Fibonacci Can Do A 360 On You…Watch Out

Hello and welcome to another edition of the bulls vs the bears.  Last time we kicked off  our series on the Fibonacci tool with an intro on Doing the Fibonacci. We basically learnt  that the Fibonacci tool was useful for placing trades at support and resistance levels. We event learnt how to to enter a trade using Fibonacci retracements.

However we are going to learn a very painful truth about the Fibonacci indicator. While it’s fun doing the Fibonacci, the Fibonacci indicator  can do a wicked 360 on. you.  In as much as it is able to predict whether support/resistance levels are going to break, they don’t always break. Some  of you are scratching your head saying”Wait a minute. I though you said Fibonacci could predict the future.” Well sure. But it’s not exactly bullet proof either.

Let’s look at a few examples starting with  a 4 hr chart of GBP/USD.

Resistance at the 50.0% Fibonacci retracement seems to be holding

Here the bears have been running things. So you seek the help of the Fibonacci indicator to get you a solid entry point. You pair a Swing  Swing High at 1.5383, with a swing low at 1.4799. As you can see the currency pair has been holding it down at the 50% level. And you’re like” Time to go short on this deal.”

Well News flash! If you so much as try to put in an order at this level you’ll do serious damage to your account.  The next graphic will explain why.

Fibonacci retracement levels failed to hold and price broke through for new highs

What didn’t realize wat that the Swing  Low had mounted a comeback. It managed to rally above the Swing High point.

What’s the moral of the story here?Yes Fibonacci retracement levels create a high probability of success. But they don’t always work. In such a situation you may not know if price will do  a U-Turn to the 38.2 level and restart the trend.

Then again price may hit the 50% or 61.8% levels before doing the turnaround.  Better yet, price may just override the Fibonacci and bulldoze its way past all the key levels like a freight train. You  need to understand that the bulls do not always resume their uptrend after discovering temporary support or resistance but instead zoom past the Swing Low.

Also you need to determine which Swing Low  you want to use. The Swing Lows are not  etched in stone, especially when the trend is very foggy. Not everybody sees charts the same way. Two people may have their biases concerning time frames and technical analysis. How do we clear that fog? By combining the fibonacci with other tools in your forex tool box such as moving averages. This should help give you a higher probability of success. For more information on moving averages look up  We Are Moving Averages Part I and II. 

 

That’s a wrap for ”Fibonacci Can Do A 360 On You…Watch Out  ”. Next time we’ll try and  solve   the support/resistance  quagmire by using the Fibonacci indicator in combination with other forms of support and resistance levels.

Till next time take care.

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Trading Less Will Bring You More Profits

Hello and welcome to another edition of the bulls vs the bears. This week I want to throw another suggestion you:Trading less will bring you more profits. Some of you are looking at me like”This guy has lost his marbles.” News Flash! All my marbles are intact. Listen, it makes  absolutely no sense trading 40 times a month. You run the risk of slipping into an emotional roller coaster-not to mention blowing your account into smithereens. What am I trying to stay?  Less is more. If you show your face too many times on the charts, you’ll get breadcrumbs in return.

However, if you show up every once in a while, you will surely reap in huge dividends. Of course your trading edge has to be in full effect on the market for you to reap those dividends So what’re we going to do? We are going to take a look at three trade setups you could use starting this month. If you’re not sure which trade setups to look up, try these suggestions. You should see major improvements in your trading fortunes.

So first up:

Pin Bar Sell Signal Image result for pin bar sell signal at resistance level Now take a look at this juicy pin bar. sell signal along the trendline athe level of resistance. Now  this took a few weeks for this sell signal to materialize. It takes patience to to trade like this. And you need patience to make money as a trader. The last thing you want to do is to jump in and out of trades as if your pants are on fire.  When you do that you lose a lot of money.

