FOREXNETWORTH

One Good Trade

2011-11-18T03:01:00.000-08:00

Amidst all the chaos in the global financial markets fuelled by uncertainty in EU, debt crisis in US and currency interventions by Swiss National Bank and Bank of Japan - good breakout trading opportunities still exist.

The frequency of trades have definitely decreased to 2 to 3 trades per month. This may seem unacceptable to most, however, I am looking for One Good Trade - that one trade where my eight factors are aligned in perfect harmony. The trade below was executed on Nov 16, 2011.

GBPUSD Sell

Entry: @ 1.5765

TP: @ 1.5710

Result: + 55 pips

Belief in Trading Plan

2011-06-06T15:41:00.000-07:00

Imagine this!! Going through an entire month without placing even 1 trade.. Thats exactly what happened to me during the month of May. It was a frustrating month that required extreme patience, discipline and a belief in my trading plan. As you know, I trade only high probability breakouts in the direction of the trend. Eight factors must be aligned prior to me executing the trade.

I believe in my trading plan. My trading plan is the result of more than 6 years of intense & extensive research, testing and executing trades under every market condition conceivable. Its perfect for trading my own account, where I am under no pressure to trade. Its's OK to sit and wait for the right trades. It's OK. After going so long without placing any trades, the 8 factors were aligned on GBPJPY currency pair today for the perfect trade. This trade produced a cool 5% & was called live on my twitter feed. Check it out!

GBPJPY Sell

ENTRY @ 131.75

Profit Target @ 131.00

Result + 75 pips

What are the 8 factors that must be aligned to produce a high probability breakout trade?

Trading - The Right Mental Mindset

2011-04-17T21:56:00.000-07:00

Trading is a high performance discipline that requires total focus, dedication, commitment and a burning desire to win. Once you have discovered your trading niche, tried, tested and proven your trading plan, there is an essential ingredient required for success – The right Mental Mindset. Please see the below video and consider its relevance to trading. There are lots of lessons to be learnt from this video.

E:60 Evan Longoria from E60 on Vimeo.

Real Trading Account Statement

2011-03-16T11:18:00.000-07:00

Finally.... I have linked a live trading account to http://www.myfxbook.com/ that will allow you to see my trading statistics and also follow trades live. http://www.myfxbook.com/ is an amazing tool that can be used to record trades, assess performance, assess a particular strategy and help to streamline your overall trading. From today you will be able to see real time trading performance by looking at the red box to the top right hand corner of the blog. The red box shows a summary. For detailed trade reports please click on the box. Happy trading!!

GBPUSD - High probability Breakout Trade

2011-02-25T05:33:00.000-08:00

Thought I would share another GBPUSD high probability breakout trade. Market Flow & Momentum were bearish on the 4 hour chart. I use the 4 hour chart for analysis, then confirm with daily chart. When multiple time frame and multi currency pairs are in harmony, excellent trading opportunities are present. Once again I wait for 8 factors to align themselves prior to executing trades. Rigid discipline, focus and extreme patience is required to trade in this manner as several days will pass without trades.

My goal is not frequency of trades, but a select few high probability trades in the direction of the trend. I always target 50 pips or daily S1/R1 pivot levels as my profit levels. I do leave several pips on the table on many occasions, but again I would rather target a sure 50 pips per trade. This is my method that suits my personality. If you trade your own account, you only need 1 or 2 high probability trades per week or even per month to be successful. Consider this, risking 2% per trade with just 1 high probability trade per week is 8% per month. Thats basic stuff.

I wish I had the time to blog more, however I would rather trade!!

Please see below GBPUSD high probability breakout trade taken today. Price broke Asian Session low@ 1.6120. Price then retraced providing me an opportunity to place a sell order @ 1.6110. Today's Support 1 daily pivot level was @ 1.6070, hence trade was closed there. Note how price has held throughout London Session so far at S1 pivot level. I have found in daily pivot points a very reliable and objective tool that shows key support/resistance levels daily.

GBPUSD                     Sell
ENTRY                       @ 1.6110
Profit Target          @ 1.6070
Result                          + 40 pips

NB: Currently in GBPJPY trade. Closing trade @ 131.30, todays Daily S1 pivot level.
Follow me on twitter. Type in forexnetworth..

Trading Breakouts & Daily Pivot Points

2011-02-18T18:04:00.000-08:00

Beautiful GBPUSD breakout trade taken today. Price action remained in a 37 pip range throughout yesterdays US Session and todays Asian Session. Daily pivot points were applied to the charts to identify key levels. Pivot points play an integral role in my trading as they provide an objective way of identifying support and resistance levels. I use these levels as my profit targets.

