USDJPY Trade - Typical PA Trading vs True PA Trading

Just want to quickly use a USDJPY trade to answer a comment made on my previous post.

USDJPY M30

USDJPY M5

USDJPY M1

So here is my take on how typical PA traders will trade this vs how true PA traders (Lovejoy style) will trade this.

Typical PA: Probably wouldn't even be looking at this because they focus on H4 and above and believe that LTFs are all noise
True PA: Sees a material false break into former demand with strong rejection back down, starts looking at LTFs to identify the SD structure and any potential trade opportunity.

Typical PA: Dismisses the setup because there is no pin bar or some favorite candlestick pattern
True PA: Understand that what is important is a strong rejection which indicates strong selling strength, candlestick patterns are secondary and unnecessary

Typical PA: If they decided to trade the false break, they will usually place the stop above the high of the breakout bar, which results in an unnecessarily wide stop loss and poor RR
True PA: Understands that the M1 former demand should hold for the trade to work out, and hence there is no need for a stop loss higher than that.

Typical PA: Have the mindset that the trade should at least yield 1:1 or more, and thus are only willing to TP when they're 1:1 or more in profits. Recall that they already have a very wide SL above the breakout bar high, and as such requires price to move a substantial distance before they will TP. They do not realise that 1:1, 2:1, or a TP based on moving average, Fib etc are just arbitrary levels with no logical implication. As such price often turns back on them and a winning trade becomes a losing or break even one
True PA: Understand that price moves from zone to zone, and there are certain ways to identify which zones/levels are significant and will cause a material reaction. Such a zone is used for the TP.

So in summary, I believe that SR and SD is all a true PA trader needs to be very profitable. Interpreting that correctly is the difficult part. In the above trade, my SL was 0.8 pips and the return was 4 pips, hence a 5R trade (excluding comms). I believe most traders would think that a sub pip SL is extremely tight, but really it is not about the SL size but the SD structure behind the setup. Also, if one were to focus only on the H4 and above time frames, the above setup isn't even visible and is probably only a small move. However this small move if played correctly using multi TF analysis down to M1 is actually a 5R trade within 45 mins.

Trading like that required a huge mindset paradigm shift for me as I came from the typical PA background. However I truly believe it is the most profitable way to trade, though quite honestly also the hardest I've come across. Hope this post helps!

Professional Trading

It has been many months since I last blogged. I came to a point where I realized many activities are good, but one has to prioritize and focus on the most effective and productive activities. As such, learning, practicing, back testing etc took precedence over blogging. In my last few posts, I mentioned that I have been learning a lot from TheTradersGuild (now known as LJ Forex Group), and it has been a tremendous learning experience since then.

To cut the long story short, I'm writing this post because I feel responsible to "caution" any readers regarding any other posts I've written in the past. No doubt trading is a continual journey of learning, and all traders start somewhere and pick up various things along the way, some good, some bad. I went through the same process, and my learning will never stop. However my entire view of price action changed after studying Mark (owner of LJ Forex Group)'s material, it is price reading in the purest form and makes total logical sense. 

As such, I just want to inform any readers to ignore any of my previous technically related post, be it strategies or vendor recommendation. In hindsight they're all crap. I'm particularly concerned because many of my top visited posts contain very amateurish material and recommendations to vendors which I no longer endorse. I just want to say this: candlesticks patterns are meaningless, it is ridiculous to only trade the higher TFs (H4 and above) with the excuse that the LTFs are just noise, claiming you only need 3-5 trades a month to trade for a living is also a senseless inefficient use of time. Gosh I'm tempted to state so much more, but I shall leave it at that, and shall avoid citing names.

In summary, I think in any craft it makes sense to seek out the best and learn from them. As far as trading is concerned, Mark is by far the best trader I've come across (and I do patronize quite a number of forums/sites). Add generosity, willingness to share, and a gift for teaching to that and he is really a gem. These days I devote entire days and wk ends solely on his material, and really hope to be able to achieve the kind of price reading proficiency and success that he is enjoying now. 

Mark often tells his students that it is very important to research, back test, practice, and work things out for themselves. That is the way to improve and gain confidence. A good trader should always have an inquisitive mind. I'm trying to live out that advice, and guess that is also the advice I would like to offer to any reader. 

