions. This is very exciting stuff. Isn’t it?

That’s a wrap for “ How To Profit From Position Trading In The Long Term”  Like I said you don’t need to stay at your screen all day scouring for trades. Just pick 1 or two trades and watch them play them selves out any where fro two weeks to a year – depending on the time chart that you choose. Of course you will have to do consider fundamental factors backed by price action analysis while you work out your strategy.

Till next time take care.

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How To Trade Breakouts with Ease

Hello and welcome to another edition of  the bulls vs the bears. A while back I did a post on  How To Cash In On Trading Breakouts. .  This week we are going to learn how to trade breakouts with ease and we we will be   looking at three breakout patterns

Knowing the type  of breakout you are dealing with is absolutely crucial if you want to succeed as a forex trader. Why am I saying so? Because it will help you understand the bigger picture as to to the happenings on the forex market. Breakouts are also crucial in the forex market’s scheme of things in that they help indicate the change in preference as to the currency pair you are trading. In other words they indicate the change in supply and demand. This pendulum swing those huge moves we so dearly love. And they create huge opportunities for racking up profits.

So the first breakout pattern we are going to touch on  is:

Continuation Breakouts

Continuation breakouts  are trade setups that shows price action skewing sideways. Here  buyers and sellers take a breather to contemplate their next cause of action after initiating huge moves on the market  Here, prices drop with the bears selling short to take their profits. Once they recover their bearings, they resume selling again. Consequently, it causes a period of consolidation which result in the skewing patterns you see on the charts. Let’s take a look at an illustration  of consolidation before the breakout  using the USD/JPY pair.

Ladies and gentlemen, here is an illustration of  consolidation. You have  sellers taking a break after closing  out their original trading positions.  You see  the sideways  formation that I  explained above? Now let’s see what happens when the bears decide to push price in the same direction

This ladies, and gentlemen is the continuation breakout that I explained earlier, Basically the bears have decided to continue with the initial trend that they initiated earlier. In so doing they are going to continue selling til they drop.

Next up  is:

Reversal Breakouts

Reversal breakouts occur where traders  run out of steam at the end of the trend. So they decide to do an about turn by pushing the price in the opposite direction. And just like its continuation counterpart, the traders take a long pause . Now let’s take a look at the reversal breakout in action

Here we see a consolidation period as a result of the traders taking a breather.However,realizing that the initial downtrend was running out of gas,  traders do an about turn and decide to breakout and head for the hills (as indicated by the green arrow). You can only imagine the profits they cold accumulate on their way up.

Last but not least is:

False BreakOuts

Now false breaks are very dangerous customers. False breaks take shape when price breaks through a certain level(e.g. support or resistance) but discontinues its advance in that same direction.  And when that happens you may find your initial trading position swallowed by a  blood sucking consolidation. Let’s a see a false breakout in action

The yellow circles in the upper and lower consolidation areas  represent the false breaks I referred to earlier.Instead of continuing in the same upward direction price does a complete pump fake and heads downward. What resembles a price increase is immediately followed by a  price crash straight  into a consolidation zone. Now someone is probably asking

How Do I Enter A Breakout?

Wait for price to retrace  back to its  original breakout level and see whether it creates a new high or low. Of course it depends  on the direction you are trading in.

Also do not pounce on the first breakout that catches your eye. In so doing  you deny  yourself an awesome chance of racking up huge profits.The downside to keeping watch is that you may miss out on profitable forex  trades as price accelerates at the speed of light. Trust me, I’m talking from experience.

That’s a wrap for “How To Trade Breakouts with Ease. ” It’s possible to profit from trade breakouts if you know which breakout you are trading. Think of breakouts as indicators of the grand scheme of things on the forex market. That they also help reveal the change in currency preference in terms of the currency being trades.

Til next time take care

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Expand Your Winning Trading Position

Hello and welcome to another edition of the bulls vs the bears. Last we touched on How To Scale Out of Trades. This week we  are going to look into how to  expand your winning trading positions. Basically we are going to   learn how to add to our winning positions. Someone is probably asking “How Do I add on to my winning position without losing my profits?”

Well here are a few simple rules you need to follow:

• Decide in advance  the entry levels for your additional pips
• Calculate your risk with  your additional pips in mind.
• Put in a trail stop to put your growing trading position withing your risk confines.

Now I can hear someone still  complaining”That’s all well and good. But I’m still confused.” No problem I’ll give you a:

Trading Example

You decide to trade on the trend using  the EUR/USD pair. You keep a close watch on this pair hoping  for a massive breakthrough. Unfortunately all you see is consolidation. So you say to yourself “Hmmmm.. let’s see whether  my trader pals will push this pair a little higher.” With that in mind you put in your entry at 1.2700. Immediately you discover that the consolidation gets stuck in traffic at 1.2650. So you decide “Okay, I’ll put my stop at 1.2600.”

But then a red light really flushes in your head. You’re like How about I take my profits at 1.3000? Because the bulls surge may not go further than that.”

Let’ see the first illustration of what we’re talking about.

Ladies and gentlemen, here is a layout of everything that we explained. Firs you see the entry set at 1.2700. Then it’s followed by the trail stop at 1.2600. Even more importantly the take profit is set at 100 pips which translates to $300- not to mention a risk reward ratio of 1:3. Sounds like a good day at the office right?

So you then say to yourself” I’m feeling on the top of the world about my trade. How about I add to my winning position since the market is moving in my favor.” So you decide to add more figures whenever you hit 100 pips. You thren  add a trail stop of 100 pips. Because you are adding additional figures, you decide on 1% as your risk parameter. Since your initial account  is $10000  your risk is 1% -or $100 You will add  10000 units every 100 pips and trail your stop every 100 pips.

Now let’s watch 3 graphics showing a change in risk-reward with each addition of pips

The three graphics above do  a nice breakdown of how to add to your winning positions without blowing your account to smithereens. Now before you get all excited about  adding every winning position in your mind’s eye, let me sound a little warning. Winning positions may not always be suitable for every  market situation. The best situation for winning positions is trending markets.

As you add  a winning position, the average price moves in your direction as well. Now you’re probably asking yourself ” What does this mean?” Well even if the market pulls back against you, you don’t suffer the humiliation of your trading position going negative. Also be aware that adding winning positions in range bound markets can be hazardous to your trading health. Your trailing stop could end up taking a major hit. In other words you could be completely stopped out. Even more precarious to your trading health you could you use up your entire margin. This could trigger a margin call from your broker. And we don’t want that. Do we?

That’s a wrap for “Expanding Your Winning Trading Positions. ” This brings to an end to our series on scaling in and out of trades. Sorry but all good things must come to an end.  I hope you have  blast learning how to scale in and out of  trades. I know I did. Before we end this series, let’s recap on the rules of scaling and scaling out of trades.

• Always use stop losses. Your trades will burn if you don’t use them
• Only add to losing positions if your trading positions are withing your risk parameters
• When adding to winning positions use a trail stop if your added position carries a huge risk.
• Before adding/removing from your trading position, Get your position size calculations right before you even think about entering a trade.  Failure to do that and your trading position is toast.
• Scaling in trades works with trending markets
• Scaling out trades works best in range bound markets

Til next time take care.

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I Have Scaled In My Trading Position…..Now How Do I Scale Out?

Hello and welcome to another edition of the bulls vs the bears. Last week we  started our scaling series by learning how to scale  in on a forex trade. Now I get the feeling the question on somebody’s mind is…”I Have Scaled In My Trading Position…..Now How Do I Scale Out?” Well not to worry! We are going to learn how to scale out of trading positions. Since we’ve scaled in on our trades, it’s only sensible that we scale out. right?