Pivot Points

Floor traders have been using pivot points for years. They are thought of as critical points of support and resistance. The majority of traders still use pivot points. As such, every day price action reacts to these levels. A search on google will reveal lots of information on this topic. Pivot points remain popular because they are predictive as opposed to lagging.

Pivot points are calculated by using the previous day's high, low and close, along with two support levels and two resistance levels (totaling five price points) to derive a pivot point. The equations are as follows:

R2 = P + (H - L) = P + (R1 - S1)

R1 = (P x 2) - L

P = (H + L + C) / 3

S1 = (P x 2) - H

S2 = P - (H - L) = P - (R1 - S1)

Here, "S" represents the support levels, "R" the resistance levels and "P" the pivot point. High, low and close are represented by the "H", "L" and "C" respectively. Note that the high, low and close in 24-hour markets (such as forex) are often calculated using New York closing time (4pm EST) on a 24-hour cycle. Limited markets (such as the NYSE) simply use the high, low and close from the day's standard trading hours. (courtesy of Investopedia). I personally use the NY closing time of 8pm to calculate my daily pivot levels. Its my opinion that this time provides the most conservative figure.

Unlike most traders, I am not in the business of predicting price action. So for me, pivot levels are my profit targets once I am in a trade. They have worked perfectly well since I commenced using them in 2005. I encourage you to apply these pivot levels to your charts and observe how price reacts to them daily. If you use Fibonacci levels try combining them with pivot levels and see what happens.

On the below chart, the grey line is the daily pivot point. Green - S2. Yellow - S1. Blue - R1. Red - R2.

GBPUSD BUY

ENTRY @ 1.6192 - range breakout on high volume.

Profit Target @ 1.6260 - R2. Notice how price reacted at R1.

Result + 67 pips

I target 50 pips per trade or pivot levels depending on volume, liquidity and momentum present. There is absolutely no need to predict price action or overtrade. 1 or 2 high probability breakout trades per week is more than enough.

GBPUSD - 4 Hour Chart Analysis

2011-02-10T12:09:00.000-08:00

Posting my GBPUSD 4 Hour chart to give you a snapshot of what I am looking at. The chart is self explanatory. Fractals are used to identify market flow. Various session ranges are shown along with daily pivot levels. Trend line shows price reversal that occurred today. Of interest is the triangle formation that has enclosed price action. I expect a major breakout soon.

The charts tell the entire story. It clearly shows the dominant trend and supply/demand levels. The charts are alive and do speak to us. The key is to listen and allow the charts to speak. There is no need to predict the markets. Time permitting, I am hoping to post live trade analysis next week for the 5 currency pairs that I analyse daily. 90% of my trading is done on GBPUSD as I have found it to be the currency pair with the best breakout characteristics. Happy trading.

Trend Following - A Definite Edge

2011-02-01T23:54:00.000-08:00

Wikipedia definies Trend Following as an investment strategy that tries to take advantage of long-term moves that seem to play out in various markets. The strategy aims to work on the market trend mechanism and take benefit from both sides of the market, enjoying the profits from the ups and downs of the stock or futures markets. Traders who use this approach can use current market price calculation, moving averages and channel breakouts to determine the general direction of the market and to generate trade signals. Traders who employ a trend following strategy do not aim to forecast or predict specific price levels; they simply jump on the trend and ride it.

There is absolutely no need to predict the markets! Professional traders wait for the markets to tell them its intentions then they react. They go with the flow. The GBPUSD and EURUSD have been enjoying an excellent bull run that commenced on January 10. So many traders have been trying to find the “top” or predict the “reversal” point. The old adage “the trend is your friend until it bends” has withstood the test of time. Trend following is one of the few ways that retail traders can benefit from price movement influenced by the institutional traders.

If you are struggling with trading, I wish to share 3 tips that will immediately improve your trading:

1. Stop trying to predict the market! Allow the market to tell you what it’s going to do then react.

2. Always trade with the trend – this gives you an immediate edge.

3. Stop using small time frames for your analysis. Institutional traders use monthly, weekly and daily charts for analysis. I personally use daily and 4 hour charts for my analysis (intraday trading). Using a higher timeframe allows you to see the “big picture” more clearly.

Trend following works! The trend is your friend… Blessings.

Another Day In the Office

2011-01-20T11:12:00.000-08:00

Breakout trades continue to work well. A solid 101 pips made.

