What Is 2618 Trade Entry Technique?

What Is 2618 Trade Entry Technique?

2618 Trade Entry Technique is probably the safest way to trade a double top or double bottom and although the Risk/Reward ratio is a little less favorable.

The basic concept behind this technique is that after a double top or double bottom formation, the market usually comes back to retest the structure before it finally resumes the originally diverted trend.

In double top formation the trend is downwards and in double bottom formation the trend is upwards. After the retest the market starts following these trends again.

2618 Trade Entry Technique
2618 Trade Entry Technique

This retest gives us a very good opportunity to get involved in the market. 2618 Trade Entry Technique is the best confirmation you can get in double tops and double bottoms.

The PRZ runs from 61.8 fibonacci retracement to highest high of the recent double top formation. In case of double bottom it is between 61.8 retracement and lowest low of double bottom formation. Hence the stops must be above double top highest high and below double bottom formation.

Few points to remember:

  1. This method has few disadvantages:
    1. The price may never come back to retest the PRZ
    2. Reward may be lower and risk higher because of confirmation in wide PRZ. So if possible we should wait for candle stick formations inside the zone to take a late entry.
  2. V formation and break:
    1. Double top and double bottom formation is only valid if a V (double top) or inverted V (double bottom) formation has been formed.
    2. We must use 2618 Trade Entry Technique only when the market has broken this V formation and has come back to retest the PRZ.

Have a great trading time

-TradeYodha

 

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Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
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How To Score A Trading Opportunity With Your Tools

How To Score A Trading Opportunity With Your Tools

Tools for Scoring Trading Opportunity
Tools for Scoring Trading Opportunity

Not every trading opportunity that we see on charts is same. Trading opportunities must be filtered and we must pick only the best ones. To cherry pick trading opportunities which have best expectancy and best profit margins, we must have a Scoring Card in our trading plan. This helps us filter out a lot of risk even before trades have been booked.

I use below tools for scoring a trade. Each trade can have a score between 1-5 depending on their quality but each trade must have at least score of 20. That means at least 3 factors with best quality must be a present in a trade. More the better score.

Depending on score I can change my position sizing too to minimize risk.

Tool
Fibonacci Confluence
Advanced Harmonic Patterns
ABCD Pattern
50 SMA
200 SMA
SMA Crossover
Double Top/Bottom With RSI Divergence
Bollinger Bands Extreme Deviation
RSI Oversold/Overbought
How Far The Price Has Moved From The Zone In Past
How Much Time It Has Spent In The Zone In Past
Is Zone Fresh

 

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Disclaimer: This web site is just my financial trading log and is for educational purposes.
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Head and Shoulders Pattern With Fibonacci

Head and Shoulders Pattern With Fibonacci

I recently found this great post by morshedul.sazid on Trading View. I wanted to capture this here too for benefits of me and others. This simplifies and quantifies Head and Shoulders Pattern with Fibonacci ratios.

Head and Shoulders Pattern With Fibonacci
Head and Shoulders Pattern With Fibonacci
  1. First thing is to identify the Butterfly pattern: The first profit objective will be at 78.6 retracement of AD of the sell from butterfly
    B. 2nd sell will trigger at 50% retracement and the profit taking objective will be the touch of the neckline or break of it.
    C. 3rd sell can be triggered from the break of the neckline and the profit objective will be 1.272 of AD.
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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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EURAUD Gartley Pattern Butterfly Pattern ABCD Pattern 200SMA Short Forex Trading Idea

EURAUD Gartley Pattern Butterfly Pattern ABCD Pattern 200SMA Short Forex Trading Idea

Snapshot:

EURAUD Gartley Pattern Butterfly Pattern ABCD Pattern 200SMA Short Forex Trading Idea
EURAUD Gartley Pattern Butterfly Pattern ABCD Pattern 200SMA Short Forex Trading Idea

View it on TradingView

Reasons For Trade:

  1. Gartley Pattern completion in PRZ zone
  2. Butterfly Pattern Completion in zone
  3. ABCD Pattern completion
  4. Fibonacci confluence of 78.6 retracement and 127.2 extension of last retaracement
  5. 200sma in the zone
  6. Strong supply Area

Stop Placement:

Above supply zone

Targets:

as shown, there are 3 targets

  1. Structure based
  2. 38.2 Fib retracement from advanced pattern
  3. 61.8 FIB retracement from advanced pattern.

Trade Execution:

Wait for confirmation

  1. Take targets as you go along
  2. Tail stops on 3rd target as EUR can take a bearish rotation again to give large profits.