Scaling out helps reduce your risk and protects you from being obliterated by the  market-regardless of whether you are in a winning or losing trade. When you are scaling out, back it up with trailing stops. With this added security, you can lock ion your profits and make your trade risk-free. Now if you are a bit rusty on your trailing stops look up Forex Trading Basics – Top To Bottom Part II. You will learn about various market orders including the trailing stop. You may want to check out Part I while you’re at it.

Now let me explain what’s happening here. You have a $10000 trading account and you decide to trade the EUR/USD pair. You say to yourself “Let me sell 5000 units at 1.3000.” You place your trail stop at.1.3100 and your profit target 300 pips below your entry at 1.2700. For this trade you risk $100.

A few days later EUR?USD dips to 1.2900. And as  predicted, the trade moves 100 pips in your favor. Not to mention the fact that you make a nice $100 profit. Sounds great. Doesn’t it? Unfortunately  bad news starts filtering that the U.SD(U.S.Dollar)may take a dip in the future. You then say to yourself”Let me lock in my profits. Because I’m not sure I can the USD can slide any further.” So you decide to close half of your trading position  buying 6000 units at 1.2900. You then lock in $50 in profits at the exchange rate of 1.2900.(100 pips*0.50=$50).

So you now have an open position of 5000 units selling at 1.3000. Meaning you can now adjust your trailing stop to breakeven(1.3000) to make your trade risk-free. If the EUR/USD pair climb back up to hit your adjusted trailing stop 1.3000, just close your trading position  without incurring a loss. But if the pair dips any lower, just rack up all the profits til your heart’s content.

Now supposing you still had 10000 units and EUR/USD  dips to 1.2700, and you caught 300 pips in the process. Then  your profits will be a cool $300. But since you closed half of that position you will only get $150. Add $150 to the previous $50 and you have a neat total of $200.

What you need to understand is that it’s entirely up to you if you want to  leave some profits on the table. You just need to weigh the pros and cons of your strategy

Now  Let’s me show you a little visual  illustration of  this scaling out  example

Now here is the graph showing you the various times that you have to scale out. The question you need to ask yourself is”Do I push for more profits and risk huge losses? or Do I want to sleep better at night knowing that I have locked in at least half of these profits?” It’s a tough question, but one that needs to be answered for your own sanity. Also there is always that possibility that the market could surge beyond your profit target and add more cash to your trading account.

There is so much to think about when  tweaking your trading positions. But with more practice you should be able to scale out your trading positions with flawless ease.

That’s a wrap for “I Have Scaled In My Trading Position…..Now How Do I Scale Out? ”  Next week we’ll continue our scaling series by touching on how to expand your winning position.

Til next time take care.

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How To Manage Multiple Trading Positions Scaling In and Out

Hello and welcome to another edition of the  bulls vs the bears. Today we are going to  start a new series learning  how to manage multiple trading positions scaling in and out.  And please I’m not talking about checking your weight on a scale. We’re talking about a different kind of scale here.Basically we are going to get creative by managing multiple trading positions. Except that we won’t gung-ho like gamblers. we’ll apply risk management principles that most of you already know about.

Before you tackle the scaling series there are a few things you need to do. You need to  know how to set proper stops like the back of your hand. And you  must know how to calculate position sizes to a tee. If you  haven’t mastered these two trading skills, learn them fast. Or else you will be pulling your hair out trying to figure out what’s going on in this series.

So with much ado we’re going to do what we always do. We’ll define what Scaling is. And then we’ll figure how to scale in and out of trades. But first off:

What is Scaling?

Scaling  simply means adding or removing figures from your open trading position. You use scaling to adjust your risk, lock in profits, or maximize your profit potential. Of course there are side effects of scaling which we will be touching on later.

So

How Do I Benefit From Scaling?

It’s more psychological if you ask me. For one thing you don’t need to be super perfect in your entry or exit. It’s important you get this in your head because it’s difficult predicting  the price action or  the exact turning point of the forex market. You’d have to be Albert Einstein To get the perfect entry point all the time. You keep trying to be like Einstein and you’ll be setting yourself for a huge crash. There can only be one Einstein

The best way to protect your head is to identify an area of potential support/resistance, momentum change, breakout, e.t.c. Just take your position in little chunks  around these areas and then lock your profits. Locking your profits must also be accompanied by a properly executed trailing stop. This will definitely take the pressure of your shoulders. And it can also  help safeguard your profits in case the forex market does a sharp 360 on you. Of course the more you add to your position the more profits you rack up as the market  runs in your direction.

I guess the elephant in the room is:

What  Are The Side Effects of Scaling?

First You risk over-risking your money. By that you increase your risk. Don’t forget that you are not just a profit maker. You are also a risk manager. And if you don’t scale properly you risk wiping out your account. News Flash! I’m gonna show you how to add to your open position in our next segment.

Second , when you subtract from your open position you reduce your maximum profit potential. I’m sure you’re like”Why will I want to do that?” Like I said you are a risk manager not a gambler. So it makes sense to leave some money on the table for later.

Now  to the main agenda for the day:

How To Scale In  Trading Positions

Before I show you how,  you need to follow the following rules”

• You need to put in a stop loss or you account will go up in smoke
• Your position entry levels must  be planned in advance before you enter your trade
• Your position sizes must also be calculated in advance. And make sure you are comfortable with your risk levels – i.e you must  decide on how much money you can afford to part with.

Now onto the matter at hand

Ladies and gentlemen, we have a scaling in situation taking place in a breakout situation. Now as you can see the bears broke out of the consolidation trap after taking a breather. Now how did that happen? The pair dipped lower from 1.3200and then got caught in the consolidation trap between 1.2900 and 1.300. Luckily they managed to breakout for slopes at that level. The pair then dip further at 1.2700 and 1.2800 before retracing to the level of recent consolidation

Now assuming you are not Einstein enough to pick the exact exact entry point, you can consider the following options:

First

You can put in a sell order at the support-turned -resistance level of 1.2900. The problem with this option is that the pair may climb higher, and you could miss out on a juicier price.

Second

In that case take a chill pill while the pair reaches the 1.2900 level. However, if you wait for the market to hit this level then you risk the market turning on you and going the opposite direction- which is further down. And you could miss the return to the downward trend.

Third

Take another chill pill while the currency pair tests the resolve of the resistance area.  Once they move back below  1.2900 area, you make your grand entry. This tells you the bears are back on the saddle. Again the downside to this option is that you  miss out on entering at a better price.

Fourth

Wanna jump in on a better price? How about jumping in at both 1.2900 and 1.300. Just make sure it’s part of your trading plan. Even more important  make your calculations in advance or else your account will fry to pieces.

Now let’s look at another trade setup which combines everything we’ve talked about.

Here is the price action involving the EUR/USD pair. You can make your entry at the 1.2900 level we mentioned earlier. Even if the market climbed higher, leaving your position in the lurch, you could still enter at 1.300 assuming you stay within your risk parameters. If the market took a dip after triggering both trading positions, you would have achieved you risk /reward ratio(Let’s say it’s 1:1).

We also notice a huge chunk of the trading position was entered at 1.300. Now this seems like a favorable price. Why? because even if the market took a dip you will still make a handsome profit. Not bad for a day’s work.

That’s a wrap for “How To Manage Multiple Trading Positions Scaling In and Out ”.  Next week we’ll continue our series scaling by touching  on  Scaling Out of Trading Positions

Til next time take care.