Entry @ 1.5955. Added to trade @ 1.5880. Trade closed @ 1.5850, today's Support 2 Pivot level (green line) which also coincided with a completion of GBPUSD daily range.

Blessings!

High Probability Breakout trade

2011-01-18T01:57:00.000-08:00

GBPUSD produced the perfect high probability breakout trade today. Market Flow and Momentum were bullish. Price action was above previous days high and above R1 Pivot level indicated by blue line on chart. Trade closed for 50 pips at todays R2 pivot level.

These are highly selective trades where 8 factors must be aligned prior to trade execution. I have found that the market tends to produce an average of 2 to 3 such high probability trades per week. Sometimes, 2 to 3 per month! This type of trading requires extreme patience and discipline. Its probably not the type of trading for those seeking thrills from the markets. Slow and steady.

GBPUSD BUY

ENTRY @ 1.5980

PROFIT TARGET @ 1.6030

RESULT + 50 PIPS

Happy New Year

2011-01-13T06:40:00.000-08:00

I wish for all a wonderful, prosperous, successful and peaceful 2011 filled with God’s richest blessings. Time permitting, I will post more and move towards live analysis of trades. My focus remains on trading breakouts in the direction of the immediate and dominant trend at specific times of the day. Volume, liquidity and momentum are required to move price to its profit target once an entry order is triggered. I am continuing my intense research on filtering out false breakouts. Every day, with every trade the market teaches me something new!

So far, 2011 has produced some great breakout trading opportunities. Below, please see today’s high probability breakout trade for a sure 30 pips.

GBPUSD BUY

ENTRY @ 1.5800

PROFIT TARGET @ 1.5830

RESULT + 30 pips

Survey of Foreign Exchange and Derivatives Market Activity in April 2010 - Preliminary global results... by BIS September 2010

2010-10-12T01:17:00.000-07:00

In April this year, 53 central banks and monetary authorities participated in the eighth Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity ("the triennial survey"). The objective of the survey is to provide the most comprehensive and internationally consistent information on the size and structure of global foreign exchange markets, allowing policymakers and market participants to better monitor patterns of activity in the global financial system. Coordinated by the BIS, participating institutions collect data from some 1,300 reporting dealers on turnover in foreign exchange instruments and OTC interest rate derivatives. The triennial survey has been conducted every three years since April 1989, and has been modified since April 1995 to include OTC interest rate derivatives.

Previous triennial surveys have used the expression "traditional foreign exchange markets" to refer to spot transactions, outright forwards and foreign exchange swaps. This expression excludes currency swaps and currency options, which are under OTC instruments. Beginning with the 2010 survey, the expression "global foreign exchange markets" will include all five foreign exchange instruments.

The headline figures from the April 2010 survey are the following:

1. Turnover on the Global foreign exchange market

• Global foreign exchange market turnover was 20% higher in April 2010 than in April 2007, with average daily turnover of $4.0 trillion compared to $3.3 trillion.

• The increase was driven by the 48% growth in turnover of spot transactions, which represent 37% of foreign exchange market turnover. Spot turnover rose to $1.5 trillion in April 2010 from $1.0 trillion in April 2007.

• The increase in turnover of other foreign exchange instruments was more modest at 7%, with average daily turnover of $2.5 trillion in April 2010. Turnover in outright forwards and currency swaps grew strongly. Turnover in foreign exchange swaps was flat relative to the previous survey, while trading in currency options decreased.

• As regards counterparties, the higher global foreign exchange market turnover is associated with the increased trading activity of "other financial institutions" - a category that includes non-reporting banks, hedge funds, pension funds, mutual funds, insurance companies and central banks, among others. Turnover by this category grew by 42%, increasing to $1.9 trillion in April 2010 from $1.3 trillion in April 2007. For the first time, activity of reporting dealers with other financial institutions surpassed inter-dealer transactions (ie transactions between reporting dealers).

• Foreign exchange market activity became more global, with cross-border transactions representing 65% of trading activity in April 2010, while local transactions account for 35%.

• The percentage share of the US dollar has continued its slow decline witnessed since the April 2001 survey, while the euro and the Japanese yen gained relative to April 2007. Among the 10 most actively traded currencies, the Australian and Canadian dollars both increased market share, while the pound sterling and the Swiss franc lost ground. The market share of emerging market currencies increased, with the biggest gains for the Turkish lira and the Korean won.

• The relative ranking of foreign exchange trading centres has changed slightly from the previous survey. Banks located in the United Kingdom accounted for 36.7%, against 34.6% in 2007, of all foreign exchange market turnover, followed by the United States (18%), Japan (6%), Singapore (5%), Switzerland (5%), Hong Kong SAR (5%) and Australia (4%).

