Support and resistance

Support and resistance are probably the most talked elements of technical trading. Some trader’s only trades using S/R, they buy the support and sell the resistance. Of course nothing is fool proof, some days even the best of the best set up wont work, that’s trading. Cost of trading is some losing trades, you have to accept it.

Facts that you need to know:

The more times the old support/resistance levels are tested the more forceful it is if it is violated.

After a support level has been broken, it often acts as a resistance level; this is because traders want to limit their losses and will sell later,when prices approach the former level.

Easy way to trace historical support or resistance is to look for V shape pattern in the chart.
In the chart above we can see that price made several V shape patterns.

Valid trend line

New traders, who want to make money with high probability set ups, should get used to drawing trend lines. Tend line could be the simple tool to profit from the market, but please draw it on the bigger time frame and move to smaller time frame to execute the trade. Some Of my fellow traders send me e-mails about a valid trend line. From my way, when we are able to connect to points (HH,HH and LL,LL) we get a trend line and when the price touch the line third time and bounce back to the original trend we can say it’s a valid trend line .

Slow start

I had to go to Canberra over the weekend for some reason. This is almost a year ago since I had an escape from Sydney. I had a nice time there with my wife, but worst part is good thing always finish quickly. We arrived at Sydney domestic airport Monday evening. I had a chance to look at the market not before 8 pm Sydney time, which was already too late for any entry. I tried AUD/JPY didn’t work well, closed out break even.

MMDC result: $573 profit

This week market didn’t have any direction, best time to lose money in the market. Good news is the whole week I traded half of the regular position size, which resulted in less profit, only 573 dollar gain this week. In this kind of market, I shouldn’t complain about any profit.

Trend line trading:

Trend line trading is one of the most popular trading system that I use, as far as I remember most of the time it’s bring very good outcome from this system. So what you need to know to trade trend line system, answer is, you just connect two valid points and bingo, you are in the right track. Monitor the price when it comes close to the line, how it behaves, if it started to move away from the line, than its time to jump in the trade after the completion of the candle (what ever time frame you are trading). If the price break throws the trend line, wait for the pullback to enter the reversal entry.Detail of this system is available in my course.

Change in market sentiment:

Gross Domestic product (GDP) is the primary gauge of the economy’s health. Healthy economy should create job in a moderate phase, job hiring dropped from last quarter, which does not support that. US GDP advance increased from -0.7 to 3.5% which moved the market sentiment in the New York session. Economic commentators say that stimulus plan and “cash for clunker” helped the economy to recover from the recession. The national association for business economics thinks this growth will slow to a 2.4 percent pace in the October –December quarter. So we might observe a mixed economic data in near future.

Melbourne cup day interest rate rise:

Is it still on? Markets have priced in a 67 per cent chance that the Reserve's cash rate will go from 3.25 to 3.75 % - which would be the biggest rise in almost a decade - when it meets on the Melbourne cup day. The release of the Reserve's bullish views boosted Australian dollar over the last two weeks. This week some important indicators is showing some weakness in the US economy. Especially US consumer confidence and new home sale down by big numbers. Australian economists are also concerned about the inflation; interest rate rise won’t help the situation. So let's see what the reserve bank has to offer.

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Swing set up

I have always been interested in swing trading but mind set and interest is two very different things,I guess.I like the idea that in swing trading you have long time to analize a trade ,which could be a help to make bigger profit.Prolem is I am reluctant to set a bigger stop ,which is the key to this long set up.I am in the EUR/GBP short,i'll see how it goes.

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Stop Placement with Average True Range (ATR)

Why position size is so important

This is the number one element to succeed in the market. Traders who lose their capital, have no control over their position size, they don’t know how big their lot size should be, how much they are risking in a particular trade.
Some key points to follow:
Always keep your position size the same in every trade. Traders who change their position size randomly are very often likely to fail in their business.
As your capital increases, you can increase your position size accordingly.
Never risk more than 5% of your capital in a single trade
If you lose two trades in a row third trade must be ½ the size of initial size.
After three losing trades in a row, do not trade anymore, what ever happens in the market.
As a swing trader you should not lose more then 8% in a single trade.
If you have 10 consecutive losing trades, you should take some time off from trading and review your system.
Remember; traders who make money are only good in one thing; that is money management.
What ever system you use for entry or exit should only differ by 1-2% of your performance.
Risk management will make you money.
It is very important that you understand trading is a game of probability, no one is 100% sure about their prediction, so before you enter a trade you must know how much you are willing to lose if the trade does not work out your away.
When you enter a trade, set a stop loss order.
You must know the reason behind your entry, stop and exit. If you don’t know the reason, don’t enter the trade.

Trading forex like a pro

Why you need a trading plan?

A trading plan should have complete sets of rules that cover every aspect of any trader's trading.
• What instrument (stock, forex, options, future, CFD etc) you want to trade and why? I trade stock and forex not because I like stock or forex market I have definite reasons to trade those, you need to know why you are trading individual stock not index?
• Which market (NYSE, NASDAQ etc) you want to trade?
• What is best time for you to trade why? (Suppose for forex London open is the best time to trade)
• How you will select a stock or a currency pair that will give you the best result. (I have 12 specific rules to select a stock that helps me a lot to avoid over trading)
• The maximum percentage you will risk on each trade. This is most important for new trader to learn risk management. I follow three golden rules to manage my risk.
• How many lots/share you will trade per trade (position size).I always follow two different rules to know my position size.
• Which time frames you will look at. Time frame is very important aspect to any trading. I follow 5 and 15 minutes chart for equity .Any good set up will appear in any time frame but the point is exit will be different in different time frame.
• A trading plan will give you clear-cut entry strategy, where should you enter and why .My trading plan has eight specific entry strategies.I think exit is the key to a successful trading plan. An exit strategy will show you where to exit and why. I use Three different exit strategies.

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Double top

A double top is a reversal pattern .This pattern occurs following an uptrend. It is named for the two of peaks which form when price is unable to make a new high. Traders get the sell or short signal when price breaks below the reaction low which formed between the two peaks.
The characteristics, volume pattern and measuring rules are similar to that of the head and shoulders except for there being only two peaks.
Ideally, the double top would have two peaks at about the same price level with volume being heavier on the first peak and lighter on the second.

2B pattern

When market makes new high or new low, there is always a pullback .After the pullback the market will retest the previous high/low. If the market fails to hold the new high/low, it signals a potential trend reversal. Trades orders are entered to sell the low of the bar trying to breakout or buy the high of the bar trying to breakdown. Target: The target is usually the ‘swing low’ prior to the new high or ‘swing high’ prior to the new low. Stop: Protect your ‘long’ trade entry by placing a ‘stop’ below the recent low and protect the ‘short’ trade entry by placing a ‘stop’ above the recent high.

How to find and confirm a trend?

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