It’s the vacation season and I am taking some time off from the blog - just a few days or so.  Next week I should be back with more updates.

Hope you’re finding some time to relax as well.

Here’s the 15 minute chart and a baseLine. This is going to be our profit target.

And
here’s the EntryLine.  If the pair closes above this line, on this 5
minute chart, I am going to buy the pair, with a stop loss 15 pips
below the lowest low it has made so far, and use the BaseLine as the
profit target.

I did a webinar this evening about support and resistance — and there were some technical difficulties.  For those of you who have come here to check out the trade ideas, I’ll be posting plenty of them here for you soon.  I’m off to bed for now but you can check back here tomorrow and we’ll see what we can drum up!

Not many of you can even see this pair on your trading platform; I am getting ready for a possible trip to Signapore to do a seminar, and I’d like to update this pair more often to get myself ready, and to put the pair in your mind as a possible pair for trading (if your broker offers it, of course).

Here is the 4 hour chart, showing a nice baseLine:

And here is the 1 hour chart.  If the pair can close below this blue EntryLine, then I would be willing to sell the pair, with a target of the BaseLine.

Ravi asks a brilliant question:

Hope you are
well.  I was looking at your recorded FX Street webinar on Longer-term
Support and Resistance: Setup and Rules (11 Jul 08).

 

With regard to your
2-Trendy system, can you tell me why you tend to trade counter-trend?  Is
it because when the trade works out you tend to get big movements which occur
quickly, as the trend traders panic and execute their stops thus causing a rush
of selling or buying?  And by definition, does counter trend trading mean
that your win / loss ratio is lower but that this is offset by higher risk /
reward ratios? Thanks for sharing
generally, and I appreciate the education.

Ravi, you are absolutely right that when a trade works out the moves can move very quickly.  Yes, that is one reason that I very much enjoy counter-trend trading.  I enjoy being on the opposite side of the crowd when people’s emotions start to get the best of them and they start thinking that a trend can never fail. 

My win/loss ratio is not lower.  There is no relation between trend trading and win/loss ratio.  There probably is a better correlation between stop loss placement and win/loss ratio - people with wider stops tend to have more winning trades (and also bigger sized losses).  People with tighter stops tend to have fewer winning trades but smaller losses.

Also, people with smaller profit targets have more wins but smaller wins.  And wider profit targets?  If you go that route, you will win less often and have bigger winners. 

In all my experience, there is more correlation between stop loss placement and win/loss ratio than anything else.

Usually, I only post trade ideas in this blog, but I wanted to mention that today, in the live session at FXstreet, a trader asked me what he could do as a beginner to help him.

I was asked the same question in San Antonio over the weekend, from a new trader.  So I thought I’d just list a few things:

1.  Test before you trade. Learn how to backtest, either manually or mechanically. 

You can get a program like Metatrader (free demo) and actually  program into the system different criteria, and then the program will  go back in time and see how your system performs.  This is traditional  backtesting.

Superior backtesting is when you actually develop a system, and then manually go back over the charts and look at 500-1,000 examples of the trades you are studying and actually plan out the trades as if  they were happening in the present time, moving the chart forward one candle at a time.  Then you take trades in the present time, whether demo or live, and you test how you do over a 2-4 week period of time. That is really more accurate.  A program like Forex Tester can make this easier.

2.  Buy Marilyn McDonald’s book Forex Simplified.

This is the best book for getting started in Forex.

3.  Never risk more than 1% on any trade, even after you have done all of your testing.  Never do anything to lose any significant amount of money trading.  If you can survive (keep your money) you can eventually learn to trade for a living.

The AUD/USD is breaking above a short term trendline, and I think it’s a reasonable by trade right now.

Here is the chart:

The pair has been in a severe downtrend for a few days and could really use a nice correction, at least temporarily.

Our AUD/NZD trade is now closed.  If you took this trade, you made over 100 pips.  My calculations show that it should be closer to 120 pips, but your final result will depend on where you entered.

The pair has hit the green BaseLine and that’s our call to exit.

Here’s a new BaseLine for the NZD/USD 4 hour chart:

Now
let’s go down to the 1 hour chart and see what we can drum up in the
way of an EntryLine, and then we’ll talk about taking the trade.

I
know that the entryLine is not connected to the green BaseLine.  That
somtimes happens.  If you want to draw the EntryLine a bit steeper, or
in a different place, that’s totally cool.

If the pair can close above the blue EntryLine, I am going to buy
the pair and target the green BaseLine.  The NZD/USD can be a tricky
pair to trade, with huge spikes every now and then, so please remember
to never risk very much on any single trade.

The EUR/USD fell outside the channel and hit the first Winnipeg level.

Here is the original trade idea.

Here is the current chart:

The trade opened at 1.5777 when it closed below the bottom of the channel.

The trade closed at 1.5586 when the pair hit the first dashed red Winnipeg line (an extension outside the channel).