Category: Trading Strategy

1hr Charts = less trades = less stress

EURJPY swing trade
swing trade startegy EURJPY

I was chatting with a trading buddy on skype the other day and he insisted that I start looking at longer timeframes. His rationale was that at age 57 he needed a timeframe that was less stressful. I obliged him, really just to be polite, but as I watched him go into his explanation I realized that he might have a valid point. So, I started watching the EURJPY on an hourly chart.

The above chart has just three indicators. I have mentioned 2 previously on this blog – market structure and center of gravity. The third I recently picked up from a forex factory thread by Islander and Medeci – it is called trend magic. First – there is no magic. It is simply a combination of a 9 period and 20 period MA that has been coded to show the cross as a single line. It has some adaptive features which can be seen by the flat horizontal lines it produces during periods of consolidation. It is these consolidation periods that alert us to potential breakouts. These consolidation periods can also churn your account if you are not careful. I have gotten in the habit of only trading breakouts of higher/lower highs/lows to avoid some of these congestion periods. On the 1 hr frame this really helps – extremely helpful.

In the image above the consolidation came after a nice downward move to 106.00 (Mongolian must be smiling). Then we get a very bullish bar that takes us from 105.80 up to 106.30 before losing steam. What is interesting is this bar tested, but did not break a lower low and then went to create a lower high (some might argue a higher high). This lower high above our magic trend-line gives a good signal that price might be breaking out of the 24 hour consolidation period. You might also notice that while still flat, the magic trend-line has turned from a bearish red to a bullish green – nice confirmation.

The breakout occurred at 106.30 with the trend-line still flat at 106.15 meaning that an initial stop of 20 would be sufficient.

There was some minor consolidation around 106.60 before she really took off, but notice that at no time did price really threaten our “magic trend-line”.

As for exiting, I got out at the first real test of the trend-line, but if you have more intestinal fortitude, you might hold on a little longer.

Note the 1-2-3 reversal pattern at the end of the chart….

CCI Divergence For The Patient

So it is a trend day and you were not awake when the trend started. Where do you jump in???

CCI to the rescue!

I have developed a simple system that utilizes CCI divergence, TMA bands and 13 pip range bars to trade pullbacks, allowing you to enter trades in the direction of the trend.

On the chart 1) is a bullish CCI divergence.

2) Confirmation of the trend/trade direction

3) Entry signal – piercing of TMA bands.

It is important to wait fot the the TMA bands to be pierced. If they are not pierced, then no trade.

To keep this a low risk trade – use a 6 pip stop and target at least 12 pips.

 

Looking At The Pound

Looking at a market profile view of the GBPUSD you will immediately notice that price has been trading in a range smaller than the single range of last Friday.

The double inside day usually means when we do break out of the existing range, we could be in for some pretty big moves.

GBPUSD OverviewIt is also of interest that today’s high was right at Friday’s VIRGIN POC and with 30 minute tweezers. That first time virgin bounce was good for about 50 pips, but never made it down to the virgin created yesterday at 1.5431. That with todays action created a virgin at 1.5479 creates a nice trading range between the two virgins

I think virgin POC’s are good complimentary indicators so look for whatever system you use to give entries around 1.5431 and 1.5479.

Trade well.

Quarter Levels On Steroids

First, if you don’t know what I’m talking about when I say “Quarter Levels” then you need to go over to my good buddy Mongolians thread on Forex  Factory. The thread is “Make Money Everyday: A Guide To Short Term Trading” – brilliant concept.

I have incorporated the quarter levels into my trading and am amazed at how price respects these psychological support and resistance levels. Mongolian advises in his thread to just use the levels to scalp 12 pips all day long, which I have done and I must report is very doable. However, I never being settled, have been tinkering with a way to stay in trades longer…so I have been toying with a few indicators to the pure price action method Mongolian uses.

I have been playing with a system called “Forex Gold H1″ on a 5 minute chart. I have not tested it out with cold hard cash so I cannot offer you anything other than my observations.

Thus far, it seems pretty promising.

10.13 london session 4hr pivot

More 4 hr Pivot Scalping

Just a couple of examples. In the first one during the London session price actually dropped about 80 pips from the pivot. I am a scalper so I only collected 5.

10.13 london session 4hr pivot
10.13 london session 4hr pivot

 

In the second image, you had to be quick as only 8 pips were offered. I have a take profit of 5 for this trade so it worked out well for me.

4 hr pivot scalp - NY session
4 hr pivot scalp - NY session
4 hour pivot point strategy

The World’s Simplest Trading Strategy

Drum roll please…..

Really there is nothing earth shattering here. I was talking to a trading buddy of mine and recalled my most profitable trades were done using 4 hour pivot points and… oh yeah thats it!

The strategy is so simple that many will just brush it aside, but give it a try and you will see how profitable it can be with minimal risk. All you do is pull up a naked chart – any time frame you like (or this example I used 1 minute) and plot the 4 hr pivot points. You can do this

4 hour pivot point strategy
4 hour pivot point strategy

in a spreadsheet, by hand or using an indicator (send me a message if you need help here). Once plotted, enter your trades. We will be fading the market so for short entries enter a limit sell 1 pip below the upper pivot and for long entries enter 1 pip above the lower pivot. For example in the chart to the right R1 is 1.3833 so your order should be to sell at 1.3832. Set a stop that you can live with and take your profit after a 5 – 12 pip bounce.

There are instances when you can hold this for a swing trade, but that requires a little more homework and risk so i’ll table that for another day.

In my opinion pivot points are not magic lines but rather levels that so many traders use that they become self fulfilling levels of action. At the end of the day I could care less, I just want to see green on the last line of my brokerage statement and I hope you fell the same.

The key to this technique is to get comfortable with it and add size as you see how predictable the market is around pivot levels.

Give it a try and please comment on how it works.