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How To Break-Even With Forex Trades

Hello and welcome to another edition of the Bulls vs the Bears. Today we are going to learn how to break-even with  forex trades  You know when a business is hemorrhaging so much money the only option left for them is to break even?It’s  the same situation with forex trading. Sometimes you lose so much money in a trade that you struggle  to save your trade from going under. This is where the break-even strategy comes in. We are going to learn how to protect our forex trades with the break-even strategy.

So we are going to do what we always do. We’ll define what break-even is and then we’ll show a few illustrations of how the break-even strategy is implemented. So onward:

What’s Break-even?

Well in business circles break-even simply means the point at which gains equals losses. The same principle also applies to forex trading.   With price action, break-even is  the level where the risk of the trade is recovered. When you’re losing badly on a trade you tweak your  market order to recover the money you lost. You are not looking to make a profit. You are looking to recover your losses. So there is neither a winner/loser situation here.

You basically move your stop loss from your original stop loss position to your original trading  position once price moves in your trade’s direction. So that if price does a U-turn and hits your stop loss, you won’t get stopped out at your original stop . Instead you get stopped out at your new break-even stop.

And as I intimated earlier, you won’t lose a cent of your money either. I can hear someone asking”Really? How so?” well, the new stop is set at at the same price you entered with. Thus, you don’t incur any more losses. I guess the next question should be:

When Is The Right Time To Break-Even?

You move your break-even loss only if it makes logical sense to do that. Just be guided by the highs and lows of the  forex market. Price will eventually mark out  these points depending on the extento f the pressure brought to bear by the trend.

Make sure you see a definite high or low before  deciding to move your stop loss. Anything different, and you risk pulling your hair out over  a stomped out stop loss. Let’s take a look at a graphical illustration

Here you see a bunch of recent natural highs nicely formed in a swing trading  situation. So naturally the breakout order has been triggered based on these natural highs as suggested by the green tick. Not to mention the fact that a nice risk/reward ratio of 1:4 has also been set. And we all know what that means: A health profit return on your trade.

So it does not make any sense at all to move your stop loss while racking up the profits. Instead let the market ride its natural course and see what transpires next.Two things will  occur:Either price will hit your intended profit target or it will hit your original stop loss – whichever comes first.  Let’s look at another illustration:

Now see how price has started nicely  carving out  higher lows? Now will be the perfect time to move your stop loss to break even.  Because if you don’t and the market hits the most recent higher low, price might crash and annihilate your trade.

For more information on stop losses, look up  How To Place a Stop Loss To A Tee

That’s a wrap for ”How To Break-Even With Forex Trades .” Applying a breakeven trading strategy is very useful too to have. In fact it can come in handy when  the market all of a sudden U-turns against your trading position. Let the market tell you whether to  break-even or not. Don’t be anxious to achieve a risk-free position, or  else  you may end up incurring a  nuclear-sized loss.

Til next time take care.

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How to Pair Fibonacci Tool With Stop Loss To Protect Your Trading Account From Going Up In Flames

Hello and welcome to another edition of the bulls vs the bears. Last time we learnt How to use  Fibonacci Extensions to Rack up Profits. This week we will be looking at how to pair the Fibonacci tool with a stop loss to protect your trading account from going up in flames. Basically you  will be using the Fibonacci tool to place a stop loss so your trading account does not go up in smoke..

It’s really exciting entering a trade and racking a chunk of profits. But you do need to know where to place a stop loss. You can just make your entry on Fibonacci levels being clueless as to how to head for the exits when the market turns south on you. Failure to get a clue could cost you your forex trading account, not to mention you blaming Fibonacci for your troubles.

So here is what we are going to do.  To equip you for the day when the market does a U-Turn I will show you how to set a stop loss using those Fibonacci levels. Oh by the way, if  you feel your stop loss knowledge  is a little stale look up How To Place A Stop Loss To A Tee. If you don’t well,  you will be pulling your hair throughout this lesson.So  First Off:

Place Your Stop Loss Above First Fibonacci Level

The first thing you need to do is  place your stop loss just above the first Fibonacci level. If the plan is to make your entry just above the 38.2 level, then it makes sense to place your stop loss beyond the 50.0% level..  If you feel like “hmmm…I think the 50.0 level will hold just fine”, you put your stop loss beyond the 61.8% level. You can apply this technique for any level, depending on the ongoing price action of course.

Let’s look at the price action on the EUR?USD pair

In case you put in a sell order at at the 50.0 level, you gently slot in your stop just beyond the 61.8 % level. You do this  believing that the 50.0% level will hold the fort at the resistance level. Such that if the bulls surged past this point, it will render your trading initial trading strategy null and void.

However, and this is a big however. It’s dependent on you making a flawless trade entry. Anything less, and your trade and your account will be history. You have to be super confident that  the support or resistance level will hold the fort.  Because Fibonacci analysis is not rocket science. Because, like the title of my second installment suggests, Fibonacci retracements can do a 360 on you if you don’t get it right. So watch out.

Some  of you are wondering “Hmmm…. what should we expect?” For starters the bulls  will overrun the bears and head for the hills.  They will then smash your stop loss and head in your direction. And then you will start pulling your hair out saying”What the heck have I done?” Just make sure you limit your losing trades to a minimum and focus on winning as many trades as possible.

The  whole idea behind the stop loss is to decide on how much money you can afford to lose.  This way when it happens you  don’t cry over spilt milk. You move on to the next trade. Just make sure you don’t repeat the same mistake again.

Next up is:

Place Stop Loss Past Recent Swing High Or Swing Low

If you want err a little further on the side of caution, you can set your stop loss past the most recent  Swing High or Swing Low.  When you want to trade long(buy) in an uptrend just gently place your stop loss just below the latest Swing Low which most likely will act as a likely support level.

On the flip side if  you want to trade   short(sell) in a downtrend  place your stop loss just above the Swing High. The Swing High plays the role of the  resistance level. This strategy should give your trade more oxygen and increase the chances of the trade swinging in your favour. Let’s take another look at the price action the  EUR/USD pair.

As you can see both the Swing Low and the Swing High are labelled  with roundish sea blue. Now if the price were to breeze past either the Swing High or  Swing Low, it can only mean one thing:Get ready for a trend reversal.

It also nullifies your trade setup which makes it too late for you to jump back in. If you value your trading account I suggest that you don’t even think about trying it. I guess the question  burning on everybody’s mind  is:

Is There A Better Way To Pick A Good Stop Loss Point?

Well, let me put it this way. it will be very unwise to rely on the Fibonacci  tool alone. Like I said it earlier, it can do a nasty 360 on you. However, an assortment of tools such as  support and resistance levels, trend lines, and candlesticks  will go a long way in helping you find the perfect stop loss point. You shouldn’t rely on Fibonacci retracement levels alone  to help you place your stop loss. That would be suicidal.

Stop loss placement is not etched in stone. But with the help of multiple tools you can tweak your odds – not to mention give your self a safer exit point. Even more important, you give your trade more room to breathe and a better risk-to-reward trade.

That’s a wrap for ”How to Pair Fibonacci Tool With Stop Loss To Protect Your Trading Account From Going Up In Flames ”.  I hope you all enjoyed the Fibonacci series. I know I did. Like I indicated at the beginning of this series,  I’m not an indicators fan. But the Fibonacci is the one tool I’d vouch for because of its ability to help you visualize your trades.

