11/7/11 Trade Results: 3 positions, $118.75 profit. Very erratic market environment

Had 1 long trade in the Euro and 2 long trades in the NQ. The one long NQ later in the day was a little bit impatient and counter trend, so I decided to take a small profit on in because I felt uneasy about the positions; I took $50 on that one. Below is an example of how I trade a wedge. A wedge represents consolidation and will break out to one side or another at some point. Until that point, if there's volume, you buy the lows and short the highs with a stop outside of the wedge. Before even taking the position, you will know where your target will be and where you stop will be. In this example, my max profit on the position was around $60, the top of the wedge. Don't be greedy with these types of trades, be realistic.

11/4/11 Trade Results: 3 positions, $103.75 profit. Trading low volume / range days

Had 3 NQ positions and 1 Euro trade, ended with $103.75 profit. The Euro trade ended up getting stopped out for 5 pips of profit. I actually got stopped on a tail, where price hit my stop and continued in my original direction. This happens, you cant get mad about it, just follow the system. The targets on the NQ where moved down from 10 points because of the lack of volume during the session, so I entered on the signals and scaled down my target expectations because of the low range. Being 12 noon, I stop for the day no matter what. Until Monday everyone, have a good weekend!

Determining trade zones and how to recognize non-trading environments: 11/4 NQ example (Wedge)

It is very important to RECOGNIZE MARKET ENVIRONMENT. You need to know the following:
- When and where to trade
- When not to trade
- How to trade certain trading environments: e.g. do you buy the highs or short the highs? when? why?

You need to have all of these answers before risking capital.

I apply the following saying, "Recognize, then decide."

If I recognize a good trading environment, I trade it; if I recognize a non-trading environment, I sit on the sidelines.

Here is a real time example of trade zones and trade environment on the NQ. I know exactly what I will do when and why I will do it. Currently, being in the wedge, I do NOTHING. Patience is an important skill to learn because it will a) save you money and b) make you money.

I look at price action on the NQ this morning and I recognize:
- Wedge
- No clear direction
- Indecision
- Tight range

All of this = a NON-TRADING ENVIRONMENT. It's important to not trade during this time and wait for price to go into your trade zones.

How to recognize and trade price channels: 11/4/11 Euro (M6E) example

I have only a few patterns that I look for throughout the trading week. I like to analyze the M6E and NQ on a longer term basis first, see what fundamentals / current events are impacting each instrument, then zoom into a smaller time frame chart to look for entries.

I try to recognize the following things:
- Buyer / Seller Failure: Inability to break highs / lows during price moves.
- Channels: (Bull) HH and HL, (Bear) LH and LL, (Neutral) Sideways
- Consolidation: usually signaled by failed signals in the form of a wedge.

Once I recognize, I plan the trade. I wait for certain things during certain conditions. Here is a real time example of a bull channel on the Euro and how I plan to trade what I recognized:

From the formation of higher highs and higher lows, there is a little bit of a higher probability to buy the lows of the channel rather than short the highs. If you are going to short the highs, be very protected with your stop. Possible level to short would be around 1.3800 IF buyer failure is present.

11/3/11 Trade Results: 2 positions, $107.50 profit. Greece making the markets very volatile

A lot of volatility in the markets because of Greece right now. Due to this, I am very cautious with positions, trying to be invested, time wise, as little as possible because of the swings / uncertainty. I had one long position in the Euro for 20 pips and 1 position long in the Nasdaq. Ended with $107.50 profit on the day. I want to discuss a few things about my system during this NQ trade:

One of my trade setups is buying upon the break of the current days high or selling at a low as long as there are now levels of support or resistance above / below the trade entry. I consider institutional levels, numbers on the NQ such as 2300, 2350, 2400 etc as levels of fierce battle between buyers and sellers, therefore there is a lot of uncertainty upon what will happen around those prices.

As you see from the chart, I entered long on the break of the high, I had a 10 point target, but upon getting filled I noticed the institutional level of 2350 (blue line), so I moved my target to 2349.75. I like to be systematic with this, never leaving anything up to chance. Always assume the worst, always look for reasons not to enter a trade, and always look for reason your trade won't work out. It's easy to make yourself believe your trade is great, because you took it; but don't be like that, try to be a professional, protect yourself and don't be left at the mercy of the markets.

11/2/11 Trade Results: 2 positions, $111.25 profit.

1 position in the Euro and 1 in the Nasdaq. Ended the day with $111.25 profit. An important lesson from today is to manually exit positions when you see condition changes. I had a long position in the Euro, price was about 20 pips away from my target, we formed a double top at the high of the day (should have exited manually upon seeing this). Instead, my stop got hit and I took a small profit on the position, whereas if I would have exited manually upon the condition change, the profit would have been around $340 on that trade instead of $85. It's an important lesson that needs to be enacted going forward. I almost consider that trade a losing trade because of the outcome, amateur mistake.

