Early entry or signal bar entries day trading

Early entry is probabilistically low, but the risk is low too. From last week we entered short at the bear signal bar below. The risk was 12 pips with a profit of 20 pips. The early entry bar had not closed below the prior bar, a signal rather than an entry bar. But it was a trend bar, and it did close below the support marked by the yellow ellipse.

5-minute bars

With 5-minute bars, a decision sometimes has to be made quickly; this is tricky for the beginner to do as they have not seen the hundreds of examples that give them the ability to recognise “spatially contiguous chunks” of bars.

Early entry but only reservedly

Many day trading seminars encourage early entry or signal bar entry. Suits the beginner because the risk is low. But it is entirely the wrong thing to do. Day trading experts, on the other hand, take an early entry infrequently. Okay, the risk is lower but so is the probability. A Signal bar entry, such as mine below, ought to be made reservedly.

The on-market exit was more manageable ‘live’ than the screenshot suggests.

Early entry or signal bar entry.
Early entry

Pullback, how to manage day trading

The pullback, live day trade mid-afternoon 21st February 2018.

Pullback, entry

The bear trend for the morning had hesitantly reversed to form a robust bull recovery. In the chart below, bar 1 is a 17 pip bull bar. Are we likely to go higher or is this the final bar before a pullback?

We consider that we are not at a point of significant resistance and with no apparent signal that bar 1 is a final bar. We enter long at the upper green arrow and scale-in at the midpoint of bar 1.

The following two leg pullback anticipated. However, we’re uncomfortable with bar 3 even though it is still above the open of bar 1. We accept a pullback not beyond the second fib of bar 1.

Pullback, exit

We set an exit for both entries at the first entry point, a breakeven for the first entry and a small profit for the second.

A day trading a pullback entry long in a bull trend
Pullback example 1


Breakout entry

We’re out of the trade with bar 4 above. The close of bar 4, however, provides another excellent ‘day trading example’ entry, this time a breakout. We have sold our long, but the end of bar 4 offers a new proposition. We take it, entering long, again. As we see from the chart below price rapidly moves to our measured move target. We exit from our single entry for a gain of 21 pips.

A pullback entry provides less risk but presents a trader with a dilemma. Is the entry a pullback or a reversal. A clear strategy of criteria assists our decision process.

That last bet looks simple. But if we view the same trade from the one-minute perspective below, we see the rapid up and back of the deal. Holding, in reality, was like staying on a bull in a rodeo ride. We need to set our target, grit our teeth and ‘hold the line’.

Successful day trading a pullback can provide a breakout opportunity
Pullback example 2 with a breakout


Slow Trader Fund update

 An increase in Slow Trader Fund profits and new investment added. See table below.

Day trading:

  • A day traded fund in Forex is deemed as risky by most. To trade this way attracts the boom and bust people. Hence the planned European increase in the margin that we have discussed.
  • Day traders that are not boom and bust have to accept an extended skill learning period, which few are prepared to do.

Day trade amount:

  • Over time we plan to trade the Slow Trader Fund at a risk that is 1/50th of the fund per trade. (throughout our skill development period we have bet at about 1/100th). We take several trades per session.
  • For example, take a Forex day trade with a £50,000 funded account. Such a statement would attract a deal of £500 risk with the option of a second entry also of £500 making £1000 risk  (1/50th) per concurrent trade.

How we’re doing:

  • We take statistics of ‘how we’re doing’ from batches of 20 trades. We accept a loss rate of 4 to 6 trades out of 20 – therefore a 70% to 80% win ratio. Anything less requires a review of tactics. A 50% loss rate would necessitate a review of the underlying strategy. (More recently, several weeks, we’ve achieved a 77% win ratio.)

Commodity trading:

  • We are also looking at reintroducing longer-term commodity trades to the Slow Trader fund. Both Forex day trading and longer term commodity trading use the same strategy with the addition that the commodity trades would only be in agreement with the COT report.

 Slow Trader Fund withdrawals:

  • As we primarily day trade, funds can be withdrawn at minimum notice. Withdrawals of your full lot amounts (e.g. JB2) would be preferential.

Trade timetable:

  • We aim to trade the fund for 200 days annually. Manageable, but we don’t trade weekends, some of the USA or UK national holidays, times of significant news due to unpredictability and most Friday afternoons.

The last four lots are new money as of 1st March 2018.

Backtesting helps

Backtesting. Good morning Forex day traders, our second entry for the morning GBP/USD 5-minute chart, 8.15 am 21st February 2018.

We are trending short, and we are looking to take the third push down, as shown in the chart below. For this trade we have scaled-in. We have a first limit entry marked by the lower green arrow, and the higher green arrow shows our pullback midpoint second limit entry.

We are looking for the pullback not to close above the yellow corridor that we have marked. Our stop is in the vicinity of the blue circle. The measurement of the amount traded per pip, however, is taken from the very top of the day at price 14,000, some 33 pips distant.

Our entries are successful. And as we are on a third push, we have a target at the scalp position of 18 pips and 24 pips respectively.

Notice that even with both entries our overall acceptable risk remains consistent. Therefore, if we are to scale-in, this needs to be considered from our initial entry. Where to scale-in comes from relentless backtesting.

The entry, ‘live’ screenshot.

Towards target, ‘live’ screenshot.

Forex trading signal, a high-two reversal

We entered short at the close of bar one which provided a reasonable probability of a measured move. Tuesday 20th February, 9.30 am. High-two reversal.

The close at bar 2 put us in the money and looked right at this stage to reach our target. We only noticed later that the close of bar 2 equalled the support level at 7:30 marked by the red arrow.

A high-two was activated (bar 3) closing above the previous three bars; this required an immediate exit of our short for a small loss and a reversal entry long.

Our reward came with the big move for the day so far.

The reversal entry is often hard to do and one that we do reluctantly and only if we are confident of the Forex trading signal.

Forex trading and USA holiday

Good morning Forex day traders, 8 am Monday 19th February 2018. USA holiday.

We missed the first trade of the day. From the close of the bear bar at bar 1, an unassuming engulfed bar, I went for my first pot of tea of the day. I missed the second bear bar, bar 2, which provided a probable entry short of eight pips.

Eight pips are our minimum entry in the GBP/USA currency market.

The short went 12 pips below our planned exit, down to Friday’s low and the significant number of 14000. That, of course, means 1.4 dollars to the pound.

Trades today will in all likelihood be light being a USA holiday. Expect a trading range day, but occasionally on such holidays, a trend can form.

Our missed entry looks good on paper, but in reality, I would not have made the short. The spread at the time was double, which is typical for a no-news Monday morning. As I don’t pay the entry spread, I always like to achieve a limit entry, the subsequent pullback at the close of bar 2, and at two pips spread, would not have worked.

We wait patiently for the next opportunity.

Trade management, a skill

Trade management is a skill and tricky to achieve, the first thing in the morning! The trade is from 8.15 am 16th February 2018.

The chart below shows a possible wedge; three pushes down marked by the red arrows. A strong bull-bar, the close of which is characterised by the green box, provided a reasonable probability of an entry-long with a target back up to the previous high.

We enter (the green box) long. The follow-through, however, is somewhat weak. Until we get the bear bar, the close of which is marked by the red circle; acceptable as a small loss exit position.

However, we hold. The trade is expected to go back to the low of the day. The risk is a breakout short.

At the price action long, shown by the green horizontal arrow, we scale-into the trade. Our target is a breakeven on the original bet and a small profit on the scaled-in take.

To scale-in improves probability but is not for the beginners.

A screenshot of the trade live.