Concerns:

None

Planned News/Events Expected:

Week is packed with news

MonOct 26 5:00am EUR German Ifo Business Climate
TueOct 27 5:00am EUR M3 Money Supply y/y
8:30pm AUD CPI q/q
AUD Trimmed Mean CPI q/q
WedOct 28 8:30pm AUD Import Prices q/q
ThuOct 29 All Day EUR German Prelim CPI m/m
4:00am EUR Spanish Flash CPI y/y
4:55am EUR German Unemployment Change
8:30pm AUD PPI q/q
FriOct 30 3:00am EUR German Retail Sales m/m
4:00am EUR Spanish Flash GDP q/q
6:00am EUR CPI Flash Estimate y/y
EUR Core CPI Flash Estimate y/y
EUR Unemployment Rate

 

Post Execution Review:

Pending

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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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Holy Grail of Financial Trading

Holy Grail of Financial Trading

Holy Grail of Financial Trading
Holy Grail of Financial Trading

Lets face it, this is a hard fact to swallow that 95% of traders fail. Only 5% of traders make money consistently. Unless a traders is making money consistently he/she is still in 95% of unsuccessful traders. One of the main reasons why traders fail is because they are always searching for a Holy Grail system. A strategy which will some how make them rich and famous. They hop on to strategies one after another. As soon as one strategy stops working, they are on the look out for another one. So what is is Holy Grail of Financial Trading and where is it?

Van K. Tharp’s Trade Your Way to Financial Freedom
book gives a complete account of Trading Holy Grail and where it can be found! He was able to unravel this mystery once and for all.

A trader’s Holy Grail is within himself. It is not some system or strategy. There are thousands of strategies used by successful traders. They do not use the same one. So what makes them successful? It is they themselves. So question is how to find this Holy Grail of Financial Trading? Well, here are some clues:)

  1. Trader’s Psychology is the biggest part in Trader’s success. It is not strategy or system. It is the person inside the trader. A trader should be disciplined to follow strategy day in and day out. There is no strategy which gives 100% results and there will be losses/draw downs on the way. That is when trader’s psychological strength is tested. If the trader understands that losses are part of the business  and treat them as cost of running business like any business, he/she will excel. Small acceptable predefined losses must always be welcomed. They are better than losing capital and accumulating losses. A small loss in a trade tells the trader that it is time to get out. Fail Fast and Move On to Next Thing. Trader must run trading as business. It may be small to start with like any other startup.
  2. Trader must remain calm, objective and indifferent to successes or failures of trades. It is the process which is more important than outcome. A process with positive expectancy repeated over time automatically produces good outcomes. But trader must follow the process objectively. An example will be a machine which has certain fixed input and certain output.  A machine stays objective and keeps on processing. If there is a positive expectancy in the machine processing to produce output, it will generate output. But machine must conduct processing else there is no output.
  3. There is no such word as BIAS in trading world. If trader is biased towards something in a market, the analysis will be biased too. This goes against the objectivity of the process (point 2 above). Biases hurt objective processing and can be deadly. (Read more about biases.)
  4. There is no EGO in markets. Markets represent collective decisions taken by millions of buyers and sellers at a given time. A trader can not fight that. Market runs and can not be controlled by a single trader. There is no point in fighting it. However you can stay with it. A trader must learn to read what market is saying and act upon it.
  5. Have a tested rule based trading plan. Traders mistake trading with trading strategies. Strategies are just one part of trading plan. Strategies tell a trader how to enter and exit positions but plan contains rules which have been developed based on experience while using those strategies. It contains a whole lot more than just strategies. A trader’s trading plan is what a Business Plan is for a business. It must contain all aspects of trading business. For example: Money Management, Risk Management, Position Sizing, Trading Rules, Market Portfolio, Contingency Plans, Equity Withdrawal Plan and lot more.
  6. Traders must have Money Management and Risk Management in their trading plans. They are key to success and grow the business. Traders are often confused between Money Management and Risk Management. Risk Management is about how to protect the capital. Like any other business trading can not survive without cash in the bank. Protecting capital is number one priority. Money Management is all about how to make use of capital in most effective way without increasing risk of losing capital.