11/1/11 Trade Results: 2 positions, $87.50 profit. This is why I use stops and follow my system

I had one short trade in the Euro from last night that met target. There was some positive news regarding Greece this afternoon that rallied the Euro for a short period. I was in the long trade and was able to add to the position as the Euro kept climbing. It's critical to make sure if you're increasing leverage have your risk off. Upon structuring the position, I had a best case scenario of $500 and a worst case scenario of around +$15 if getting stopped. Here is the chart, I got stopped on the break of the invalidation point, which ended to be a good thing because the Euro eventually sold off after that. This shows that you need to stick to your rules, eliminate risk, and trade your system day in and day out:

10/31/11 Trade Results: 2 positions, $407.50 profit thanks to Japan Yen intervention

I had only trades in the Euro during Monday's session. Ended with $407.50 profit. Its important to realized that you have all day, week, month, year to trade. Don't get fixated on each little bar, look on a bigger picture and try to analyze the direction. Don't risk capital in non trading environments! Wait for the perfect price action, be patient, know what you're waiting for. The Yen, Dollar, and Euro were markets of strong movement because of the Japan intervention. Here's part of the article from Bloomberg:

The yen slumped the most since 2008 against the dollar as Japan stepped in to foreign-exchange markets to weaken the currency for the third time this year after its gain to a postwar record threatened exporters.
The dollar rose against all its major peers after MF Global Holdings Ltd. filed for bankruptcy after making bets on European sovereign debt, driving stocks down and boosting refuge demand. The yen fell against its 16 most-traded counterparts tracked by Bloomberg after Japan’s Finance Minister Jun Azumi ordered the intervention. The euro extended its drop after Greek Prime Minister George Papandreou said he will put the region’s new agreement on financing for his nation to a referendum.

“The yen is no longer a safe-haven instrument to buy in times of risk aversion,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “When you do get risk aversion going forward, the dollar is the only true remaining currency that won’t be debauched by authorities. The reason to buy risk today is few and far between.”

The yen depreciated 3 percent to 78.17 per dollar at 5 p.m. New York time, after touching the post-World War II high of 75.35. Japan’s currency dropped 1.4 percent in October. The yen slid 1 percent to 108.33 per euro and weakened 1.5 percent to 82.31 per Australian dollar. The euro fell 2 percent to $1.3858, paring this month’s rally to 3.5 percent. The franc gained 0.5 percent to 1.2152 per euro. 

Here is the chart of my trades for the day:

 

Trading risk free! (eventually) Overnight position trade in the Euro: 50 Pips profit to 17 pips profit (risk)

NEVER let a winning trade turn into a loser. You need to pick and trade direction of the market, not pick tops and bottoms. When a trade moves in your favor, adjust your stop above entry (for long) below (for short), trade risk free! Here's an example. Best case, I'm waking up to 50 pips of profit, worst case, I'm making 17 pips of profit; no matter what, I'm waking up to money being made! This is the mindset you need when trading, NEVER leave anything up to chance! Lose your ego, be smart!

How to recognize price action and trade it: 10/30 Wedge on Euro (M6E)- $375 return to $20 risk

It's important to recognize a trading environment / trade-able price action. The main reason it's important is because it will preserve your cash when you recognize conditions that you should not be trading in. This may mean not having a trade for hours, maybe even days. But when the price structures itself in a way that signals a trade-able environment, you need to act on it. In this type of a profession, you are always working. This work includes simple things like checking whether price is pressuring the high or low of the current day, while you're out running errands. It doesn't mean you're trading 24/7, the trading aspect of it should be very minimal because perfect price action occurs much less than non trade-able environments. So your job as an analyst is the most important, the trader part of it only executed orders based on what the analyst decides.

I want to share an example from this evening:
- I received a text alert on my phone from cnbc, the following article: Japan Intervenes to Curb Yen's Strength
http://www.cnbc.com/id/45098537
- As an analyst you formulate the following opinion using economics. Yen weakened = Strong US Dollar = Weak Euro.
- I trade the M6E Euro futures, therefore I looked on my phone on ThinkorSwim to see the price of the Euro.
- My last note in my phone from Friday was that the Euro was in a wedge and to expect a breakout to either side upon fundamental shift.
- I took the following trade, selling the top of the wedge with contract 1, max risk of $20:

- I was able to eventually add 2 more contracts into the position.
- I had a target of 100 pips for each contract, which would result in a profit of $375 if max targets are met.

I met target on the first 2 contracts, will be looking to add into the short position if movement increases. If not, I will move my stop below entry price, leave my target, and go to bed. I will update tomorrow.

Goodnight and good luck this week trading!