The market is moving like a bat out of the darkness and you jump into the trade. Sure as can be, you get in just as the trade peaks, for a loss. This is impulsive trading. Impulsive trading will kill your account.
The focus this weekend is changing your psychology so you no longer take impulsive trades. All of us have been taken in by sudden price movements outside our trade plans. You have to stop taking these trades if you want to run a successful forex trading business.
To stop impulsive trading you have to associate impulsive trading with something dangerous, or disastrous so that you feel the situation strong enough to sink it into your subconscious. Use what ever works for you. As you recall a impulsive trading scenario also recall an impending car wreck or whatever else scares the pants off of you. Repeat this image over and over to drive it into your mind. Feel it smell it. Impulse trading = car wreck, impulse trading = car wreck. Know your avoidance reaction to it. You want to change your subconscious response. It is after all your subconscious taking the trades. You would not in your right mind enter out of trade plan trades - would you?
Impulse traiding = alligator trap, impulse trading = alligatior trap.
Remember we trade like the elite professional traders. We always have a trade plan and stick to it 100%. We trade chart pattern signals respecting the fundamentals. We trade breakouts seeking to maximize trend riding profits while minimizing risks.
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Sorry no posts today as it is the end of the month and it is friday and the volatility is crazy.
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GBP/USD 4HR 1/29/09
The WEEKLY BIG BOX BREAKOUT SETUP is a different box breakout strategy. In this strategy the box is the previous week. As seen in this 4 hour Pound chart the vertical lines separate the weeks. You can see that the pair paid out 800 pips as it broke out of the last range box. That is $8,000 on a one lot trade! In one week! $800 on a one minilot trade. With just 2% of your account at risk that is a 16% return on investment with a 100 pip initial stop loss. If you can squeeze off this trade with a initial 50 pip stop loss you would generate a 32% ROI on this one trade in one week. Of course this is an exceptional occurrence in normal times. In these volatile times the Pound moving 800 pips in one week is not so rare.
Look at how these weekly range boxes have been paying out. You can see that money management is the most critical component of this type of trading. Keeping losses minimized, managing to keep from getting stopped out and maximizing the weekly payout is the name of this game. Looking at the chart you can see that 5 of the last 6 Weekly range boxes paid out if the stops were properly managed.
I will be studying applying and publishing this trading method more as the year progresses. One payout like this per month even per year is an enormous return on capital investment.
Update 2/8/09: Weekly breakout trades are stronger if they are also multiweek breakouts and monthly breakouts. This is indicative of new trends setting in. New multiweek highs and lows are easily spotted. They are trading indicators that many others use and see. The famous Turtle trading group focused on this type of breakout trading, buying on new 20 day, 4 week highs and exiting on new 10 day lows. They also used a 2x 20 day Average True Range they called 2N as their stop. The smaller the stop the bigger the trade. Their longer term trade was a 11 week breakout with 20 week exit. Extractred from the Complete Turtle Trader, by Michael Covel.
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USD/CHF 5M 4:45AM
- GBP/USD 5M 2AM
The Pound, 2nd chart, made a nice move at 2 AM this morning out of a short range box. If you were awake at that time you caught the pair as it has moved up 200 pips so far…………. It is near the US open now at 4:14 and we will see if it reverses or continues to rise on the comments of George Soros the billionare trader who says he is no longer short the Pound.
It is 4:45 and we are seeing reversal candles on the Swissy and Euro. ie first chart……. 5:30 AM I am stopped out of the Swissy with 1 pip gain.
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The GBP/USD looks be the sweetest forex channel breakout pair tonight. She already broke out of one small range box at 9:20 PM and is setting up to do the same again.
7AM update: I am too tired to trade last night, and I had an inkling it would not be a good time to trade because of the FOMC meeting today. You cold have picked up a few pips on the first break down at 11:15 if you were quick to move your stops……..The volatility looks schitzophrenic last night. The charts are all over the place…… Today is a good day to stay away. Save your money for another day.
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EUR/USD 15M 10:50PM Monday
The EUR/USD seems to be the best looking chart at the moment. The USD/CHF and the AUS/USD have similar layouts. It is just a matter of deciding which currency pair you think has the better risk reward potential……..Euro news at 1AM and Pound news at 3AM be careful then.
EUR/USD and GBP/USD breakouts at 11:20 PM. At 1:00 AM I have stopped out with a loss of 23 pips on the Euro and 73 pips profit on the Pound breakout.
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USD/CHF 5M @10:30PM 1/25
US/CHF 15M 7:50AM
EUR/USD 5M 7:20AM 1/26
The US Swiss currency pair has the best channel tonight at this time. However if the dollor shows strength again I expect that the GBP/USD pair will be the best mover. I may do the unusual and use a break higher on the USD/CHF pair as a strong indicator to short the GBP/USD. The reason being that the GBP/USD broke it’s channel early this evening at 9:30 and may not provide us with another nice range box tonight and the Pound is much weaker than the Swissy.
At 7:30 this morning the USD/CHF is down about 130 pips from breakout. I did not take this trade, my expectations and bias for trading with the trend kept me out. Now, however most pairs are boxing in and there is the potential to take the trades in the opposite direction with the trend. The EUR/USD chart above shows its current range box AS IT HAS BROKEN ABOVE ITS FALLING WEDGE FORMATION.
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- AUS/USD 4HR 1/25/09
- EUR/USD 4HR 1/25/09
- GBP/USD MONTHLY
The outlook this week is dependent on market movements. The trend is dollar strength but the pairs are nearning consolidation areas or extremes. The Pound in the last chart is at a new multiyear low which is a very bearish indication. The Euro and the Aussie are near upper wedge trendlines. We could see a big bullish retracement especially on the GBP if these upper trendlines are broken.
Monday update: These falling wedge formations broke to the upside pulling all dollar currency pairs with them. The USD/CHF showed that the Swiss currency may be the strongest currency if the dollar pulls back.