All the best!

Some Setups On Singapore Stocks

Just for fun I decided to scan through some Singapore stocks and see if I can spot any setups. Did manage to find some, will monitor them in the coming weeks/months to see how they turn out.

GLP

Neratel

SIA Engin

Tat Hong

AUDNZD Compression + Liquidity Spike Trade

Just want to share an interesting trade I just took on demo. It is based on compression followed by a liquidity spike, similar to the pattern I mentioned in a previous post.

AUDNZD M15

AUDNZD M1

I'm happy because the setup worked as expected, and a little peeved because I got stopped out by the 15 pip spread caused by NFP. Its cute when you see it on the charts huh? Price didn't even come close to my SL but I got stopped out. Thankfully its only on demo, really wonder what I could have done to avoided it though, probably nothing. It doesn't make sense to set a extra wide SL just to cater for news based spread widening.

Anyway, I've been going through a very reflective period, and some events have really led me to feel very blessed. Some conversations with Mark (http://www.thetradersguild.co.uk/) as well as deeper study of his material has really opened a whole understanding of what price action really is, what most traders (including myself) have got wrong in their approach to trading, and how much more there is for me to learn and practice. It is really humbling, and yet I feel so motivated and excited to learn more and get better at my price reading. So Mark if you're reading this, thanks a lot for everything, truly appreciate it!

Accumulation Pattern And USDCHF

I like to study and save charts of repeating patterns I observed with the belief that over time I'll get better at spotting them and anticipating a move. Here is an accumulation pattern that I've noticed many times. Again I don't know what to call it. The pattern formation goes something like this:

1. Huge spike down - Selling climax in VSA?
2. Price subsequently tries to make 1 or 2 more stabs down but fails to make significant lower lows. This indicates a weakening in selling pressure and often shows up as bullish divergence. The stabs down might also stop hunt previous swing lows, allowing pro money to load up longs.
3. Price then breaks out of the pattern

Here are some chart examples:

It would be good if this pattern takes place at a HTF demand zone. It is also similar to a falling wedge pattern.

And now... I think I'm seeing something similar on USDCHF H1. It is still a small distance over a significant demand zone (blue area) so I won't be surprised if it takes another stab down into the zone first.

USDCHF H1

And here is the anti climax -  I don't know how to trade this pattern! I guess some ideas might be to trade PA bars at the 2nd or 3rd stab down (aggressive), or trade the breakout (in which case I don't know where to put the stop). 

Just something which I thought might be interesting!

AUDCAD - Watch To Short

AUDCAD Weekly

AUDCAD is approaching a very major level where there is a nice confluence of factors. If this was a H4 and below chart,  I would without a shadow of doubt place a sell limit to short the supply zone. However it is a weekly chart and to do so would incur too wide a stop loss. My plan for now is to wait for price to form new levels of H4 supply within the weekly zone and then short those.

Just thought I would post this because it is such a clear as day level that I believe every trader would be watching it no matter what system he is using.

Perils Of Unregulated Spot Forex

Spot FX is unregulated, and as such traders are at the mercy of their brokers. Unscrupulous stop hunting is one of the biggest complain (the market makers know where their clients' orders are). I just want to point out what this problem really looks like on a chart.

The top chart belongs to Broker A whom I'm so tempted to shame, the below chart belongs to Broker B. Ironically Broker A is one of the most reputable spot FX brokers, which is why I'm shocked at the blatantly obvious stop hunting that is going on. Now I have many MT4 platforms, and it only takes a couple of minutes to verify across a number of brokers that the problem indeed lies with Broker A. No other broker has those ridiculous spikes. And mind you this is not a rare occurrence, 10 in one screen and on a major pair on a relatively high time frame is a very serious matter! I've been observing this broker's charts and know that this is a very common occurrence. I don't see how it even manages to keep its clients.

So in conclusion, it is very important to select a good spot FX broker. Sure low spreads are important, but factors like execution speed, integrity of charts, ease of funding, technical stability are equally important. I used to neglect that until I experienced platforms that keep disconnecting, or orders that hang and refused to be processed so you cancel them and reenter a new order, only to end up with a duplicate position. In spot FX we have the luxury to try out demo platforms for free, take full advantage of it and at least trial a platform for a week or two before committing to the broker.