Here are some DON’Ts to help along the path to finding Holy Grail of Financial Trading:

  1. Never accumulate losses. Never add to losing positions for averaging.
  2. Never risk more than predefined limits on a single trade. Limits must be well defined and tested.
  3. Never trade without a protective stops.
  4. Never exit a position without a good reason. If there are reasons to enter a position, there must be reasons to exit too.
  5. Never fight the market. Once a position is in the market there is nothing a trader can do about it other than early exiting which will stop the Process which we talked about in point 2 above.
  6. Never enter a position without your own analysis. A trading plan is trader’s personalised business plan. Follow that. If a trade fulfils all rules of trading plan, enter the trade else must not.

Good luck with trading. I welcome your comments and suggestions.

-TradeYodha

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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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USDCAD Bat Pattern Butterfly Pattern Fibonacci Retracement Confluence Flat Candle Long Forex Trading Position

USDCAD Bat Pattern Butterfly Pattern Fibonacci Retracement Confluence Flat Candle Long Forex Trading Position

Snapshot:

USDCAD Bat Pattern Butterfly Pattern Fibonacci Retracement Confluence Flat Candle Long Forex Trading Position
USDCAD Bat Pattern Butterfly Pattern Fibonacci Retracement Confluence Flat Candle Long Forex Trading Position

Reasons For Trade:

  1. Fibonacci confluence of 78.6 of overall impulse leg, 61.8 of another impulse leg, 161.8 fib extension of recent retracement.
  2. Flat candle in zone suggesting new orders started from there which has fibonacci confluence with 88.6 Fibonacci retracement level and Fibonacci extension of recent retracement. This makes an area very string due to bat pattern formation.
  3. Level on Level demand area. So we will have to combine.
  4. This impulse leg has string ERC candles which broke previous structure.
  5. Due to 161.8 extension of recent retracement this zone also has completion of Butterfly Pattern too which coincides with flat candle and bat pattern completion on the same point.

Stop Placement:

Below flat candle

Targets:

First: 38.2 fibonacci retracement
Second: 61.8 fibonacci retracement

Trade Execution:

  1. Wait for confirmation in the zone.
  2. As there are 2 fibonacci confluence levels creating level on level demand zone take multiple positions using zoning technique.

Concerns:

None

Planned News/Events Expected:

Whole next week is packed with USD CAD  news

MonOct 26 10:00am USD New Home Sales 468K 546K 529K
TueOct 27 8:30am USD Core Durable Goods Orders m/m -0.4% 0.0% -0.2%
USD Durable Goods Orders m/m -1.2% -1.1% -2.3%
10:00am USD CB Consumer Confidence 97.6 102.5 102.6
11:20am CAD Gov Council Member Lane Speaks
WedOct 28 8:30am USD Goods Trade Balance -58.6B -64.9B -67.2B
10:30am USD Crude Oil Inventories 3.4M 3.7M 8.0M
2:00pm USD FOMC Statement
USD Federal Funds Rate <0.25% <0.25% <0.25%
ThuOct 29 8:30am CAD RMPI m/m 3.0% 1.2% -6.8%
USD Advance GDP q/q 1.5% 1.6% 3.9%
USD Unemployment Claims 260K 264K 259K
USD Advance GDP Price Index q/q 1.2% 1.5% 2.1%
9:10am USD FOMC Member Lockhart Speaks
10:00am USD Pending Home Sales m/m -2.3% 1.1% -1.4%
FriOct 30  8:30am CAD GDP m/m 0.1% 0.3%
USD Employment Cost Index q/q 0.6% 0.2%
USD Core PCE Price Index m/m 0.2% 0.1%
USD Personal Spending m/m 0.2% 0.4%
9:45am USD Chicago PMI 49.5 48.7
10:00am USD FOMC Member Williams Speaks
USD Revised UoM Consumer Sentiment 92.6 92.1