However, you do not want to use the Fibonacci in isolation. You will get burned instantly. You will be better served combining the Fibonacci with multiple tools such as support and resistance levels, trend lines, and candlesticks. These tool combinations will  help you find the entry and stop loss points that  you so desire.

Til next time take care.

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How to Use Fibonacci Extensions To Rack Up Profits

Hello and welcome to to another edition of the bulls vs the bears.  Last time we  tried  Lighting Fibonacci Retracements with  Candlesticks. Basically we combine Fibonacci retracements with candlestick analysis. This week we are going to learn how to use Fibonacci extensions to rack up rock up profits. We are going to use  Fibonacci extensions to help us ascertain when to take profits.

I guess some of you are wondering:

What Are Fibonacci Extensions?

Well Fibonacci extension are levels that extend beyond the current price. Unlike Fibonacci retracement where you are dealing with four levels(0.382, 0.618 and 0.764), you only need to sweat about two levels:1.382 and 1.618. 

Once you identify a trend with a retracement, just pull up your Fibonacci tool  and you will see the extensions pop the 1.382 and the 1.618 levels onto your charts. Those two levels then become potential price target levels. You determine the Fibonacci extension levels with three mouse clicks.  Some of you are going ” How do you that?” Well click on the most recent Swing High, and then drag your cursor on the most recent Swing High. Last but not least, drag your cursor back down and click on any of the retracement levels.

The result will be that each of the price extension levels showing both the ratios and the corresponding price levels. Pretty neat right?  To help us create The Fibonacci extensions level let’s take a look at the at the price action on the  USD/CHF chart that we worked with when we used the Fibs retracements

If we remember correctly the 50.0  level held up quite nicely. as support. After surviving three tests, the bulls, who were buying  price  resumed their upward climb. They were so confident climbing that they even bypassed the previous Swing High.

Now let’s pull up the Fibonacci tool and hunt for the best place to rack up profits using the USD/CHF currency pair

First off let’s see what happened after the retracement swing Low happened.

• Price launches a comeback hitting the 61.8 level, which aligns nicely with the previous Swing High.
• Unfortunately it slips back to the 38.2 level where it runs into support
• Price then rallies and hits the resistance wall at the 100% level.
• A few days again price mounts yet another rally and runs into, you guessed it, another resistance barrier.

So judging from the example it’s pretty obvious the 61.8%, 100%, and 161.8% levels are the spots to rack up profits.

Now we are going to look at Fibonacci extension levels in a downtrend. In a downtrend the main objective  is to take profits on short trades. Why? because the market seems to find support at these levels.  Now let’s take another gaze at the USD/CHF chart we looked earlier in the Fibs lesson.

We recall seeing  a nice looking doji forming at the 61.8 level. Price then went into reverse as sellers smelled blood and dragged price all the way down to the Swing Low.

How about about we pull up the Fib extension tool and see the best places to rack up profits assuming we traded short at the 61.8% level.

The 38.2%, 50.0%, and 61.8% extension levels would have all been good places to take profit” />

Now here is a summary of what happened after the price reversal at the Fib retracement level.

• Price hits support at the 38.2 level.
• 50.0% level holds out as support but then turns into an event zone.
• 61.8% level aso turns into an event zone before price takes a dive to test the previous swing low.
• 100% level looks like it’s been busy acting as a support barrier also.

From this synopsis we could have picked up profits from the 38.2%, 50.0%, or 61.8 levels.  It is also possible that other traders were  watching these support levels like a hawk since they were also anticipating  significant profits as well.

What Do We Learn From These Examples?

That price  makes a put stop at support or resistance at the Fibonacci extension levels. But don’t be fooled into believing it happens all the time, because it doesn’t happen that way. But it happens enough for you to adjust your position and rack up profits, and more importantly manage your risk.

Unfortunately there is no way of  ascertaining  which Fibonacci extension level will put up the resistance. Another headache is choosing which  Swing Low to start from in creating the Fibonacci extension levels. One way to get around this is using the Swing Low from the previous examples. The point is there is nothing etched in stone as to which is the right way of picking the right swing points. But as they say, practice makes perfect.  So with a little practice you should be able to master picking the right swing points.

In short  you will have to use your discretion when using the Fibonacci tool.  You will have to determine how long the trend will stay on. Your decision  could either make or blow up your account.

That’s a wrap for ”How to Use Fibonacci Extensions To Rack Up Profits ”. Next week we will learn how to use the fibonacci indicator to place a stop loss.

Til  next time take care.

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Lighting Fibonacci Retracements With Candlesticks

Hello and welcome to another edition of the bulls vs the bears.  Last week we touched on Combining Fibonacci Retracements with Trend Line Analysis. This week we are lighting Fibonacci Retracements with candlesticks. No, we are not doing a night vigil on the collapse of the forex market. Far from that. We are merely combining Fibonacci retracements with candlestick patterns –  the Japanese variety.

Before we move on to today’s lesson. Let me give you a little tip. If you know you are a little rusty on reading candlesticks look up Fundamentals of Reading Candlestick Patterns   and You Need To Know Ten of These Candlestick Patterns. Now onward.

Like I stated earlier, we are going to learn how to to combine the Fibonacci retracement tool with candlestick patterns. With this analysis we are looking  for what we call in the forex business as exhaustion candles. Now exhaustion candles are called such not because they look worn out. But they reflect the level of buying and selling pressure among the big boys- not to mention the fact they reflect the indecision among traders as to whether to  buy or sell. Also they give you an idea of where the next trend is going to come from.

Let’s take a look at a price action  illustration using the 1 hour chart for the EUR/USD pair.

As you can see the the USD/CHF pair has  been in a bullish mood for a while. Then all of a sudden the big players decide to take a break. I guess the burning question is ‘When should I get in on this trade?” Well let’s  pull out the Fibonacci tool and see where it leads us.

As  you can see the Swing High has been set at 1.3364 with the Swing Low at 1.2523. Now let’s see whether it’s safe to make our entry in the next chart

I guess it’s more than safe to make your grand entry. Evidently the bulls are shooting to the heavens. The 50.0 fib level held up for the bid with buyers pushing the EUR/USD pair  further up the hill. Let’s see whether the 61.8 fib level was able to keep its shape.

Look what we’ve have here! The 61.8 level is doing just fine. Even better we find a doji sitting right on this barrier. In  case you don’t know by now the the doji is an exhaustive candle reflecting indecision or equality among the bulls and bears. In light of this information the questions that should be running through your mind are : Are the bulls running out of steam? Is resistance holding at the retracement level? You need to answer these questions because other traders are also watching that level like a hawk.

You may also be  thinking “Is it time to sell”? The chances of a reversal are quite high. Just make sure you have a  risk management plan in place just in case the market decides to head south. The next chart should answer all these questions for us.

As you can see it’s definitely time to put in a sell order. Why? because  the doji has formed, meaning the buyers are worn out from battling the sellers. So get ready to make some serious doe!

However, the bears stall for a bit. But not for long  because they  then head straight down the slope after the brief  respite. Obviously the bulls were too tired to lock horns with the bears, which then  allowed the bears to seize the initiative. Eventually price nose-dives all the way down to the Swing Low. The bears then racked up 500 pips along the way –  A candidate for trade of the year if you ask me.

If you want to learn more about swing trades look up Do A Little Swing Trading

So as you can see the Fibonacci tool is very useful in signalling whether a retracement level will keep its shape or not.  Even better you don’t need to put in those scary entries called limit orders. There are no grey areas with Fibonacci tools.  Of course you may start getting nervous about whether the support levels will keep their shape since we are dealing with event zones and not necessarily specific levels. This is where  your knowledge of candlestick formations  come in real handy.