To see the full report please visit www.bis.com.

Boom Time for Forex

2010-08-01T14:42:00.000-07:00

By Adam Kritzer at www.forexblog.org

It has been three years since the Bank of International Settlements’ last report on foreign exchange was released. Since then, analysts could only speculate about how the forex market has evolved and changed.

The wait is now over, thanks to a huge data release by the world’s Central Bank, which showed that daily trading volume currently averages $4.1 Trillion, a 28% jump since 2007. Trading in London accounted for 44% of the total, with the US – in a distant second – claiming nearly 19%. Japan and Australia accounted for 7% and 5%, respectively, with an assortment of other financial centers splitting the remainder.

This data is consistent with a recent survey of fund managers, which indicated a growing preference for investing in currencies: “Thirty-eight per cent of fund managers said they were likely to increase their allocations to foreign exchange, while 37 per cent named equities and 35 per cent commodities. Currency was most popular even though this was the asset class where managers felt risks had risen most over the past 12 months.” In short, the zenith of forex has yet to arrive.

There are a few of explanations for this growth. First, there are the inherent draws of trading forex: liquidity, simplicity, and convenience. Second, investors are in the process of diversifying their portfolios away from stocks and bonds, which have underperformed in the last few years (on a comparative historical basis). As investors brace for a long-term bear market in stocks and low yields on bonds for the near future (thanks to low interest rates), they are turning to forex, with its zero-sum nature and the implication of a permanent bull market. Additionally, programmatic trading and risk-based investing strategies are causing correlations in the other financial markets to converge to 1. While there are occasional correlations between certain currencies and other securities/commodities markets, the forex markets tend to trade independently, and hence, represent an excellent vehicle for increasing diversification in one’s portfolio.

There is also a more circumstantial explanation for the rapid growth in forex: the credit crisis. In the last two years, volatility in forex markets reached unprecedented levels, with most currencies falling (and then rising) by 20% or more. As a result, many fund managers were quite active in adjusting their portfolios to reduce their exposure to volatile currencies: “The volume growth was really a result of the volatility and the fact that you had real end users actively hedging their exposures.” Another contingent of “event-driven” investors moved to increase their exposure to forex, as the volatility simultaneously increased opportunities to profit. Moreover, these adjustments were not executed once. With a succession of mini-crises in 2009 and 2010 (Dubai debt crisis, EU sovereign debt crisis) and the possibility of even larger crises in the near future, investors have had to monitor and rejigger their portfolios on a sometimes daily basis: “If you have a big piece of news, such as the Greek debt crisis, there’s more incentive to change your position,” summarized one strategist.

What are the implications of this explosion? It’s difficult to say since there is a chicken-and-egg interplay between the growth in the forex market and volatility in currencies. [In theory, it should be that greater liquidity should reduce volatility, but if we learned anything from 2008, it is that the opposite can also be the case]. As I wrote last week, I think it means that volatility will probably remain high. Investors will continue to adjust their exposure for hedging purposes, and traders will churn their portfolios in the search for quick profits.

It will also make it more difficult for amateur traders to turn profits trading forex. There are now millions of professional eyes and computers, trained on even the most obscure currencies. As if it needed to be said, forex is no longer an alternative asset.

My Return

2010-07-01T12:23:00.000-07:00

It’s been a while since I last updated my blog. This has been due to circumstances beyond my control that prevented me from trading. However, I have remained current with happenings in the markets by monthly checks of my charts. I have spent the last 2 weeks conducting an in-depth review of every trading day since February and “revving out” my trading plan. So far I have earned 198 pips in 2 weeks of trading and am ready to rock and roll again.

I remain focused on trading breakouts as this style of trading best suits my personality. I am a momentum breakout trader! That sounds quite cool… momentum breakout trader! It is probably the most difficult style of trading for anyone to wrap their brain around as it requires extraordinary discipline, extreme patience and a thorough knowledge of supply and demand in the markets. Supply and demand drives price action…What makes this type of trading so unique is the fact that it goes against the normal trading grain of buying low and selling high. Trading breakouts does the exact opposite. I buy higher and sell lower. It took me several years of intense research, back testing and trading to figure this out. And with all that, I feel as if I am on the threshold of an even greater and better experience of trading breakouts. Why? Because every day the markets teach me something new. That’s one of the real beauties of trading. It’s a never ending learning experience. I love it!

