My Millionaire Goal

Example of a bad trade

2010-08-16T15:02:47Z

bad trade

Selling below the low of the red cross is a bad trade…

Consolidation starts when price touches a moving average twice within a few candles…. In addition, the previous low is a failed attempt by bears to move prices lower, further adding support to the notion that price is starting to consolidate… One should not enter any directional trades in this situation….

Resistance becomes Support

2010-07-23T15:47:49Z

Resistance Becomes Support

Trade Setup: Buy one pip above candle A, or candle B.

Reason:

Price just broke above downtrend line.
Price is at a previous high.
It appears that Candle A is about to reverse and turn bearish. It has a low that is lower than the previous two candles. However, it turned around and closed near it’s high. Bears are thus trapped. We can enter one pip above candle A, as bulls have proven their strength and support has been found at the previous downtrend line.
Alternatively, a more conservation trader may choose to buy above the high of candle B, which is a pin bar. Contrary to what is expected of a pinbar, price merely dipped below the low of candle B, but eventually closed positively. Again, bears lost the battle and bulls proved their strength.

Reading Price Action (Tape Reading)

2010-07-21T08:46:08Z

To read price action, one should not just memorize some bars formation (such as outside bar, double high lower close etc)… Rather, one needs to analyse the situation and figure out whether the bulls/bears are winning the race… In addition, look for traps where traders are likely to be tricked into a position on the wrong side….

Reading Price Action - The Analytical Approach

In the chart above, one can figure out that price will collapse after candle B, for the following reasons:

Prior to candle B, price showed weak attempts to rally above the upper channel line (red). Previous bull candles all have relatively long upper wicks.
Imagine how candle B looks like when price is at the high of the candle… At that moment, price probably looked very bullish… Unsuspecting bulls may jump onto the trade, believing that price is due to rally.
In fact, candle B is a nice bull trap… Its high is slightly above the high of candle A, and will thus trap bulls who buy on breakout.
Candle C is another confirmation that price is weak. A nice price to sell will be one pip below the low of candle C.

Newsprofiteer Meter

2010-07-16T04:27:03Z

This week.. I added two new tools to my trading arsenal…

The first is an expert advisor to help me calculate my lot size and enter two orders automatically.. one order that I close when it hits my target profit, the other I let it trail using a custom indicator that I wrote….

The second tool that I started using this week is a nice little program that shows the relative strength of 8 major currencies, programmed by Henry Liu… You can get it here http://www.currencystrengthmeter.com/

This program can work with any MT4 broker, and is a really neat way of telling at one glance which currency has a higher chance of rising (or falling) vs another currency…

I use it whenever my price action reading shortlists more than one possible pair for trading.. For instance, at 12:30pm (GMT) yesterday, I noticed that JPY is suddenly very strong… all three pairs (EURJPY, USDJPY, GBPJPY) formed a long bearish candle… I had to decide which pair, among the three, to trade… Using the currency strength meter, I can easily determine that EUR was strong, whereas USD was weak… Thus, trading USDJPY will be a much better choice than EURJPY… and indeed… USDJPY fell much more dramatically than EURJPY…

A really simple but useful application… and btw, did I mention that it’s free? :-D

Oanda on Android

2010-07-14T07:47:33Z

Finally, after the launch of its mobile fxTrade for iPhone and iPad, Oanda unveils a mobile trading application for Android… To download the app, just go to Android Market and search for fxTrade…

I’ve always wanted to trade with Oanda because of their narrow spreads… However, their trading platform is one of the most primitive I’ve seen… their mobile platform (browser based) is worse… it’s basically a joke… You cannot do anything (such as adjusting your stop loss) except entering new orders or closing existing positions….

Luckily, with the launch of fxTrade for Android, Oanda offers a lot more flexibility for trading on the go… You can enter new orders and adjust the Take Profit, Stop Loss and Trailing Stop of your existing positions… My only wish is that they’ll allow partial close of our existing positions… That way, I can close half of my positions once my Take Profit is reached… and trail the remaining half…

Nonetheless, the mobile fxTrade is still an excellent application… a dream come true for me… Nice job done, Oanda…

Oanda on Android

Trading with Horizontal Support/Resistance

2010-07-07T14:43:17Z

Trading with Horizontal Support/Resistance

Trade Setup: Sell one pip below candle A.

Reason for trade:

Green line is a resistance that became support
Price made a weak attempt to reverse upwards prior to candle A.
Candle A is a bearish outside bar, with a close near the low, indicating the strength of the bears.

An Excellent Bull Trap

2010-07-06T17:09:03Z

Bull Trap

Candle A in the chart above is an excellent bull trap.

Firstly, candle A occurred near a bullish trendline and it seemed like price found support at the trendline. In addition, candle A is an outside bar and a strong bull candle. All these signals suggest that price might bounce off support and continue to rally.

However, that was not the case. Price moved up a bit, but then proceeded to fall.

One of the biggest clue to suggest that price will NOT rally and that candle A is merely a bull trap is the fact that previously, price failed to find support at the brown trendline. The brown trendline acted as a resistance initially. After price broke above the brown trendline, the line should change it’s role and function as a support. However, this did not happen in the chart above. Traders who were alert will probably detect that something is amiss, and will not be tricked into buying above candle A.

Chart Patterns and Price Action Works

2010-07-06T08:09:25Z

The Zigzag Pattern

The chart above shows a common pattern that leads to a trend continuation. I don’t know what is the actual name for this pattern, so I’ll just call it the zigzag pattern. This pattern starts with a strong uptrend, followed by a reversal that is significantly less steep. When the green downtrend line is breached, the previous uptrend resumes.

The pattern is stronger when it is combined with other price action. If we zoom into the chart above, we can see that a cup-with-handle pattern formed before the downtrend line is breached (refer to chart below). The shallow handle is further proof that bears were not strong enough to push the price down.

Cup with Handle

USDCAD

2010-06-11T15:36:18Z

For some unknown reasons, I find USDCAD very difficult to trade… In fact, when I do a post-mortem of all my previous trades, almost all my USDCAD trades were losing trades… So, from now on, this pair is out of my watchlist… That’s the power of doing post-mortems… you’ll discover some patterns that’s totally unexpected….

Price Action + Trend

2010-06-07T18:31:40Z

EURUSD 7 Jun

GBPJPY 7 Jun

In both charts above, candle A has a lower low than its previous candle. That means in both cases, bears were trapped. In addition, in both cases, price found support at a bullish trendline.

However, buying above candle A would have resulted in a nice profit for the first chart, but would have resulted in a loss for the second chart.

A more careful analysis would reveal that the price action in the second chart does not warrant a buy. This is because price failed to make a higher high prior to candle A, suggesting that bears may be gaining control.