Just wait for the Fibonacci bar to form below or above a Fibonacci level to confirm whether you should put in an order or not. If  you  see  fibonacci the bar forming go ahead and put in your trade order since that’s your cue that the   retracement level is holding.

That’s a wrap for ”Lighting Fibonacci Retracements With Candlesticks ”  Next week we’ll  learn How to use Fibonacci Extensions to Rack Up Profits.”

Til next time take care

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How To Tag Fibonacci Retracement With Trend Line Analysis

Hello and welcome to another edition of the bulls vs the bears. Last week we touched on How to Map Out Support and Resistance Areas With Fibonacci Indicator. Today we are learning how to tag Fibonacci Retracement with Trend Line Analysis. But  before we go on , if you are not sure about drawing trend lines  look up my post Drawing and Trading Trend lines. Failure do so could result in irreparable damage to your health.

Now that we’ve gotten that little alert out of the way, let’s move on with today’s lesson.

Whenever the bulls or the bears  are in control you make use of Fibonacci retracement levels to get in on the trend. So all you have to do is to look for Fibonacci levels that line up with the trend. Let’s take a look at the 1 hour price action  chart of the AUD/JPY pair.

As you can see the bulls  have been running the show  on the  bullish trend line.  You  see this and you say yourself”Now will be the perfect time to make my trade once the pair touch the trend line.” But then  that little voice in your head counters with a whisper saying “How about you pull up your forex toolkit and get your Fibonacci toolkit so you can get an accurate entry price?”

As you can see the Swing Low has been plotted at 82.61 and the Swing High at 83.84. See how the 50% and 61.8% Fibonacci levels have been intersected by the rising  trend line. Hmmm…..Something tells me these two levels could be possible levels of support. Let’s find out. Shall we?

Voila! We have a level of support at the 61.8 level. Price ricochets nicely before heading for the hills. Put in  some buy orders here and you make  the grandest  entry into the price action.

After touching the trend line, price bursts through the  nearest Swing High and heads for the hills. So it does pay to have the Fibonacci tool even if you plan on cracking the trend line a second time. When you see both a diagonal and a horizontal support/horizontal level just know that other traders are eyeing these levels like a hawk. They ‘re getting ready to pounce when the opportunity presents itself.

And, just like other drawing tools, trend line analysis can be subjective. No two traders see trend lines the same. Their binoculars see differently. But one thing is certain- You will see a trend. But once you see a trend take shape, start looking for ways to go long  to give yourself a chance to laugh all the way to the bank.

That’s a wrap for ” ”. How To Tag Fibonacci Retracements with Trend Line Analysis.”  Next week we’ll  touch on  Lighting Fibonacci Retracements with Candlesticks.  Not to worry! We’ll not be doing a vigil.. We’ll just use the Fibonacci too to find candlestick patterns.

Til next time take care

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How to Map Out Support and Resistance Levels Using Fibonacci Indicator

Hello and welcome to another edition of the bulls vs the bears. Last time  we learnt that  the fibonacci was not full proof. And that it could do a 360 on you. This week we are going to learn how to map out  support and resistance levels using Fibonacci  indicator.

Like we said last time, the Fibonacci tool is quite useful. But it can’t be used in isolation. It should be used in unison with other tools to discover the sweet spotup trades that you’ve been  salivating about. So we ‘ll take what we ve learnt and go hunting for those spotups.

If your Fibonacci tool happens to spot  support and resistance levels, combined with other price areas, then chance of price  shooting high from these areas are quite good.

Let’s take a look at an example of such a scenario using a daily price action  chart of USD/CHF

As you can see the bulls have been running the show. All these green candles make it crystal crystal clear as to who is in charge. The question you should be asking yourself is “When do I make my entry?” Using the Fibonacci tool, you you see the low at  1.0132  as your Swing Low and the high at  the high at 1.0899  as your Swing High. So your chart looks all set with all these Fibonacci retracement levels.

Let’s see how resistance support pans out in the next scenario on the same price action chart

As you can see we’ve laid a solid foundation to increase our chances of finding a solid entry. But the next question we need to ask is “Where do we enter?

Well as you can see 1.0510 put up great resistance. And coincidentally it just so happened to align with the 50% Fibonacci retracement level. As you can see the resistance got breached. And once it turns into support, that will be the perfect time to put in your buy entry. Now let’s look at where to place your buy entry.

If you put in your buy order around the 50% Fib level, you should be in a good place.  However we see some hair raising moments when the support level takes absorbs a second bite at the cherry. Price tries to break through the support barrier but is unable to close the deal. Eventually the pair do break through the barrier and continue with their journey.

The same setup can be duplicated on a downtrend. Just look for price levels with similar action from previous price action.  Come to think of it  the probability of price taking a ricochet from these levels are quite high. I can hear someone saying “Why do you say that?”  well support/resistance areas are very popular zones to place buy orders. As such buyers will be keeping a close watch on these zones.

While it’s not guaranteed  that price will shoot for the stars  from these levels, you can be confident about your chances of your trade entry returning a healthy profit.  It’s all a question of probabilities. If you stick with trades with a high probability of success, you will come out smelling like a rose.

That’s a wrap for  “How to Map Out Support and Resistance Levels Using Fibonacci Indicator.” Next time we’ll learn how to Combine Fibonacci Retracement with Trend Line Analysis.

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Fibonacci Can Do A 360 On You…Watch Out

Hello and welcome to another edition of the bulls vs the bears.  Last time we kicked off  our series on the Fibonacci tool with an intro on How To Make Your Grand Entry Doing The Fibonacci. We basically learnt  that the Fibonacci tool was useful for placing trades at support and resistance levels. We even learnt how to to enter a trade using Fibonacci retracements.

However we are going to learn a very painful truth about the Fibonacci indicator. While it’s fun doing the Fibonacci, the Fibonacci indicator  can do a wicked 360 on. you.  In as much as it is able to predict whether support/resistance levels are going to break, they don’t always break. Some  of you are scratching your head saying”Wait a minute. I though you said Fibonacci could predict the future.” Well sure. But it’s not exactly bullet proof either.

Let’s look at a few examples starting with  a 4 hr  price action chart of GBP/USD.

Here the bears have been running things. So you seek the help of the Fibonacci indicator to get you a solid entry point. You then pair a Swing  Swing High at 1.5383, with a swing low at 1.4799. As you can see the currency pair has been holding it down at the 50% level. And you’re like” Time to go short on this deal.”

Well News flash! If you so much as try to put in an order at this level you’ll do serious damage to your account.  The next graphic will explain why.

What you  didn’t realize wat that the Swing  Low had mounted a comeback. It managed to rally above the Swing High point.

What’s the moral of the story here?Yes Fibonacci retracement levels create a high probability of success. But they don’t always work. In such a situation you may not know if price will do  a U-Turn to the 38.2 level and restart the trend.

Then again price may hit the 50% or 61.8% levels before doing the turnaround.  Better yet, price may just override the Fibonacci and bulldoze its way past all the key levels like a freight train. You  need to understand that the bulls do not always resume their uptrend after discovering temporary support or resistance but instead zoom past the Swing Low.

Also you need to determine which Swing Low  you want to use. The Swing Lows are not  etched in stone, especially when the trend is very foggy. Not everybody sees charts the same way. Two people may have their biases concerning time frames and technical analysis. How do we clear that fog? By combining the fibonacci with other tools in your forex tool box such as moving averages. This should help give you a higher probability of success. For more information on moving averages look up  We Are Moving Averages Part I and II. 