Over the last 4 months the markets have been quite volatile due to a number of global macro events to include Greece debt crisis, uncertainties in the Euro Zone, Elections in the UK etc. Some semblance of normalcy seems to be returning to the markets and currencies are trending nicely, providing excellent trading opportunities.

Historically, the markets are less volatile during the months of July and August as the big boys (institutional traders) take a break resulting in lower trading volumes. It is my belief that this summer will be quite busy as there is just so much going on in the global financial markets. I am bracing myself for a summer filled with trading excitement!

Below, please see a chart of a high probability momentum breakout trade placed on June 28. This was a breakout of the Frankfurt and London opening range. A solid 50 pips.

2 teams in the World Cup play a “momentum breakout” style of football... Brazil and Argentina!! In my next blog, I will expound on this statement. Blessings.

An Inauspicious Start

2010-02-13T12:32:00.000-08:00

2010 has certainly gotten off to an inauspicious start with the markets behaving in ways not seen since the summer of 2008! Market characteristics have changed, in particular the correlation factor between the two most dominant currency pairs; GBPUSD and EURUSD.

Correlation is the statistical measure of the relationship between two securities (currency pairs). The correlation coefficient ranges between -1 and +1. A correlation of +1 implies that the two currency pairs will move in the same direction 100% of the time. A correlation of -1 implies that the currency pairs will move in the opposite direction 100% of the time. A correlation of zero implies that the relationship between the currency pairs is completely random.

The EURUSD currency pair has been severely impacted by the negative news from Greece and the inability of the EU to commit to a plan that will restore confidence and bring some financial stability to the entire situation. The issue is extremely sensitive because throughout the financial crisis that commenced in 2008, the EURO was seen as a strong alternative to the US dollar. It’s amazing that all of that has changed overnight because of one country – GREECE. Others may follow with Spain and Portugal having crises of their own. Not to mention Italy. This is the greatest threat to the Stability of the European Union since its formation. This is the first real test...

How has this affected trading? For the entire year 2009, the GBPUSD and the EURUSD enjoyed a correlation factor of 0.88. In simple terms this means that 88% of the times these currencies move together. Just last week this correlation factor was at 0.01!

As a momentum breakout trader, one of the factors that ensure a high probability trade (breakout) is the movement of currency pairs in the same direction. i.e. the majors strengthening or weakening against the US dollar which is in most cases the base currency. The correlation factor is a great tool that quantifies and qualifies the relationship between these pairs as they trend. The EURUSD is the most liquid currency pair. However, the GBPUSD is more volatile and usually leads. Since the EURUSD commenced its dive last month, the GBPUSD which usually leads has been lagging and has oftentimes remained in an unusual range completely offsetting the normal breakout profile. This has certainly presented some unique challenges to say the least!

Each challenge provides an opportunity for growth and development. No two trading days are the same and there is always something new to learn. That’s what makes this endeavour so thrilling! Yes, the year had gotten off to a slow start. However, I remain focused and committed to the task at hand and will meet the targets mentioned in my previous posting.

In the next posting, I will be discussing the issue of Leverage. The CFTC is seeking to impose a maximum leverage of 10:1. There seems to be a deliberate attempt to eliminate Retail Traders. It commenced last year with the “No Hedging Rule.” Now this… The question is... what next?

The Year in Review

2010-01-03T09:54:00.000-08:00

As I reflect on my trading year 2009, I am reminded of the quote from Charles Dickens’ book, A Tale of Two Cities.

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

I spent the last few days reviewing every trade that I placed in 2009 and made some interesting discoveries. The benefits to be gained from reviewing your trades daily, weekly, monthly and annually cannot be overemphasized. It is a tiring exercise, but a necessary one for growth, development and self-improvement. After all, trading is a business and should be treated as such!

2009 was truly an amazing year. It was not my most profitable trading year. However, it was the year that saw me grow leaps and bounds as a trader operating under the most difficult psychological circumstances, navigating through emotional battlefields and overcoming seemingly insurmountable challenges. The one thing that remained consistent throughout 2009 was my strict adherence to the solid risk management principles that forms the foundation of my trading plan.

I can assure every trader, experienced or otherwise that the first key to trading success is the development of and adherence to a solid risk management plan. I am now entering my 6th year as a currency trader and 10th year as a trader. With my limited experience I repeat… the development of a solid risk management plan is the key to trading success… the development of a solid risk management plan is the key to trading success… I have seen many profitable and more experienced traders crash and burn, because of a total disregard for risk management. One of the greatest traders of our time... Market Wizard Viv Sperandeo who has made billions through every market condition since 1971 said “ My goal on Wall Street was never to get rich but to stay in business. There’s a big difference. If you’re out of the business, you can never get rich.” The aim of the game is to stay in the game! The only way to achieve that is through sound risk and money management. Live to fight another day! Protect your principal!