 

Post Execution Review:

Pending

View it on TradingView

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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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GBPAUD Bat Pattern Psychological Number Long Trade

Trade: GBPAUD Bat Pattern Psychological Number Long Trade

Snapshot:

GBPAUD Fibonacci Cluster Bat Pattern Psychological Number Long Trade
GBPAUD Fibonacci Cluster Bat Pattern Psychological Number Long Trade

Reasons For Trade:

  1. Bat Pattern
  2. Psychological Number 2.0800
  3. This zone has been a strong demand zone in past

Stop Placement:

  1. Below Bat pattern’s X point

Targets:

  1. 38.2 Fib Retracement back up
  2. 61.8 Fib Retracement back up

Trade Execution:

  1. Wait for confirmation because the stop loss level is too wide and there have been few spikes in the zone previously.

Concerns:

  1. Price may touch 78.6 fib level of previous impulse leg XA and go back up as there is also fib confluence and ABCD pattern completion

Planned News/Events Expected:

TueOct 27  5:30am GBP Prelim GDP q/q
8:30pm AUD CPI q/q
AUD Trimmed Mean CPI q/q
WedOct 28 8:30pm AUD Import Prices q/q
ThuOct 29 5:30am GBP Net Lending to Individuals m/m
8:30pm AUD PPI q/q

Post Execution Review:

Pending

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Leave a comment: I would love to hear your thoughts, suggestions on this topic. Please leave a comment.
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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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NZDUSD Fibonacci Confluence, ABCD Pattern, Demand Area Long Trading Idea

Trade: NZDUSD Fibonacci Confluence, ABCD Pattern, Demand Area Long Trading Idea

Snapshot:

NZDUSD Fibonacci Confluence ABCD Pattern Demand Area Long Trading Idea
NZDUSD Fibonacci Confluence ABCD Pattern Demand Area Long Trading Idea

Reasons For Trade:

  1. Fibonacci Confluence of 38.2 of previous impulse leg, 0.886 of recent impulse leg, 1,272 fix extension of recent retracement.
  2. ABCD Pattern forming
  3. Good Demand Area as price shot up from this zone in multiple ERC candles.
  4. 200sma reaching the zone
  5. Price is reaching over sold territory
  6. Psychological round number 0.6600 in zone

Stop Placement:

Below Psychological round number 0.6600

Targets:

  1. First target at opposite Supply location where 50sma was crossed by 10sma.

Trade Execution:

  1. Partition entries. First entry using limit orders and second to wait for confirmation in the zone to have better R/R ratio. This is because the price may come deeper in the zone to touch round number 0.6600

Concerns:

None

Planned News/Events Expected:

MonOct 26  10:00am USD New Home Sales 546K 552K
5:45pm NZD Trade Balance -822M -1035M

Post Execution Review:

Pending

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Leave a comment: I would love to hear your thoughts, suggestions on this topic. Please leave a comment.
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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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What Really Drives The Market? How News Affect The Market?

What Really Drives The Market? How News Affect The Market?

There is always a struggle between fundamentalists and technical analysts about the relevance of news on markets. News event tend to impact markets but what drives them and how they affect trading?

I stumbled upon a great video by Jason Stapleton which gives insights into this topic.

-TradeYodha

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Leave a comment: I would love to hear your thoughts, suggestions on this topic. Please leave a comment.
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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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How To Minimize Trading Risks With Stop Losses – Part 1

How To Minimize Trading Risks With Stop Losses

Like any other financial instrument, trading is also game of managing risks. When we put our money into a process to gain profits, there are risks associated with it. Managing this risks the biggest part of trading.

