Tuesday, October 7, 2008
Monday, October 6, 2008
AUD/USD short trade
The pair broke the previous low, which was made at 17th august 2007.My speculation was that the pair will probably find support at that level .It didn’t happen instead it broke the low very aggressively. I already closed one third of position after 80 pips gain which was my initial risk.
Sunday, October 5, 2008
Analysis paralysis
Trading is a mind game or game of human emotions and logic. We Homo sapiens are undoubtedly the complex cocktail in this planet. Emotions, greed, fear control us if we don’t use relative logic. What ever we do, we want to win, and we are very competitive by nature, that’s normal. Trading is particularly very tough game to play, emotion, greed and fear always do damage to our performance, but we can not get ride of them by any means. In a game some one has to be beaten, but who wants to be beaten? Probably you are thinking newbie’s are the weaker opponent. They don’t have proper game plan; they have lack of experience, lack of confidence, so they are the easy target. Yes probably you are right. But as we all know 90% of the traders fail to make money, not every one in the 90% are new. So there are many experienced traders are also losing money. You can ask; they have game plan; they have many tools in their arsenal why they lose money? Answer is very simple too much analysis, using too many indicator, trying to be complex. If you over analyse a trade, you may end up not trading it, remember trading is game of probability. Many traders use too many indicators, which more or less tell the same story, story of price action. If you can not see any trade signal in the price action, indicators will not tell you any different story, most of the indicators are lagging, except volume. Volume is the good indicator if you know how to use it. Some traders use so many indicators, that it’s impossible to monitor every one of them. Now a days most of the drivers use GPS (Global positioning system),its user friendly .Suppose you have a GPS will you still need street directory or will ask pedestrians or fellow passengers how to go to your destination. Answer is no, we don’t need any thing but GPS. Do not over complicate your system, trading plan and your chart .keep it simple, simple is the best
Saturday, October 4, 2008
Fibonacci number and pin bar reversal
The Pinocchio or Pin bar consists of three bars. The nose of Pinocchio is the middle bar and left bar to the nose is the left eye and right bar is the right eye. The logic behind the Pin bar set-up is that price tried to breakout the previous bar’s range but it failed and many traders who traded the breakout will forced to closed their position ,which will push the price even lower. As you can see in the GBP/USD 4hour chart ,we have a prevailing down trend and after the long down trend the pair tried to retrace to the 38.2% Fibonacci level. As the pair reached the key level, price action shows a lot of uncertainty at that time. After the long side ways movement, we had a failed breakout and this was the key to our set-up. We traded the pin bar with great success as usual.
Important points:
1.A false breakout(Opposite to the main trend).
2.Consolidation at 38.2%,50% or 61.8% level .
3.Consolidation at the strong support or resistance area.
4.50 and 200 moving average S/R zone.
5.Right bar is a inside bar(for better risk-reward).
6.21 Period weighted moving average resistance/support.
Text book Pin bar:
The body of the nose should be at least 66% above the high of the left eye.It is very important that the open/close of the nose is contained within the range of the left eye. The more layers of resistance the nose penetrates, the stronger and more valuable the Pin bar is. Fibonacci retracement, Pivot Points and Moving Average lines are used in conjunction with the Pin bar chart pattern. The longer the time frame, the more reliable the Pin bar is. This pattern identified on a bar chart or Japanese candlestick chart .
Friday, October 3, 2008
Thursday, October 2, 2008
Fibonacci entry
The market usually retrace after a strong up or down trend move. The Fibonacci correction tool can be used as a way to identify whether the trend will reverse or continue.Traders can take advantage of the tool and enter a position before any breakout happen.If you are a trend trader then 38.2% ,50% and 62.8% retracement levels are the key level to enter a trade,off-course candlestick formation must support your entry.
Basics for newbies
What is pip?
A pip is the smallest price increment in forex trading - pip stands for percentage in point. For example EUR/USD is quoted at 1.4502 bid and 1.4505 ask. In this case the spread (difference between bid and ask) is 3 pips.
Each pip is worth $10 in the Standard size contract and $1 in a mini contract.
What is a Lot?
Spot Forex is traded in lots.
The standard size lot is $100,000.
There is also a mini lot size and that is $10,000.
A pip is the smallest price increment in forex trading - pip stands for percentage in point. For example EUR/USD is quoted at 1.4502 bid and 1.4505 ask. In this case the spread (difference between bid and ask) is 3 pips.
Each pip is worth $10 in the Standard size contract and $1 in a mini contract.
What is a Lot?
Spot Forex is traded in lots.
The standard size lot is $100,000.
There is also a mini lot size and that is $10,000.
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