Some Trades Based On Fakeout With Compression

Refer to my previous post where I shared about the double top with compression pattern. Here are two recent trades I took based on a similar logic.

NZDUSD

GBPCHF

Cool eh? Zero draw down on both trades, caught them nearly at the top, exited right before price turned. Multiple R trades. Do charts like these make me seem like a pro?

Now here is the thing. Those trades are real, so are the reasons for entries and exits. But here is another thing:

1. Those trades are taken on a demo account. Even for demos I have a serious demo where I track everything and trade according to rules, and another casual demo where I try to test setups and trade random lots. These trades were taken on my casual demo.
2. I took a risk with the ultra tight stops. Yes we have fake out bars which closed with an upper wick, but those are not strong rejection bars like a big red bearish pin. Especially for GBPCHF, who is to say price wouldn't want to go deeper into the zone?
3. I traded these with very small lot size. So while at first glance those might seem like multiple R trades, in reality the profits were very small.
4. Those were actual partial closes. For both trades I was actually trailing the remaining position, both of which got stopped out at a higher price. But if I included the trailed positions in the above charts, I'll lose the "exit at the very bottom" guru effect right? I wonder how many of the forum posters are utilizing this same trick...

Now here are some other scary facts. I could have placed sell limit orders at various logical places (M1 supply zone, S/R flip etc). Some of those orders would have worked out while others fail. I could easily select the order with the lowest draw down and post it, appearing as though I managed to nail the trade to the pip. People will believe me because I did have a reason for the trade - the M1 supply zone, S/R flip etc. What they don't know is that there might be 10 other logical areas which failed. Oh and did I mention you can actually adjust the trade markers on the chart? Anyone can be a M1 god of trading. 

Oh ya I recently came across another "trick". There is this guy who is pretty active on FF, he sometimes post trades before the fact, and with pretty good results. I was pretty impressed by him and yet I don't understand why he took those trades. Few weeks ago I saw him post a trade during Asian hours where FF has the least visitors (Maybe this was unintentional). I followed the trade closely and knew that it was a loser. I went back to check the post, but lo and behold the post was deleted! That taught me another way to manipulate results - Take a scalp trade on M5 or some very low time frame so the result can be known very quickly, post during the dead Asian hours so less people will notice, and if the trade is a loser quickly remove the post. Thankfully that guy started an AceGazette journal, and I know now from his results that he is not as good as he portrays himself to be.

With those points, do you now see how results can be easily manipulated, and how important it is to only study traders who post before the fact, consistently and with explanation? Its a scary world huh?

On a side note, those zero draw down trades and getting out partially right at the turn felt really good. Maybe it is luck but I really took and exited those trades based on logic, it is nice to be able to predict the failure of a breakout. The main key and secret is the compression. That signals the intention of the pro money. I will continue to test my entries, if I'm able to replicate such results consistently, I might bring it live.

Thoughts On S/D Trading

I was actually writing a reply to a comment I received, and realized that it is better to put it up as a post in case it could be useful to some readers.

I've spent many months trying to understand and trade S/D concepts, and quite honestly have been through the same stage of being overwhelmed, frustrated, and cynical.

If you ask me, I would say the biggest problem is that there are so many ways to trade S/D concepts, and most threads/sites don't have fixed rules, so you might have a rough idea of what an engulf, Quasimodo, compression, bearish engulfing candle is but you don't know when they work and when they don't. So you might see posters who take engulf trades or a bearish engulfing bar and those trades turn out as big winners, but when you try to replicate it you get multiple losses and wonder why. Good thing about AceGazette is, after some time you realize many of these posters only have a 40-50% win rate and their equity curve isn't pretty, which means there is a problem with their trades to begin with. There is no reason to study their trades except to learn from their mistakes. In short, simply taking engulfing bars at any S/D zone will not cut it, taking any engulf or Quasimodo which appears in the middle of no where will not cut it, touch trading a zone just because there is compression leading to it will not cut it.

