Harmonic setups

This bullish EURCAD setup is invalidated by the price action. But now we have two awesome setups waiting. I am all over them waiting for completion of EURCAD bearsih bat on H1 and NZDUSD bullish butterfly on H4! Perfect ratios! Good resistance on EURCAD, NZDUSD has some support in area and price has slowed down, BUT, I will trade it on a reversal bar with a small stop loss. I am prepared to enter more than once if needed. Tomorrow is NFP and due to ADP results expected to be weaker, might propell NZDUSD up in no time!



While EURCAD might complete only after the NFP tomorrow, NZDUSD IS COMPLETED, now I need just to enter on a reversal bar. Since there are no news prior to NFP, I don't expect any mad price action, so I can wait for a reversal bar without a big risk of run away, i.e. that the bar will be so big it renders trade too risky.

If we don;t have anything tonight I will see if I enter it right after the NFP even if it is running away, setup is just awesome. Makes to sense to enter prior to NFP as stops will be tight and spread jump and some volatility can easily hit the stop even if trade will move our way.

UK Construction PMI trade

Today we had a possibility to have a very easy profit on UK Construction PMI. The problem was this trade did not perform well for over a year and lately PMI releases were performing badly, after the second round of BoE easing. However, it looks like it is getting some attention again and moving into focus. So today price moved over 30 pips on 1.8 deviation, in a very stead and easy fashion. Trade and forget, let the trail stop do the job. Not a miss, as it was impossible to know, but certainly a hunch for the next month!



As I mentioned, I became lazy lately and it was showing on my trading as well, so a part of my rebirth programme I am filling a trade journal again!

21SMA pullback strategy

Looks like my power level strategy is sort of "seasonal" one, when it works exceptionally well during some market regime and doesn't work at all (at least with tight stops I am using) during others, rangy markets when same levels get tested day after day. Basically it makes no sense to keep bleeding pips when market is not acting properly for this type of trading. So I will wait with it until we get some nice definitive turnarounds at power levels.

In the meantime, I will try with very small lots the following strategy, partially borrowed from Lance Beggs:
- using 1-pip range bars on EU, AU, UJ
- using 21-SMA based on range bar close
- entry just like for my power level trading: peding stop order 1 pip away with 2-pip stop, placed by a script when price pulls back to 21-SMA and hesitates to move further
- target 8-13 pips
- use 5-pip trail stop 
- break even at 2 pips profit



Basically we simply trade pull backs to 21 SMA while market is trending. I will trade this with 1 mini lot for few days before going for 1 full lot. If market will start respecting power levels again, I will trade both methods.

After a good start I have 3 losses in a row, all on the same call level. Lesson learned - after a failed trade, don't trade than level until you see some precise turning points on it again.Besides that this is a call level, best trades are on put levels (red). In any case that third attempt was totally unjustified. I am back where I have started on Friday given back all my winnings. I will disregard that level for today, and will watch 1.3000 and 1.3039 instead.



I would much prefer a trade at 1.3000 as this levels causes massive order flow and one-directional moves that are what we are after. In a hindsight my trade at 1.3000 cut at +6 was good for over 20 pips profit if held. I won't close too early if I get to BE at my next attempt at 1.3000. BTW, my TP is now set at 13 pips and my trail stop is 5 pips away.


Grrr.. Did another trade and got kicked out by the break even order. And then trade went into my way full 13 pips to get to my TP but it wasn't there since I was out. I have seen it times already. So hence the decision: I risk only 2 pips now plus commissions, while my target is 13 pips so by kicking out I win 2.7 pips of not lost risk and commissions but lose possible 13 pips profits. So I did the following: no more break even order, risk is only 2 pips, and I have a trail stop order 5 pips FROM THE LOSS, it means it will get activated at 3 pips gain but will trail my stop loss 5 pips behind, initially limiting my risk from 2 pips to 0 and then starting to secure some profit. This is how we did during news trading and hopefully the order flow during options strike trading will be strong enough to support the same principle. So far it looks like it.

Monday 16th April

First trade of the day: order flow trade on bounce from 1.3000 NT option barrier (not power level). +6.0 pips less commissions of 0.65, net +5.35 pips.