That’s a wrap for ”Fibonacci Can Do A 360 On You…Watch Out  ”. Next time we’ll try and  solve   the support/resistance  quagmire by using the Fibonacci indicator in combination with other forms of support and resistance levels.

Till next time take care.

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How To Make Your Grand Entry onto the Forex Market With The Fibonacci Indicator

Hello and welcome to another edition of the bulls vs the bears. Today we are going to learn how to make your grand entry into the forex market with the Fibonacci Indicator  If you think we’re going to learn the latest hip hop dance  you’re at the wrong address. We’re going to learn how to use a very famous  forex indicator called the Fibonacci.

Remember when I mentioned the Fibonacci tool in   my post “How To Calculate Risk Reward Ratio Without Blowing Your Forex Trading Account?” Well  we are going to do an in depth study on this indicator. Now I’m not a huge fan of indicators. They’re  really not part of my trading menu.  But I will make an exception  because it’s quite popular among But the Fibonacci comes highly recommended among traders because of its usefulness in analysis such us support / resistance, risk/ratio, stop losses,  retracement, e.t.c

So here is what we are going to do. I’ll give you the definition, give you the background to Fibonacci and then show you two instances by which you can use the fibonacci rule.

What Exactly  Is the Fibonacci Indicator?

Well Fibonacci the Fibonacci indicator  uses retracement  to define areas of support and resistance on the charts. You basically use the Fibonacci to draw static horizontal lines to determine where possible support and resistance levels will occur. Now the fibonacci tool was name after a famous Italian Mathematician called Leonardo Fibonacci. He basically had a flash bulb moment when he stumbled on a series of numbers describing the natural arrangement of things in our universe.

Now how did he derive these numbers? He started with 0 followed by 1 and then he added 0+1 to get the third number 1. Fibonacci added the third number(1+1) to get 2 and then the third number and so on. So   you have ratios  in the following sequence:0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144….  Don’t scratch your head about manually calculating these numbers. Your  MT4 software does all the leg work. The most important thing is understanding  the workings behind the the Fibonacci tool.

Speaking of which, the only ratios you need to know for the Fibonnaci are as follows:

Fibonacci Retracement Levels

0.236, 0.382, 0.500, 0.618, 0.764

Fibonacci Extension Levels

0, 0.382, 0.618, 1.000, 1.382, 1.618.

There is one little catch though. In order to apply the Fibonacci  indicator  you need to know how to  identify swing high and swing low points.  In case you’ve forgotten, a swing high is a candlestick with two lower highs on its left and right. While a swing low is a candlestick with two higher lows on its left and right.

For more information on swing points look up Do A Little Swing Trading.

I guess the burning question  on everybody’s mind is:

How Do We Use Fibonacci Retracement To Enter A Trade?

Before you consider kicking the the Fibonacci tool into  action, there is one thing you need to understand about the Fibonacci. And that is, the Fibonacci only works when there is a strong trend in the works. If the bulls are in action you go long(or buy) at the retracement level at a Fibonacci support level. But when the bears take over, you do the complete opposite. You go short(or sell) on a retracement at a Fibonacci resistance level.

Fibonacci retracement levels are quite useful to the trader. Their job is to attempt to predict where price will hit in the future. You could say they play a prophetic role. Some of you are probably wondering”What’s the theory behind the workings of the retracement levels?”  Well, the secret is whenever either the bulls or the bears start a new trend  price will retrace or pull pack to a previous level before continuing on their journey.

I guess the next question  we have to answer is

How Do we Find The Fibonacci Retracement Levels?

Like I alluded to earlier, you need to locate the latest swing highs and swing lows. If you see the bears in action click on the Swing High in your MT4 chart and drag your cursor to the most recent Swing Low. But if you happen to spot the bulls  click on the Swing Low and drag the cursor to the most recent Swing High. Let’s take a look a look at how to make those retracement levels work on the forex markets, starting with the uptrend

Ladies and gentlemen, This is a daily chart for the AUD?USD pair in the uptrend. The horizontal and diagonal lines  represent  retracements levels of the Fibonacci indicator.  Look out for .6695 close to the .7000 line. As you can  see you plot Fibonacci retracement levels  by clicking on the Swing Low at .6995 on April 20  and then drag the cursor to the Swing High at .8264 on June 3. This creates a diagonal  line right across the chart.

Voila! your software then calculates  the retracement levels like clockwork.  You don’t need to pull your hair out doing any weird calculations. Oh! by the way the faded numbers next to the shaded areas on the shaded areas in the far right corner are the retracement levels.

Let me break this further down in simple English. IF the AUD/USD pair pulls back from a new high  one of the retracements levels will provide support as the pair look for a landing spot. Why? because  traders will be placing their buy orders at the retracement levels as price does its pullback.

Now let’s see what happens with the Swing High

Well we see that price retraced to the 23.6 level and continued with its slalom run  for the next few weeks.  See how it tried to breach the 38.2 level but failed to close the deal. See how price resumed its bullish run on July 14th and eventually breached the Swing High. It’s pretty obvious that putting in a buy at the 38.2 level would have been profitable long term.

Now let’s look at retracement levels in the downtrend using the 4 hr chart of the EUR/ USD pair.

Look at the Swing High at 1.4195 and the Swing Low at 1.3854.  The shaded areas in the far right corner are the retracement levels. What’s the expectation here? That  if price retraces from this Swing Low, it could run into resistance at one one of the resistance levels. This is because traders wanting to trade the downtrend may want to put their sell orders  at that level.

So what happens next?

Something interesting is happening here. First price mounts a daring rally, and then gets stopped  in its tracks below the 38.2 level, before trying to breach the 50% level. If you place your sell orders at the 38.2 or 50% level you stand the chance of making some ridiculous profits.

Now what did  we learn about price from these two examples? Price run into  brief support or resistance at Fibonnaci retracement levels. Now if most traders believe a retrace will occur at a Fibonacci level and are anticipating price to touch that level, then all those pending orders will have a major influence on price.

 

That’s a wrap for ”  How To Make Your Grand Entry onto the Forex Market With The Fibonacci Indicator”. Next week we’ll find out  what happens when fibonacci retracement levels do a 360 on you.

Till next time take care.

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How To Calculate Risk Reward Ratio Without Blowing Your Forex Trading Account

Hello and welcome to another edition of the bulls vs the bears. Last week we   touched on Put In Your Risk You Get Your Reward. This week we are going to learn how to calculate your risk reward reward ratio without blowing your trading account. It’s absolutely crucial that you get get this part or else your trading account will be history.

I’m sure some of you rookie traders have been struggling with risk reward ratio for ages. Newsflash! Even experienced traders are totally clueless about how to calculate risk ratio reward  before making their trade entry. 

So basically we are going to learn  the whole process of calculating risk reward ratio. This will help you understand  how important calculating risk reward ration is to your money management strategy.  I guess the question everybody is dying to get answered is:

How Do I Calculate Risk Reward Ratio?

The formula seems fairly straightforward.  Let’s say you decide to risk 40 pips and you set a profit target of $80. Your risk to reward ratio is 1:2

Your risk(40 pips)to  reward($80)= 1:2 

Fairly simple. Isn’t it? However, when calculating your ratio, keep in mind the commission your forex trader charges you every time you enter a trade. Failure to pay attention to the spread could cost you an inaccurate risk reward ratio. Not to the mention the fact that it could distort your trading account also.