I realized all that through hundreds of failed trades, and from observation of many other journals. Now this doesn't mean that AceGazette, ReadTheMarket etc are teaching wrong stuff, far from it. But there are many nuances which most traders fail to notice and this makes ALL THE DIFFERENCE. Here are some of them:

1. It is very very important to trade with the higher time frame trend and respect higher time frame zones. So for etc, suppose we see a M30 bullish engulf. We try to long the source of engulf when price comes back to it and it turns out as a loss. A very common reason for this is because the engulf is into a HTF supply zone, say H4. Or it could be because we're too high in the curve and the profit margin for longs is no longer there. I've done this dozens of times and seen many people do it too, it is probably the most common reason why engulf trades fail. 
2. Quasimodos are powerful, but I realized they have to be taken at a HTF zone and not in the middle of no where. So for etc we want to long a M30 Quasimodo in a H4 demand zone, not when it is dangling in the middle of no where.
3. Compression can last longer than expected. Just look at the AUDNZD pair, compression is everywhere and many times it is not filled. Compression works best after an engulf (Can can pattern), or if price is compressing up to an extreme and high quality zone. Do not touch trade a zone just because price is compressing to it. Sometimes we see a M30 demand zone and ecstatically buy it because we see price compressing down to it, but we fail to notice that the zone is weak, and there is a much stronger H4 extreme zone underneath which will act as a magnet to pull price to it. 

There are so many such nuances, and the sad thing about AG and RTM is that many of the pioneers/seniors are no longer that active. The legendary and genuinely good traders often post without explaining the reasons for trade (Julexo, Ken etc), and those that do explain are mostly enthusiastic newcomers. Much of their trades and analysis are wrong (the dangerous thing is these sometimes end up as winners giving the impression that it is right), but few of those posts are corrected by the seniors. There is no one to blame, because the forums are free so the seniors have no obligation to correct the young traders, and most people are more interested in trading than teaching. 

So in conclusion, I really believe the methodology of the various sites is good, but you need to have a lot of practice, really understand all the nuances in order to make it work. Once you really understand the markets, you'll realize why some zones are touch trade worthy and why it is safer to wait for PA on others. I'm still far far from being good at S/D trading, but I've managed to eliminate many recurring mistakes in the past few months. It really takes months and probably years of chart time and experience.

As for reliable sources to study S/D, here are some:

1. PriceIsEverything FF thread. Redsword is the man who started it all. Ifmyante, Ken and many others all spawned from this thread. Here is a man who dares to post before the fact, explains his trades, and is consistently and uncannily accurate. A new reader might not be understand the first few pages, but keep reading and after 100 pages or so, you'll notice some recurring patterns (whipsaw engulfing, pins at zones etc). Coincidentally I'm planning to hardcore study the thread from today onwards, with the aim of completing all 1400+ pages of it.
2. Alfonso's FF thread. Again here is a trader who posts before the fact, is able to explain his trades, and has consistently good results. He has managed to come up with a rule based S/D system, and to be honest it is my bread and butter for now. I'm very active on this thread because after months of filtering and deriving my own rules, I somehow ended up with very similar rules as him so I really agree with his methodology. It is actually nothing new, but his rules help filter most of the mistakes that many RTM and Sam Seiden traders make. I know because I have made those same mistakes hundreds of times.
3. Lovejoy's FF thread and his website. Also check out Balhana's posts on that FF thread, he is really good and his posts are full of explanations that make sense. Lovejoy has some fantastic videos, in my opinion must watch videos for any aspiring S/D trader. 

At the end of it all, I feel it is very important to decide on a certain style (touch trade or trade PA bars) and focus on it. It is very very difficult to try to learn multiple styles at once, so master one before starting on another. I have one account for touch touching (which I've tested and am confident in), and another demo account to practice trading PA patterns and bars. Pen down trading rules and strictly adhere to them. Journal every trade and study them from time to time. It is amazing how often recurring mistakes occur, and we'll be oblivious to them unless we journal our trades. 

Hope this post helps!

