August is more active than usual.

So far, the currency and index markets have been more active than traditionally so in August. 

My anchor or intraday timeframe has moved out to the hourly chart. I still, however, for context, frequently view the 4 hour and daily charts. The weekly also but only to reaffirm a previously drawn crucial weekly support or resistance line, otherwise the weekly chart not so much. 

With the higher timeframe, I’m able to consider many more currency pairings. More than a dozen together with the DAX, S&P 500 and gold. You will know from the news that the indices mentioned have been negatively volatile recently. Unlike your typical investment vehicle, we can benefit equally from the negative or positive price movement of all of these instruments.

Within the currency pairings, the British Pound has spent much of its time in a reasonably tight range against the US Dollar and other pairings. The Japanese Yen, however, has generally trended positively very well against many of the major players. 

We discussed in the last post the importance of measuring specific criteria. Probably the most important of which, together with the per cent amount risked on each trade, is the reward to risk result (R). For example, an exit position that has a 50 pip risk, but a 100 pip reward is a positive 2R trade. 

For a consistent trader, this is also a reasonable indication of market movement. August is littered usually with 1R (or less) trades. However, this week, I’ve taken a few higher trades, one of which at over 5R. 

I look forward to what next week might bring.

Of note, the fund will not be traded from the close of the market on 23rd August until 12th September.  Happy holidays everyone.

First trades of the day

First trades of the day can often test our resolve. Bar 1 below was our early trade this morning (12th February 2018). The London market is starting, and this can introduce volatility. Moreover, we don’t feel settled into the chart, we have a possible wedge that could take the price long and as the day has no news to mention we could be in for a trading range day.

We place our limit order short at the close of bar 1 and the midpoint of the same bar. The next bar, a pin bar down but not a new low, is not the follow through we wanted. We exit on-market for a break even. Bar 2 and bar 3, on the other hand, provide confirmation of reasonable probability of at least a scalp short so we take our limit order shorts at the close of each; no midpoint pull-back limit entries activated.

Our initial trade (from bar 1) if we’d held it would have provided 27 pips of profit. Bars 2 and 3 entries combined provided 17 pips of profit.

Some traders would have taken the first bull bar long after bar 3, however changing trade direction that quickly is difficult. Bar 4 was our next opportunity. By now we were in the groove and entered at the close of bar 4 and its midpoint. The subsequent scalp provided over 28 pips of profit.

The red arrows represent short-entries taken.