Let me break it down nicely. Let’s say you’re the type who  only risk 5 pips per trade in the hopes of racking up 10 pips per trade. Amd  you think you ‘ve hit the 1:2 jackpot, you need to rethink your trading strategy.

 Say your broker charges you 2 pips every time you trade the EUR/GBP pair. This means you are risking 7 pips(5+2) to make pips(10-2), which nets you a ratio of 1:14. Not the  same as 1:2. Is it? The rationale of this scenario is that   you need  a higher win rate to compensate for this huge risk reward differential. By the way the win rate is the percentage of winning trades you need to maintain to remain profitable.

This huge differential affects scalpers (Those who trade for short term gain) and day traders.  But for the swing and position traders, they’re sitting pretty since the trade on higher time frames. This huge differential could bite even harder especially if  you set tight stop losses and profits. Now let’s take a look at an illustration of the risk reward ratio using the GBPJPY pair.

Here we have a price action chart comprising of  a 100 pip stop loss and a 200 pip profit target. if we calculate the  risk reward ratio for these fundamentals the result will be less scary. However, if your broker hit with a 5 pip spread here is what the risk reward will look like:

105 (100+5) pips risk and 195(200-5)pips gives us a ratio of 1:85 How do you get a such a delicious ratio? It’s because the trade was in a higher time frame. This type of ratio works works perfectly if you are into swing trading or position  trading, you are in luck. Like mentioned earlier, these two trading categories work perfectly in higher time But if you are a scalper looking to make a quick buck, you could end up playing catch up, not to mention, blow up your trading account.

Relationship Between Win Rate and Risk Reward Ratio

Your win rate has everything to do with your risk reward ratio. I dare say your win rate plays a huge part in your risk reward ratio analysis. You need to figure out your win rate before even thinking about your risk reward ratio. Here is a simple formula you can apply if you want to continue racking up the profits.

So:

What’s The Formula?

It goes like this: Required Win Rate = 1 ÷ (1 + Historical Risk to Reward Ratio of Your Trading Strategy)

Let’s say your expected risk reward ratio is 1:1. If you plug into the above formula, you should get the following result:

1 ÷ (1 + 1) = 0.5, which is 50%.

This means that you need to be averaging 50% profits just to breakeven. Anything above 50% should make your trading account smell like a rose. But if the average dips below 50% expect a loud groan  from your trading account. Because regardless of how you perform in the short term, you will hemorrhage all your  money.

However, there is a way out of this. If you are able to establish a win rate of 50% on a 1:2 ratio, you should be able to make 50% on your capital.  All you have to do is to risk 1% of your capital – nothing more nothing less.

Another formula you can implement is:

Minimum Risk To Reward Ratio

You use this formula to calculate the minimum risk to reward ration you will need to stay afloat or stay profitable : Here is how the formula goes:

Required Minimum Risk to Reward Ratio = (1 ÷ Historical Win Rate of Your Trading Strategy) – 1 is 

Let’s say your historical win rate 50%. IF you plug 50% into the above formula, this is what you get:

(1 ÷ 0.5) – 1 = 1

Judging from the above result you need to maintain 1 risk reward ratio of 1:1 in order to remain profitable. Meaning that if you set a stop loss if 100 pips your profit target should be 100 pips. The preferable ratio among most traders is 1:2. So if you set a stop loss of 100 pips you should set a profit target of 200 pips. Mind you, these targets are not etched in stone. I’m just using them as illustrations of how to set your risk reward ratio.

You Can Use A Calculator To Calculate Risk Reward

If you  find calculating risk reward ratio is too taxing for your brain cells, help just arrived. And it’s called a calculator. Just calculate your risk ratio on your calculator and give your brain cells a break.  Also look out for free mt4 indicators on google. These tools are also useful  for calculating your risk reward ratio.

 If you prefer something  more specific look  for an fx(forex) calculator online. Just go on google and you should see the search results for fx calculator on your screen from top to bottom. But if you are scared of calculators  you can fall on on the tried and tested Microsoft Excel sheet. That should help simplify the calculation process.

Fibonacci Retracement Tool  to Identify Risk To Reward Areas 

Another tool  that can help you identify your risk reward areas  is a famous retracement tool called the Fibonacci Retracement Tool(or Fibs a forex  traders like to call it).  The fibonacci tool was originally  created to define levels of huge price swings.  Let’s look at a few examples

As you can see you can identify your risk to ratio areas using custom levels such 1.2,3, 4, e.t.c. So you label the risk to ratio areas RR1 RR2 RR3, e.t.c. RR represents the risk areas. Just remember that these levels only serve as reminders of potential risk to reward price levels of your trade. They are not actual calculations of Fibonacci ratios.

Now let’s  try to use the Fibonacci  to identify potential risk reward levels .

 

You see  the red diagonal line at the bottom of the chart? That’s the Fibonacci tool turned upside down. The blue lines streaking across the chart represent the Fibonacci  levels which you enter in your MT4 software. As you can see, the stop loss at the bottom is labelled 0 while the buy entry is labelled 100, These two levels symbolize the potential risk to reward ratios.

Right above these fibonacci levels is the potential risk to reward areas labelled RR1 and RR2 respectively

So  with the Fibonacci tool you  should be able to create a nice picture as to what price level your trade will produce a decent risk to reward ratio. Pretty exciting stuff. Isn’t it?

That’s a wrap for ” How To Calculate Risk Reward Ratio Without Blowing Your Forex Trading Account. ” Calculating risk to reward is a breeze so long as you have a grasp of how the fundamentals of risk to reward ratio work. However,  make sure you access the risk reward ratio of every trade you intend to enter in prior to entering your trade.  Regardless of the tool you you use to  do your calculation,  You absolutely have to do your due dilligence or you will get your fingers burnt severely.

Even more important, you need to understand the relationship between risk to reward with your  chosen  trading strategy.  Then spend as  much time as possible testing as many risk to reward ratios a possible to establish the best risk to reward fit for your trading strategy.

Once you find a risk to reward combination you are comfortable with, you then  calculate the minimum win rate required  based on your chosen risk reward ratio . In so doing you can keep a better eye on the success of your trading strategy.

Till next time take care.

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How to Roll In The Cash With Pivots

This week we’re  playing with pivots. No, we’re  not talking fancy gadgets here.. We’re going to  learn how to roll in the cash with pivots. Pivots  play a crucial role as far as identifying support and resistance levels on the charts. They’re more like robots with the mentality of sniffer dogs  as their job is to ascertain the overall trend direction of the market.

So we’re going to breakdown the pivots three way.We’ll explain what pivots are.Then we’ll learn how to calculate the pivots, and finally we’ll learn how to trade the pivots.

First off:

What really are Pivots?

Well,pivots are these indicators that help the trader determine the overall trend in a market over different time frames. The pivot points simply average the points from the previous trading day.

These pivot points are absolutely immense.Why? because they’re the means by which forex traders support and resistance areas. In plain English,  the pivot points  and their surrounding support/resistance levels are most likely to experience change in the direction of price movement.

This then begs the question.

Why are forex traders so crazy about pivots?

Well, it’s very simple. They tell things as they are on the charts.You don’t get any pussy footing or any discretionary moves from pivots.They just give it to you straight as far as the happenings on the charts are concerned. Because so many people have their eagle eyes set  on these support/resistance levels, these zones confirm the traders worst suspicions. However,  pivots  can be a bit subjective as far as spotting the highs and lows are concerned.