How To Save Time When Studying Trading Forums/Sites

I just came across this article and man do I agree with it. In fact the third kind - Honest Ninja Guru is growing rapidly and I've seen many such examples in the Singapore trading scene. The thing is, this isn't just limited to gurus selling courses, but also active posters on forums. My heart aches at the amount of time I've wasted trying to understand why certain traders take and manage their trades. Many of these people are very active on the forums, they post mostly winning trades and often go around correcting others. As a result they're highly hailed as expert traders, and due to their connections they're often highly vouched too.

Now recently I had a series of eye openers, which led me to a conclusion I will share about later. I'm so grateful for sites like AceGazette, where trade journals not just have to include the trades, but also the account statement and the reasons for the trade. It is through there that I realized how many of these traders are actually not even profitable. I've also seen statements of traders who multiply their accounts within a very short time only to over trade and blow up another one before long. Their equity curve is like a roller coaster and their win rate is low. There is one common theme: They mostly post winning trades after the fact, and their results are inconsistent. Why should I study such traders? Now I'm not trying to say they're out to deceive or have any ill intentions. But given the enormous and endless amount of trading resources and threads out there, shouldn't I spend my limited time studying the really good and consistent traders? So now here is my conclusion, only study traders and posts with the following attributes:

1. Posting before the fact. This is very obvious, you know a good trader because he posts when he takes the trade and not after the trade has ended as a profitable one. 
2. Able to explain his entries and exits. This is super important. Now if you're only interested in a signal service, you might not care about this, but if you really want to learn, the trader you're studying has to be able to explain his trading strategies coherently, and you must be able to observe from his trades that he does adhere to them consistently. This point alone eliminates many traders who only post their winning trades but are very evasive and unwilling to explain their entries/exits.
3. (Optional) Positive and consistent account statement. This is optional because if points 1 and 2 are fulfilled, I don't really need to see their account statement to know if they're a successful and consistent trader. Nevertheless, an account statement is the best proof. 

There, I've grown wiser based on that criteria, and no longer waste time studying or listening to traders who sound very knowledgeable and are hindsight kings but still lack profitability. 

Double Top With Compression Pattern

I've been going through charts and filing patterns which I've noticed repeatedly. It is so fun to do so and helps increases my confidence in them. In this post I want to share another powerful pattern. It is some what like a double top, but the defining factor is that there is compression prior to the second top, and the second top is often into a supply zone. A bearish divergence is also almost certain. Here are some charts:

This is similar to the CP + LS pattern - compression followed by a liquidity spike. In this context, price first forms a first top. It then drops and slowly compresses up. This compression is the pro money's attempt to remove buy orders so that the subsequent move down is unopposed. After the compression, price spikes up. This stops out early shorts as well as traps breakout longs, providing liquidity for the pro money to go short. A huge reversal then happens. The way to trade this is to wait for a candlestick pattern or rejection wicks at the supply zone where the second top is occurring. More aggressive traders can just take a touch trade at the zone with a stop above.

Great Article - Passion VS Interest

Really like this article, probably because it is relevant to my current situation.

http://2ndskiesforex.com/strategies-for-forex-trading/forex-articles/difference-trading-passion-interested/

The below excerpt really spoke to me:

I think many people get depressed when they lose focus or motivation because they think that successful people have some unstoppable passion and willpower that they seem to be missing. But that’s exactly the opposite of what this coach was saying.

Instead, he was saying that really successful people feel the same boredom and the same lack of motivation that everyone else feels. They don’t have some magic pill that makes them feel ready and inspired every day. But the difference is that the people who stick with their goals don’t let their emotions determine their actions.

Triple Witching

DJ 30

Notice the four super high volume days in the chart? I always knew it was due to options expiration, but I only just realized these four days occur on days of triple witching. According to Investopedia this is an event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December.

As such, traders using volume analysis might want to interpret the volume on these days with a pinch of salt. Just scroll through some stocks and you'll notice this disgustingly high volume on them too. Interesting huh?

New Chart Pattern - Last Breath Pattern

I think I've discovered a new chart pattern. I hate thinking of names so I shall call it the Last Breath Pattern for now. I seriously don't even know what the logic behind it is and why it works, but I've seen it so many times to know it is not a fluke. The pattern basically starts off with a compression like up move which then curves down a little and shoots up as if taking its last breath. It finally drops back down rapidly and breaks the origin of the final spike up.