In retrospect, I should have taken a break from trading last year. However, I am a better person and a superior trader for having endured. My burning, intense desire to be the best trader combined with my passion for trading allowed me to break through barriers and overcome obstacles. I now enter 2010 with the perfect trading plan, 100% confidence and a deep conviction that I will achieve all my goals this year. To put things in quantitative terms, I have set a personal target of 50 pips per day, 250 pips per week, 1000 pips per month and a total of 12000 pips for 2010! In terms of profits that’s 1% per day, 240% for 2010!

This is my conservative target. I intend to exceed this by a very wide margin. You will be afforded the opportunity to follow my performance daily through the website www.myfxbook.com that details every trade. Further details will follow.

Going forward in 2010, my primary focus remains that of trading breakouts of GBP pairings. I will be trading breakouts of the Tokyo, London and US opening sessions. I am hoping to make this blog more interactive, post live trades and daily analysis. I invite you all to share in this exciting journey as we work to make 2010 the best year of our lives!

In concluding, I wish to recommend to every trader, if you have not already done so, develop a solid risk management plan and adhere to it throughout 2010. I wish for you all a wonderful, prosperous and productive 2010 filled with God’s abundant blessings and many, many pips!

Extreme Volatility

2009-11-27T22:55:00.000-08:00

Focus, consistency, discipline and the will to win are essential ingredients for trading success. I have received numerous questions on various techniques from trading retracements, using moving averages, other indicators etc. I highly recommend that when starting out explore everything. Try out the indicators, trade breakouts, retracements etc. Backtest everything! Then find the method that suits your personality and apply 100% focus to that method. Only then can mastery of a method be achieved. I trade breakouts and breakouts only. This is my trading niche! For me, trading breakouts offers a very disciplined, low-risk approach to trading. It can for you too, provided you already have an excellent money management plan in place.

If you are serious about trading breakouts then I highly recommend the book “Day Trading With Short Term Price Patterns and Opening Range Breakout,” by Toby Crabel. This is one of the few trading books written by a successful trader. Many regard his book as the “Bible of Trading Breakouts.”

William "Toby" Harrison Crabel is a United States self made millionaire commodities trader. The Financial Times called Crabel "the most well-known trader on the counter-trend side." He is the fund manager of "Crabel Capital Management". Mr Crabel currently manages 1.6 billion dollars and is a producer of consistent returns whatever the weather. Crabel avoided having a losing year from 1991 to 2002. In 2005 the Absolute Returns Survey ranked his fund 101 out of 172 funds. Today his firm continues to do well.

Toby Crabel in his book states “Opening Range Breakout is one of the most important indicators of daily market direction that a trader can utilize.” I have every reason to believe him.

The Global Financial Markets have seen exciting action and extreme volatility over the last 48 hours. The catalyst for this volatility has been uncertainty in the financial markets relating to Dubai’s $60 billion debt. The markets do not like uncertainty. Did anyone see what happened to the London Stock Exchange on Thursday Nov 26… According to Reuters “The London Stock Exchange (LSE.L) halted trading for more than three hours on Thursday because of technical glitches, while it placed all order-driven securities in an auction call period. Trading resumed at 1400 GMT, following an auction call period that started shortly after 1030 GMT.

What transpired before trading was stopped? The market had just dropped 4.5%! To use the excuse of technical glitches… that’s a nice one... If trading was not halted I suspect we could have seen a 20-30% drop.. a crash! It’s a good thing the US markets were closed for Thanksgiving.. A blessing.

Due to other commitments, I was not around to trade. However, there were 4 excellent trading opportunites on my favourite currency pair GBPUSD over the last 2 days. See chart below with explanations of colour coded breakout levels. The action this week is great news for all of us. Why? Because usually, trading winds down for the Christmas period.. No such thing now! There will be extreme volatility and lots of action in the markets for the month of December. Lets make some pips!

Cyan Line - 1-2-3 formation breakout-reversal trade
Entry @ 1.6640

Purple Line - UK opening range breakout -continuation trade
Re-entry @ 1.6580

Green Line - US opening range breakout -continuation trade
Re-entry @ 1.6495

Yellow - Previous days low breakout -continuation trade
Entry @ 1.6370

What do these lines represent?
Hint.. These lines are related to my previous post.

