A Tale of 2 Cities.... EURJPY

I spotted a potential long trade on the EURJPY when it was trading in a triangle pattern.  The price was moving towards the bottom trendline which was also supported by a past Resistance at 137.85.  The situation looks good that the price should move off this significant combination of trendline and support line.  I felt that the bounce could be strong enough to cause a breakout of the triangle.

So I entered the following trade:

EURJPY
Long: 137.93
Stop: 137.71 (22 pips)
Target: 138.38 (45 pips)

And true enough the price moved off the trendline/support and subsequently broke through the triangle and hit 138.38.  Great!  A nice 45 pips profit!

Now, after witnessing the breakout, I was keen to ride up with the break as I have seen previous breakouts move another 100+ pips.  So I entered another trade targeting the next resistance at 138.73.

EURJPY
Long: 138.33
Stop: 138.06 (27 pips)
Target: 138.68 (62 pips)

However, the breakout did not hold.... in fact it crashed back down through the support of 137.85 and went down to 136.82 over the next couple of hours.... a drop of over 160 pips from the top of the breakout *whew*  Thank God for the Stop at 138.06!

Now could I have seen that coming?

Ok, the read on the first trade looks pretty sound, with both up trendline and support providing strong indication of an upward bounce.

Well, on hindsight, the read on the second trade was full of wishful thinking.... After a successful trade, the euphoria and greed blinded me into making a trade that was not supported by any evidence.

Without any supporting trendlines or support/resistance lines, I will have to look to the indicators for evidence of a significant move up.

1. On the completion of the Green Candle at 1030pm, the Slow Stochastic was at 79.06 and the RSI was at 69.36.  Both showing strong upward momentum but also indicating possible Over-bought situations.
2. On the completion of the Red Candle, during which I entered the trade at 138.33, the Slow Sto was at 86.91 and RSI has turned DOWN to 61.30 indicating a significant LOSS of momentum.
3. With the Sto in Overbought territory and the RSI indicating loss of momentum, the price indeed fell through strongly.

*whew* Lesson learned, do NOT jump straight into another trade following a successful one in the hope of chasing it further.  There was absolutely nothing to suggest that it will continue.  Only enter a trade when all the signals are right.

Happy Trading!

Nice Channel To Trade The EURUSD

The EURUSD formed a nice channel pattern giving good opportunities to trade the swing between 1.4990 and 1.5050.

EURUSD
Long: 1.4995
Stop Loss: 1.4980 (-22 pips)
Take Profit: 1.5047 (52 pips)

Managed to enter the trade at 1.4995 and exited at 1.5047 for a nice 52 pips :)

At the time of this writing, the EURUSD looks like trading down again to test 1.4990 and the interesting thing is that there is a long term trendline in Cyan that will provide further support for a bounce up.

Now to see if I should go Short around 1.5050, currently it is at 1.5025.

Happy Trading!

EURJPY Hit Target of 137.33!

Yes!  EURJPY hit my target of 137.33 around 930pm.  It is now hovering around the 1st Fibonacci resistance, looks like a possible retracement as the price seems to be trading in a slight uptrending channel.  Will do more analysis later.

Happy Trading!

My First Losing Trade

I went long on the AUDUSD shortly after I set up the EURJPY trade as there was such a strong break out of the resistance at 0.9297.

AUDUSD

Long: 0.9308

Stop Loss: 0.9286 (-22 pips)

Take Profit: 0.9360 (52 pips)

But after entering the trade, it continued to trade down and finally hit my Stop and exited.

So what went wrong?  Was I too enthusiastic to jump into this trade without doing enough analysis?  Let's take a closer look at this trade.

Ok, I decided to enter this trade around 2am when the price was already retracing from the peak move at 0.9328, after breaking through the resistance at 0.9297. I entered the trade at 0.9308 at 2:33am, which is in 3rd candlestick (Green) after the peak, just above the 1st Fibonacci retracement level.

Ok should I have entered this trade?  What were my indicators telling me?  As I entered on the 3rd candlestick after the peak, which is Green, I should be using the Indicators for the 2nd Red candlestick to confirm my trade.  Now MACD was sloping up so ok, but Slow Stochastics was at 92.30, indicating a super-overbought situation! And RSI was at 68.10, also indicating an almost overbought situation.  So 2 out of 3 indicators did not confirm my trade.

*sigh* should have been more diligent to ensure that all my key signals line up before pulling the trigger to enter this trade.

At the time of this writing, the AUDUSD has dropped to a low of 0.9209, breaking through a key trendline in Cyan that was drawn in the 3hr chart and approaching the 0.9201 support.

At this point the MACD is sloping down, the Slow Stochastic is at 6.6 and RSI is 34.

So 2 things can happen:

1.  The price breaks through the support and continues down.

2.  The price bounces off the support and trades up to test the 0.9297 resistance again.

What to do now?  Nothing... :)  I will need to see confirmation of either a breakthrough or a bounce off before the signs are clear for another trade.

Let's see how things pan out :)

Happy Trading!

EURJPY retraced and entered trade at 136.45!

Wow!  When the retracement came it actually retraced down to the 3rd Fibonacci level!

Ok I am now in play on the EURJPY entered at 136.45.

Hmm.... I am still pondering about what is a good Exit for this trade.