This is going to sound stupid but I don't know how to trade this pattern. You can't short at the top because you don't know whether it'll spike back down or not, and you can't short the support break because you don't know whether it'll be a genuine break or not (yes it does false break and go higher too). This pattern only gives a high probability that the support will break, it doesn't guarantee that the break will follow through. :P

There is one use for the pattern though - Avoid going long when price is returning to the origin of the spike up. You see, I managed to discover this pattern because I fell for it many times by going long at the origin of the spike up and getting stopped out. After some time I can't help but find it familiar. I'm happy to say that in the past two days, I've avoided two losing trades simply because I remembered this pattern. Every other trading rule of mine stated that those trades were valid but I just couldn't pull the trigger as something "didn't look right". Well that discomfort saved me 2R and I am even more convinced that there is something going on behind the scene of this pattern. Maybe I should add this to my trading rules - Do not trade if there is a Last Breath Pattern. :P

It Is Not The Critic Who Counts

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. ― Theodore Roosevelt

That quote has to rank among one of my favorites. I've read it many times and I still feel so inspired and encouraged whenever I read it. To me, it has to do with critics vs vision. Every successful person has a vision, be it Mother Theresa, Nelson Mandela, Steve Jobs, or President Obama. There will always be people who don't agree with your vision, ALWAYS. Critics will rise up, and in this generation where social media is prevalent, their voices will sound out far louder than ever before. However, successful people know this - They have to choose their battles. Not all battles are meant to be fought. Every second spent answering or pacifying a critic is a second that could have been spent furthering the vision. In other words, critics = distraction, and a visionary has to be very careful not to be caught up with such distractions.

In the trading context, not everyone will agree with your trading methodology. However, every second spent debating and fighting in the forums with your critics is a second that could be spent improving your strategy, back testing, reading, practicing. It is the same for every aspect of our lives, every vision, every journey. Critics will never understand the ironic relationship of the inevitable yet necessary occurrences of failure. They devote their time and energy to nitpicking on you, hiding in the shadows and ready to pounce whenever you make a mistake. Fast forward a few years and the focused visionary who failed repeatedly would have gained a treasure trove of lessons from his failures. He would be at a much higher level than where he was a few years ago. And the critic? I shall leave that question open. :)

Update On EURNZD Trade

Just to update the EURNZD order which I mentioned in the previous post. So price continued down and did not retrace enough for my entry. The original target has been hit so I've pulled my order. This actually happens very often. I find myself cancelling more than 70% of my orders because some criteria gets broken, but it is how it is. There are more than sufficient opportunities every week. Price is now in a strong D1 demand zone, so surprising as this sounds I'm going to start looking for a setup to go long. The criteria for this would be for a H1 supply zone to be absorbed/engulfed as a sign of bullishness. I'll then buy when price retraces back to the source of engulf. A lot of people will find it hard to buy after such a steep drop, but we should instead love such steep moves because the entire sharp move down is a liquidity gap (at least on the D1) which can be easily filled without trouble. Just look at the prior few steep moves up and down, notice how price subsequently moves from one end to the other quickly and easily? This is because there is no zone in between to stop the move, and we know that price moves from zone to zone. Besides, I'm not taking a blind entry, I'm waiting for a lower time frame supply zone to get engulfed as a sign that the bulls are interested in higher prices. Can it go wrong? Sure it can, but if it works out, I'm potentially entering based on a H1 demand zone with a D1 supply zone as my target. In the best case scenario that my trailing stop is never hit, the RR could be as high as 20:1 or more, depending on the width of the H1 entry demand zone.

EURNZD D1

Pending Sell On EURNZD H1

EURNZD H1

A nice short setup just occurred on EURNZD H1. Downtrend, demand engulfed, very distinct supply zone with strong departure (signifying a huge order imbalance there) for entry and clear S/R flip level for target. Just want to share what goes on in my mind with this concept of trading. We know that trading is a probability game and expectancy is what matters. This trade if successful would yield approx 3R. If I lose, I lose 1R. I only need to be right 25% of the time to break even. Do you think shorting such a nice supply zone in a downtrend with clear space below has at least a 25% chance of working out? If so, take the trade.