Pivot points are also valuable to short term traders.Why? Because they create opportunities to cash in on price movements. Also, forex traders have the luxury  of choosing to trade the bounce or break like  normal support and resistance levels. Those who trade range-bound markets use reversals.They see zones as great opportunities to place their orders. While breakout traders use pivot points to detect key levels that must be broken or penetrated.

This is a beautiful illustration of pivots at work. Notice how the support and resistance levels and pivot point are nicely labelled  on the chart. Doesn’t  get any better than this. Now before I continue let me give you a run down on  the meaning  behind those acronyms on the charts. Not to worry!They’re not CB radio signals.

PP = Pivot Point

S = Support

R = Resistance.

Which brings us to:

How to Calculate Pivot Points

Boys and girls grab your calculators because we’re going to do a little Math. We ‘are going to learn how to calculate pivot points. But before I  get started, let me say this: If you have a phobia, about algebra,or you hate algebra with a passion, not to worry! In most cases, the software behind the charts does the calculations. You don’t need to crack your brains too much.  But for you Math nuts, let’s get cracking.

Basically, we are calculating the pivot point and the surrounding support and resistance levels. And do to accomplish this task, we make use of the previous trading session’s open, high, low and closing prices.

To calculate the pivot point the formula goes like this:

Pivot Point (PP) = (High + Low + Close) / 3

You then calculate the support and resistance levels off the pivot point in this direction:

First level support and resistance:

First Resistance (R1) = (2 x PP) – Low

First Support (S1) = (2 x PP) – High

Second level of support and resistance:

Second Resistance (R2) = PP + (High – Low)

Second Support (S2) = PP – (High – Low)

Third level of support and resistance:

Third Resistance (R3) = High + 2(PP – Low)

Third Support (S3) = Low – 2(High – PP)

Quick alert!Some price chart software plot intermediate levels, or what we call midpoint levels. Here is how they look like on the charts

As you can see all the levels are nicely labelled for you comfort, thanks to the backend workings of  the software. Most forex charts software  automatically calculate these points like clock work for you. The only thing you have to do is just configure your settings  for the software to deliver to you the closing time and price. See how stressless this is?

You may also want to arm yourself with pivot calculator . You will definitely need it especially when it comes to backtesting to check prices reaction to pivot points. You’ll be amazed at how honest the pivot points are. They just tell you exactly how the prices  react to their presence on the charts. Getting a pivot calculator is not that difficult. I believe most brokers provide you with one. Or if you prefer,you can download it online. Just  Google pivot calculator and Google’s search spiders will be only too glad to oblige.

Now that we’ve gotten the math out of the way, let’s get to the most exciting part – THE TRADING!

We’re  going to cover three parts . The first part is

How Do I  Use Pivots to Trade Ranges?

Well the easiest way to use pivots as part of your forex trades is to treat them like typical support and resistance levels.  And if you know prices as well as I do, when they see support and resistance levels, they hit them repeatedly in their attempt to break through and head for the hills.

And if these levels are able to  withstand  a currency pair’s constant barrage,then it means these levels have a strong backbone. So applying the description of the support/resistance levels to the pivot point, your pivot level is able to withstand the currency pair’s onslaught this creates great opportunities for you. And these opportunities could come in the following waves:

• If a price is closing in on the resistance level, sell the pair and put a stop loss just above the resistance
• If you see the price inches ever closer to the  to the support level, buy the pair and put a stop just below the support level.

Nothing to it at all. Let’s  see the actual representation of this range trade

As you may have noticed, price is testing the resolve of S1(Support Level 1). If you believe in your heart of hearts that S1 can repulse the price, put in your buy order just  above S1. Of course  you want to safeguard your trading position,  so you put in a stop loss past the next support level.

If you want to play it safe,  you can set a wide stop just below S2. However,if price  breaches the barriers of S2,the probability of i turning around and going uphill is unlikely as both SI and S2 would have converted from support to resistance levels. But if you want to be bold, and you are 100 percent certain  S1 will hold its ground, just place your wide stop loss just below S2.

Some of you are wondering”Where do we place our take profits?” Well, you could place your profit targets , you could aim at PP or R1. Then again these two levels could put up some resistance. So watch out for that. Anyways let’s see how the market looks when you place your buy order.

Voila! S1 survived the onslaught! And if your “Take Profit” is PP it means “Take the money to the bank” However, a  little news flash! It’s not always that straight forward. You shoudn’t always put all your pivot point eggs in one basket.

Make sure  your pivot  point levels are parallel with the previous support and resistance levels. To  help you get confirmation of a trade, just fall back on your candlestick analysis. And if you’re not sure about your candlestick knowledge read up on You Need To Know Ten of These Candlestick Patterns.

Last but not least:

How Do I trade Breakout with Pivots?

First you need to support the support and resistance levels. As  I’m sure you know by now, support/resistance  levels can’t sustain a rearguard action forever. At some point, they’re bound to cave in. And when that happens, you get to work with your trades. As we found out earlier, you can trade it safe, or you can go aggressive.

However,for those who like to play it play it safe,you ;d be better off taking advantage of the initial breakout.  Why? because if you’re waiting for a retest of the support/resistance barriers, you may end up missing out   on huge trading opportunities. Let’s see how pivots points scout potential trades in this graphic

We see price surge above PP before cooling down at R1. Eventually the resistance barrier at R2 caveS  in, giving the bulls free passage to surge  by a further 50  pips. This shows the dividends of trading the aggressive way if your eyes are sharp enough to catch the initial price action. However, if you’re sitting there waiting for price to  take a second bite at the cherry(or retest), you’d be waiting in vain. As you can see,price chose not to come back. It continued on upwards.

See how the bulls try to attack the resistance barrier at R3.   You do not want to adopt the same aggressive posture here like you did at PP. Why?because this is false break territory. Failure to take heed could result in a huge loss for your trading position, not to mention,spike your blood pressure.   And if your stop loss is too close for comfort, you’d most certainly get swamped. So your best option would be to take the safe option.

If you want to learn how the false break strategy works read up on Trade The False Break

Notice how  the bulls break out after the initial resistance by the bears. Also pay attention to how  the bulls make a U-turn and break down past R3. You could go short(or put in a sell entry) at the retest of the broken line.

Last but not least:

Where Do I Place Stop Losses And Profit Targets In Breakouts

Hmmm……placing stop losses and profit targets in breakouts is not an exact science. Why?because unlike range trades where your focus is on breaks of support and resistance, you are looking  for strong fast Usain Bolt-like surges in the breakout.

It’s like keeping up with the speed of light. If you choose to go long(buy) and price fizzles out at R1, you could place a stop below R1. Let’s take a look at the previous graph again.

As you can see price slightly cooled at R1. In this scenario,you place your stop loss at R1.  Better safe than sorry if you ask me.

Speaking of setting targets, here is what you do. Aim for the next pivot point support or resistance level.By the way if you’re expecting price to break through at all levels, DREAM ON! The  only time  this miracle happens is when a major economic event or surprise news occurs. Whether this news is good news,your guess is as good as mine. Let’s take a look at the previous graphic and see where the stops are placed.

As you can see, the bulls break through at R1. In that case you place your stop just below R1 to protect your position from nasty unexpected U-turn. Keep vigil over your position and move your stop to see if the pattern continues.

That’s  a wrap for “How to Roll in the Cash with Pivots. ” Pivots can be fun to trade  trade with. They help catch  profitable trades that the naked eye misses.   If you place them properly on your chart, you could have yourself a major harvest.

Til next time take care.

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