Risk Taking

I trading, traders use stop loss levels to limit their risk exposure in a particular position. However at time we have opportunities which demand extra bit of risk for a major gain. Depending on what is their in our individual trading plans, we usually have few options:

  1. Pass that trading opportunity
  2. Manage risk by either taking an entry at a better level in our favour or placing optimal stop loss levels.

However in certain cases optimal stop losses can not be determined. This series of posts on How To Minimize Trading Risks With Stop Losses is about how to manage risks in these conditions.

Method 1: (Limit Trade Risk By Reducing Position Size)

Lets say I trade with one contract and you have set risk appetite of 50 pips in my trading plan. The trading opportunity that I have demands for 60 pips. I can reduce my position size from 1 lot to a lower contract size to reduce my exposure in that trade.

However this method has one disadvantage. If lets say I was supposed to gain 120 pips in the trade and my trade was successful, I will not profit as much as I could. The over all dollar (cash) profit will be smaller because of reduced position size.

Method 2: (Take a Better Trading Entry in Our Favour To Reduce Risk)

Lets say I want to short a currency pair. It is demanding 60 pips of risk instead of my usual 50 pips risk appetite because I trade with 1 lot. I do not want to follow the method 1 above as it does not give me good dollar profit in my bank.

In such cases, I can wait for the market to come into the zone and wait for a confirmation. Because the price is already there in my risk zone against me, I can take a better entry reducing my overall risk. My stop loss level will still be there where I planned but because I entered the trade late, I will have lower risk.

Wait For Confirmation To Get A Better Entry Price And Reduce Risk Exposure
Wait For Confirmation To Get A Better Entry Price And Reduce Risk Exposure

This method also comes with its disadvantages. The price may just touch the zone and start moving immediately. So I may never get a chance to be in the trade as I planned. It may also never come deep enough into the zone to give me better risk profile that I was looking for.

Method 3: (Adding to Trade Position To Average Down Overall Risk)

Traders also call it Zoning or Average Down/Up or Adding to Position.

This method works with Method 1 and Method 2 above. Initially I will reduce my position size to ensure that I have lower risk profile on the trade but have a guaranteed entry.

Once I have trade running and if it comes deeper in to my zone against me, I will wait for a confirmation and take another trade to average down my overall position. This averages down my overall risk exposure because I took second part of trade at a better price level.

Average Down Your Risks With Multiple Trade Positions Inside The Zone
Average Down Your Risks With Multiple Trade Positions Inside The Zone

This method is only effective if your average of multiple positions is actually reducing risks/reward ratio. So it is essential to set entry levels and position sizes in advance.

Of course as it has few characteristics of Method 2, it comes with disadvantages of Method 2 too. However it comes with advantage of being in the trade of Method 1.

Method 4: (Tail Stops To Actively Reduce Risk)

This method is a very common method and is used by a lot of traders to protect their profits as well as their overall risks. We can use it in conjunction with any methods mentioned above.

I can take an initial position in a trade depending what method I used for my entry. I also have an initial stop loss level set. Once I am in the position, and the price action has started moving in my favour, I start moving my stop loss level too. Moving stop loss level is usually done in certain conditions only. (Moving stop loss levels when trade is going against us, is strongly discouraged as it increases your risk exposure.)

These conditions are:

  1. If the price action has reached our predefined target I can take part of my profits and move stop loss level to a break even position. This allows to me have no loss (break even) if the trade reverses and goes against me.
  2. If the price action goes in my favour and creates a new zone where I can safely my put my new stop level. For example, in a short position if my initial stop loss level above previous swing’/structure high, I can move it a new swing high/structure if price action has created that for me. This allows me to have much safer risk exposure.
Move Stop Loss Level To Reduce Risk Exposure In Trading Position
Move Stop Loss Level To Reduce Risk Exposure In Trading Position

More to come on this series of managing trading risks. Please feel free to leave me a comment or your ideas. I would love to hear from your experiences and techniques.

Have a great trading time.

-Trade Yodha

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Leave a comment: I would love to hear your thoughts, suggestions on this topic. Please leave a comment.
---------------------------------------------------------------------------------
Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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