NB. Kindly post questions on this blog so that others can benefit from the question and response.
In my previous post titled “Supply and Demand,” I asked the question: What is the relationship between trading breakouts and understanding Supply and Demand levels.. any takers?

Supply and Demand

2009-11-24T01:57:00.000-08:00

Monday got off to an unusually slow start with sluggish price movements. 3 buy orders were placed on GBPUSD and 1 buy order on EURUSD. The EURUSD trade was triggered by a breakout of the previous days (Friday) high at 1.4936. Trade was entered at 1.4950. Even though price had already moved over 100 pips since the weekly open, sufficient volume, liquidity and momentum was present to move price action to my pre-determined target of 1.5000. Of course, once again, I closed the trade too early at 1.4982 for only 32 pips.

On GBPUSD the price movement was uncharacteristically slow. The first trade placed was based on the break of the Asian opening range. The trade was closed for + 3 pips. A second trade was immediately entered as momentum picked up briefly at 1.6540 and closed at 1.9592 for + 52 pips. A third and final trade was then entered at 1.6600, the breakout of the London opening range and profit target hit at 1.6638 for an additional + 38 pips. After a very frustrating 9 hours of trading a total of 93 pips were earned on GBPUSD and 32 pips on EURUSD. I say frustrating, because what transpired during those 9 hours usually occurs with the first 2 to 3 hours of London open.

As discussed last week, my area of strength is precisely timing breakouts and eliminating false breakouts (whipsaws). The main area of weakness is closing trades too early. As such, I am on a new mission to find the most efficient way of staying in a trade for maximum profits and this consumed my weekend. So much to accomplish in so little time...

Some useful info...

Trading breakouts took on new meaning for me when I stopped looking at support and resistance levels as just lines on the chart and instead started to view them as dynamic supply and demand levels. Two things move the markets:

a. Price Orderflow
b. News - Fundamental data

Nothing more, nothing less!

One thing and one thing only causes the market to trend: SUPPLY and DEMAND. I could write a book on this..lol.

What are support and resistance levels?

A support level is an area where the market receives considerable buying pressure. An area where DEMAND overcomes SUPPLY. Buyers overwhelm sellers causing price to go up!

A resistance level is an area where the market receives considerable selling pressure. An area where SUPPLY overcomes DEMAND. Sellers overwhelm buyers causing price to go down!

Simply put, a support level is a demand level and a resistance level is a supply level. A thorough understanding of this concept will change your trading life. It sure did mine!

So what does this have to do with trading breakouts? Any responses would be appreciated. Thank you.

See trades for Nov 23. below.

GBPUSD
See entries in above text
+ 93 pips

EURUSD
See entry in above text
+ 32 pips

Whew!

2009-11-20T10:43:00.000-08:00

Whew! What a day! What a week! A total of 208 pips in 4 days. This has been my first week as a blogger and it has been quite exciting sharing through this medium. As an amateur blogger, I am still getting used to the concept of typing while trading! As such no live trades have been posted as yet. However, as my "blogging proficiency improves" the frequency of trade calls will follow suit.

Today was the perfect day for trading breakouts. Rarely, do we have days where the previous days low, the Asian session low and the Frankfurt open low were all aligned prior to the London opening session.... Now thats a mouthful...lol! Not to worry, once I get some breathing space, I will explain all these session highs/lows in detail. Such was the case with the GBPUSD. All the major currency pairs with the exception of the USDJPY had great breakouts today. Unfortunately, because of other personal commitments, I was not able to focus on trading today. However, I did grab a sure +54 pips on the GBPUSD breakout. Please see chart below. Lets discuss this a little.

4 hour and 1 hour market flow were down.. The immediate and dominant trend was bearish. Within 10 minutes of London opening at 0800 GMT, price broke the previous days low at 1.6606. An immediate retrace (pullback) followed on the 15 minute chart. Volume, liquidity and momentum as measured by my propertiary indicator validated the breakout as true! I placed my entry with confidence at 1.6604, for a sure +54 pips. I target a sure 50 pips on all trades. All in...all out. If my profit target is not hit within a certain time I accept the profits and close the trade.

I intend to post my full trading plan here and discuss risk management in detail, but have not had the time to do so as yet. Coming soon!

GBPUSD
Entry @ 1.6604
Take Profit @ 1.6650
+ 54 pips

No Trade Day

2009-11-19T11:45:00.000-08:00

Yesterday, I called the GBPUSD bearish breakout successfully and earned a further 37 pips bringing the total pip count up to 154 pips in 2 days!