This is the way I'm approaching every single trade now, measuring the reward-risk vs the probability of the trade working out. With regards to the above setup, I would say it should have at least a 65-75% chance of being successful. There is no reason not to take the trade! I used to be very uncomfortable with limit orders and preferred to wait for candlestick confirmation. However I realized that while waiting for candlestick confirmation might result in a slightly better hit rate, it greatly reduces the reward-risk ratio of the trade and hence my overall expectancy, especially if the candle is a big ass one. However this is definitely an issue of preference as I do know some really good candlestick traders too.

The fact that price moves from zone to zone is one of the best kept secrets in trading. It gives confidence in entering at the point with the lowest risk and holding to the next opposing zone.

With regards to the above trade, I'll only cancel it if 1) Price doesn't trigger me and goes on to hit my target
2) Price starts making higher lows on the way to my entry, signifying a possible trend change 3) I'm not in the trade by NFP tomorrow. I don't trade before NFPs, and with the Syria issue looming I'll certainly prefer not to hold trades over the week end.

Update on Silver Trade

Just to update the Silver trade I took previously. I trailed my stop below a H1 DZ and it got hit just now for a +0.5R. The fact that price failed to make a new high and the possibility of it forming a H4 head and shoulders now is giving cause to potential bearishness. Side note: I'll be very cautious of trading in the next two days due to ECB conference on Thurs and NFP on Fri.

Silver

AUDUSD confluence with the AUD crosses

Just want to write a short post to describe a form of confluence that could aid an analysis. In this example, we can observe nice H1 zones across the various AUD pairs. This means that if price should retrace, there is a high chance they'll hit their respective zones around the same time, hence acting as a form of confluence for any AUD related trade.

At first glance one might wonder duh doesn't this always happen? Well it doesn't. Sometimes we could see AUDUSD rising strong and forming a nice Demand zone, but the rise could be due to Dollar weakness. In this case, It is likely that pairs such as EURUSD , GBPUSD, NZDUSD would also be rising and USDJPY could be dropping. What we have then is a muted reaction on the various cross pairs.

In this case we have clear zones formed across all the AUD crosses and even on AUDNZD (NZDUSD is highly correlated to AUDUSD, so for a strong zone to form here is pretty rare). This is a sign of clear AUDUSD strength which was a result of the positive morning AUD GDP news. The idea then is to pick the best looking AUD pair to trade. I've personally chozen AUDNZD as I think it has the nicest price structure and most space to move. We will not want to enter multiple trades on the various AUD pairs as that would result in excessive losses should all the trades fail.

China Minzhong - Another Reminder On The Danger Of Equities

China Minzhong Daily

Once in a while something like that happens to remind me why I quit trading equities. This stock got screwed by a short seller (similar to what happened to Olam) and dropped 50+% in a single day to its all time low. No matter how much one sucks at trading, reading charts or fundamental reports, nobody deserves to lose that much just like that. My heart really goes out to the retail investors who are affected, especially those who placed their hard earned money in the stock. It is exactly moves like this that potentially leads to suicide cases. Note that the shitty cash market brokers in Singapore do not provide stop loss orders, so unless you're trading CFDs or happen to be around when that spike happened, chances are you'll incur losses so big it'll take many winning trades to recover. So yep you can be a damn good trader, killing the markets and having a decent win rate. All you need is to get hit by one of these every few months and a big dent will be created in your account. The damage will not only be financially but psychologically. There will be a huge sense of unfairness and indignance coupled with discouragement. And mind you this happens far more often than one would like to believe. In the case of CMZ, at least it was a spike down so some people might still have got out in time either via stop or market orders, albeit with huge slippage. Most of the time though news is released when the markets are closed and huge gaps can occur overnight. Your stop loss order will not protect you then.

One might argue that huge spikes/gaps can occur in your favor too. I agree, but as a trader I'm more concerned about managing my downside than hoping for the big break.

Oh and did I mention that if you were short before the trading halt, the gap up today would have wiped out your account overnight? Welcome to the world of equities.