I feel that my Stop Loss at 135.89, just below the Support level at 136, is about right, a potential lose of 56 pips but is my Target Exit of 137.57 (112 pips) too aggressive?

After consulting my Risk Management system, I'd say it is too risky to try to stretch that far.  So I have decided to reduce my Target Exit to 137.33 (88 pips) which is just at about the 1st Fibonacci level above the peak move.  This exit still provide a pretty good Reward:Risk ratio of 1.57.

EURJPY
Long: 136.45
Stop Loss: 135.89
Target Exit: 137.55

Happy Trading!

Anyone looking at the EURJPY?

I just can't find any nice trade setups in the USD based charts today.  So I decided to look at the EUR based charts, in particular the EURJPY.

On the 3 hour chart, we can see that the EURJPY has been trending up since Oct 9th and taking a breather consolidating from Oct 16th and today (Oct 21st) it broke through the 136 resistance strongly and looks like it is making a run towards the next resistance of 138 that was formed back in Aug 7th.

When going back to the 1 Day chart, you can see that 138 is a very strong resistance that was last hit back in June.

So looking at the strong momentum of the breakthrough at 136, which is after a period of consolidation from an earlier uptrend, I believe the uptrend has resumed and this will give a good trading opportunity up to 137 and possibly a test of 138 in the near future.

So let's take a closer look at the 30 min chart to plan my trade:

After such a strong move up, I think I would try to enter on a retracement.  But how much retracement should I wait for?  To give me an idea, I tried using the Fibonacci Retracement tool on my chart.  I am not sure if I am using it correctly but it does give me a few possible levels that the price can retrace too.

Based on the Fibonacci, I decided to enter at 136.45, which is the first retracement from the peak.

Now what Stop Loss protection should I take?  Logically I should set the Stop Loss just below the resistance that was just broken, ie at 136.  To give myself some wiggle room so that I don't get stopped out falsely when the price does happen to retrace strongly, I set a Stop Loss at 135.89. potential loss of 56 pips.

Ok, so what should my target exit be?  For a 1:2 risk:reward, I will set a target of 112 pips to exit at 137.57.

EURJPY
Entry Price: 136.45
Stop Loss: 135.89
Take Profit: 137.57

Well, the current price is around 136.9.  Let's see if the price does retrace and I can enter this trade :)

Happy Trading!

My Adventure Begins - My First Real Money Trade!

Today is the first day I went live with my forex account!

After spending the last couple of months attending seminars, reading books, watching videos and trading on my demo account, I finally took the plunge and made my first trade with REAL money!

So what's my very first real money trade in forex?

USDJPY

Trade: Long: 90.17, Take Profit: 90.51, Stop Loss: 90.04

Executed Long 90:17, 20 Oct 2009, 2:22pm (GMT +8)

Executed Sell 90:51, 20 Oct 7:06pm

Profit 34 pips!!

Wahoo!! A profitable first trade!! And hopefully many more to come! :)

So what was my thinking behind this trade?

As you can see from the chart, USDJPY is in a downtrend trading along a very nice channel formed by two parallel trendlines in yellow. When the price touched the lower trendline at around 12-1230pm, I was wondering if the trendline will hold. In fact it penetrated the trendline but closed above it. In the next candlestick, it also penetrated it but closed above it as well. Hmm... looks like the trendline may hold.  Shall I go Long here to try to catch the rebound up?  I will need something else to help me make that decision.

Now do you notice the Cyan trendline that is moving up?  I drew this trendline when I was looking at the 3 hour interval chart below:

When you step back and look at the bigger picture, you will notice that the USDJPY was in a long downtrend and only began turning up around Oct 8th and 9th.  It finally confirmed an uptrend by forming a higher high and a higher low.  And I drew a support trendline linking the 2 lows in Cyan.

So when looking back at my 30 min chart, I realised that my downtrend in Yellow was in fact a tracement of an established uptrend since Oct 8th.  That gave me the confidence that there is a pretty high probability that the USDJPY will indeed bounce off the Yellow trendline, when in fact it will also be bouncing off the Cyan trendline too.

Ok, so far I am quite confident to go Long at this point..... but what if I am wrong?  What if the price continues down?  After all, the 3 EMAs that I have put on the 30min chart shows a very strong downtrend right?

Hmm so what does my other indicators say?  The MACD is sloping down, to be expected since my EMAs are all down too.  However the Slow Stochastic and RSI are both indicating an over-sold position.... hmm, so it may indeed bounce up!

Ok, I decide to take the plunge and go long at 90.17!  Why 90.17?  It was the close of the last candlestick and I didn't want to place a price too close to the trendline or I may miss getting into a position when the price runs away from me.  Now to protect myself, I place a Stop Loss below the Yellow trendline at 90.04, just in case I am wrong and there is no bounce.  Worst case, I lose 13 pips.

Now how much profit to take?  From the top Yellow trend line, a good Exit looks to be around 90.51, not too close to the trendline just in case it does not reach it, profit of 34 pips, not bad, almost 1:2 risk:reward :)

After placing the trade and establishing the Stop Loss and Take Profit orders, its time to sit back and let the trade run its course.

Now why is it that immediately after you have placed a trade, the price always moves against you?? There were a few heart stopping moments when the price went down to 91.07 :)

Well, that's my first trade folks!  Now I wonder what a professional trader will say about my trading process?...

Happy Trading!