GBPUSD
Entry @ 1.6760
Take Profit @ 1.6723
+ 37 pips

Today was a no trade day. Breakouts did occur, however my filters kept me out of the markets. When trading breakouts, extraordinary patience, focus and rigid discipline is essential. It's not easy seeing the markets moving many pips and not being in on the action. Tomorrow is another day. For me, the aim of the game is to stay in the game... I would rather be out of the market wishing I were in, than be in the market wishing I were out! My trading plan is designed to keep me out of the markets as I only target high probability trades.

Already, by blogging I have realised one great benefit. Blogging by default helps me to review my trades. One area of weakness so far is taking profits too early. I do make good pips consistently, however, I leave too many pips on the table. I have always held the view that I would rather have sure pips than unsure pips. This is a work in progress. Comments are welcome. Happy trading!

NB. I will post live trade setups tomorrow and show stop loss and profit targets.

Three High Probability Breakout Trades

2009-11-18T07:12:00.000-08:00

Three high probability breakout trades taken within the last 24 hours.

EURUSD

Entry @ 1.4929

Take profit @ 1.4884

+ 45 pips

GBPCHF

Entry @ 1.7040

Take Profit @ 1.7000

+ 40 pips

USDCHF

Entry @ 1.0136

Take Profit @ 1.0104

+ 32 pips

A total of 117 sure pips in 24 hours. Currently waiting for bearish breakout on GBPUSD. Yesterdays low of 1.6756 is my breakout level. Once this level is broken I will wait for the pullback; then check that there is sufficient volume and momentum to move price action to my profit target of 1.6700...

I will be posting an outline of my trading plan soon, and an explanation of my breakout trades, once the markets give me a chance!

Remember, Never take a breakout trade, unless it follows a false breakout...

Trading Breakouts

2009-11-16T00:06:00.000-08:00

Trading the currency market successfully is an extremely challenging endeavour that requires focus, consistency, discipline, and a thorough understanding of market structure. Many traders focus on predicting market movement and direction by use of Fibonacci tools, pivot zones, finding tops and bottoms etc. Others react to market movement by trading breakouts.

For over 5 years I have employed both predictive and reactive methods of trading and have found that trading breakouts gives me a definite edge. However, trading breakouts is no easy feat as whipsaws, false breakouts and large stop losses can lead to ruin. Also, extraordinary patience is required because a trader could wait for hours and days for the right setup. This is further compounded by the fact that trading breakouts oftentimes forces us to buy new highs and sell new lows which most people simply can’t do. All that been said, I believe that trading breakouts has a definite advantage over other forms of trading.

The distinct advantage to trading breakouts is that we are forced to trade with the immediate and dominant trend, and this trend is identified and confirmed prior to entering any trades. We don’t have to predict anything! The market tells us where it wants to go, this is confirmed and we enter the trade with confidence. We allow the market to speak to us!

Not all breakouts are the same. How do we differentiate a true breakout from a false breakout? How do we know if a breakout has sufficient force behind it to move price to our profit target? This has been the subject of intense research for 5 years. My research shows that the market requires excess volume, liquidity and momentum to ensure a follow-through after a breakout. Unfortunately, unlike markets such as futures, stocks etc., the forex market does not have a defined opening time and lacks accurate volume data as there is no centralized exchange or dedicated level II quotes mechanisms. This led to the development of my proprietary indicator that quantifies and qualifies volume, liquidity and momentum in the forex market. I also came to appreciate probably the simplest but most important trading statement mentioned several times by some of the world’s greatest traders... “Never trade a breakout, unless it follows a false breakout.” The first breakout defines the trend; the second breakout confirms the trend. If you are a breakout trader, this simple statement if employed efficiently and effectively can significantly improve your trading results.

The purpose of this blog is to record and share my breakout trades. All trades are placed in the direction of the dominant market flow (a confluence of market flow between daily, 4 hour and 1 hour timeframes). This is confirmed by my proprietary indicator. I will be trading the breakouts of 3 range periods:

a. The previous day’s high/low

b. The opening range of the London and New York opening sessions

c. The inside bar

All trades will be placed on the 1 hour chart with the primary focus on the GBPUSD. Of course, I will be scanning all the majors for breakout opportunities.

In the next post, I will provide a brief overview of my trading plan that is used to complete a top-down analysis at the start of each trading day. I welcome your comments.

Forexnetworth-Breakout Trading

2006-12-29T22:29:00.000-08:00

I have found a definite edge in trading breakouts. Why predict the markets when I can simply react to it!! Here, I will share my breakout trades as I continue to actively pursue the art of mastering breakout trading. I invite you to share this journey with me through this medium. Lets trade!!