Order flow trade example

Here is an example of a failed trade, that was stopped out at BE (or would be a loss otherwise). It's pretty hard to do with a market order so probably placing a stop order a pip or pip and a half away is better idea!

New trading rules. Examples.

Here are some examples using USDJPY. Rember we want to move to break even as soon as possible as we don't want to take weak trades, and trades that return to the entry point are weak ones. Set break even to cover the transaction costs and get a candy money - usually 1 pip is enough and move to BE+1 as soon as you are 2-3 pips in profit.

New trading rules

I looked at many ways to trade market short time, including harmonics on M1 and 1 pip range bars, channel trading as per Lance Beggs, and many other, but in my opinion they all lack that risk-reward ratio that I am looking after and probability of success. So here I am back to Order Flow trading. But instead of going for numbers of different setups and possibilities I am selecting only few this time:




POWER LEVELS

A. Reversal points at the Power Levels (adjusted option strikes) - EURUSD, GBPUSD and UDSJPY. First two are the best IMO. Also available on SP500, Gold. SP500 might be a killer but my platform doesn't have it and I don't want to engage in different markets, platforms, etc. What you do here is trading a reversal. Price must touch or pierce briefly a power level and produce a reversal bar. I am trading range bars with all methods described here. I am looking for price to retreat from the level and produce one full 1-pip range bar (without wicks or tails) and enter there. Stop is very tight - 2-3 pips. Good trades will reverse and never look back for some 10-20 pips! Yes most trades will get stop out, but in many cases tight stop will prevent bigger loss but in some will kick you out of a decent trade. But best trades are outs as reversal momentum is high and they can produce even 30-40 pips at glance. With 2 pips stop! I don't mind getting stopped 3-4 times to get one of these. Remember tight stop doesn't mean you go all-in with 100:1 leverage since 2 pips is only 2 per cents! We will get numerous losses in a row, so unless you are on demo or trading a small account you don't mind to put at risk, use something like 0.5% risk or even less. Good trade will give you several whole percentage point gain! And that can be few times a day! Don't trade this on a heaving news day, it works best on a range bound day flat or news scheduled or unscheduled. Remember not to jump in front of a freight train! We don't place limit orders at power level. yes sometime it can give a perfect reversal point with no attended trade but sometimes price will just barge through like a missile. You never know. This is why we want to see a reversal first and go on confirmation. This is very similar to my news flow trading method from the separate thread, but instead of waiting for momentum to pause, produce small reversal and then go again in the initial direction, we look for momentum to stall and start a reversal and enter only then.


Here is an example of Power Level order flow scalps:






Barrier options scalps. 

A. Unlike these options that expire every day and rumoured widely on RanSquawk, Thomson-Reuters and like, barrier or NT options are very serious things. They can be played 2 ways: reversal and barrier break. For reversal you don't look for the price to touch the number, in some cases touching the number means it starts to break. You look for the price to approach some 3-5 pips away from the number and reverse. Look for an entry signal there. Stop is just on the other side of the barrier. These trades are of very high probability I would say much higher than 50%, rather 90%, so feel free to go heavier than in Power Level method. Reversals can be 10-20 pips, sometimes more, look for the signs of stuggle and reversal. Don't wait for a retest. Breaking is similar but even easier - 1 pip away stop order on the other side of the barrier with a stop 2-3 pips away, but look for an initial push only, it maybe 10-15 pips usually, then price will retest the level. But at this point is may go back on the other side as there is nothing stopping it now. This makes for an another good trade method.

B. Barrier option break swings. As described in pt3, after barrier is broken price most likely will retest the level. We enter there, stop must be wider, some 20 pips or a previous swing high/low where barrier defenders pushed it last time before the barrier broke, but look for a big gains here, 100 pips is an easy target. Again this is a highly probably trade, so risking 1-2% is not a crazy idea.

As usual, don't trade something you can't lose, and read appropriate US disclaimers if you have anything to do with USA (I could not care less though about what USA says), but use your own common sense.

I'm back!

I have decided to return to my blog, was more involved with a community of traders work, posting all there but decided to have my stuff also here, so I am back. I will soon review all the changes in my trading I have gone through in last 4 months since I wasn't posting here. But here is one, I started to get involved into harmonic trading, and started to test a harmonic trading EA I have found in internet and perhaps can manage to develop its principles into a sound dependable trading tool for commercial use.