And  your emotions end up scattered all over the laptop screen.Even worse, you lose your beauty sleep. you don’t want that. Do you? Just put in your sell bid below the the bearish pin bar as indicated by the red arrow. For more information on trading look up  Pin Bar Strategy –  How to Trade it

Bullish Tailed Reversal Bar Image result for bullish tailed reversal bar after pull back Now as you can see this is a bullish tailed reversal bar, popularly known as the engulfed candle. As you can see this formation occurred following a brief pullback. And if you’ve noticed,  the bulls have set up a nice looking trend. This should set you up for a hefty profit. To put in your trade entry just place it above the high end if the bullish candle as indicated by the red arrow. You don’t need to make an appearance on the market every day. So long as you  concentrate on high probability setups  such the one above, prosperity will be your portion forever.

In fact,you should be able to win more than half of your trades assuming you know what you’re doing. Jut make sure you don’t risk too much and stray from your trading plan. For more information on using candlestick patterns to identify potential market moves look up How To Read Candlestick Patterns to Identify Potential Market Moves

Finally

Inside Bar Breakout

Image result for Inside Bar Breakout  - higher low and higher high

Now here  is the Inside bar breakout nicely illustrated here using the GBP/USD pair.  The higher high is the the tall candle known as the mother candle  and the lower high(right in front of the higher high) known as the baby candle. Luckily for you  price breaks through resistance without  any resistance.So this should make for a cool bumper harvest. Sometimes it makes sense to head for the exits with your cash ahead of the appearance of the resistance level. In other words it’s better safe than sorry.

But you don’t to do that too often if there is an opportunity to make more money off the trade. If you miss out on that opportunity it will mean you having to compensate by winning more trades just to make money. For more information on how to trade inside the inside bar pattern Look up Trading The Inside Bar

That’s a wrap for ”Trading Less Will Bring You More Profits.”  I’m only going  to say this.  Start using just these three trades every month and your life will never be the same. Even more important, your trading results will improve, and your you will have developed a completely different trading mindset.You will no longer experience the urge to stress yourself out with 60 trades a month.  Who does that? Give your screen a break. Go to the beach if you have to. Til next time take care.

 

 

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Allow The Forex Market to Hit Your Targets

Hello and Welcome to another edition of the bulls vs the bears. Today I have an important nugget of trading wisdom. And it is “Allow The Forex Market Hit Your Targets.” Now I can hear somebody saying”What do you mean by that?” Well all I am saying is allow the market to hit your stop loss or your profit target without you compulsively closing the trade yourself.  Don’t exit your trades too soon before price hits your stop loss or take profit targets.

When you do that you hurt your chances of making huge profits. You are basically settling for breadcrumbs. And you end up racking up huge losses by taking up small losses So to get started I’m going to show you a little illustration. Then I’ll show you some examples of allowing the market to hit your targets as opposed to compulsive closing your trades. I will also show you an illustration when it actually makes sense to head for the exits.

I guess the question of the day is:

Why Should I Not Compulsively Close My Trade?

Because if you compulsively  close a trade that is turning against you, you end up taking a loss.You see forex trading is about making profits to offset your losing trades. Sure you are going to have losing trades.But you have don’t have to close them by force all the time. All these small losses eventually add up, and they may end up wiping out your  trading account. Now we don’t want that.Do we?

Now let’s look at a little example: Say you enter a trade on your demo account, and it goes sideways for a week. The following week it heads downwards, almost stopping you out for a loss. At this point you are staring at a huge loss. The following week, the trade makes a dramatic U-turn to shoot upwards like a space shuttle and hits your profit target. You ‘re so excited you end up screaming “BULLS EYE!” You’re probably saying to yourself”Well,what has that got to do with anything?” Well  A LOT.

You see with a demo account you are thinking logically by allowing the trade to sort itself out. You feel no reason to interfere with the trade. The last thing you want to  do is to compulsively exit a trade  that could turn out to be a humongous winner. Fortunately you allowed a losing trade to transform into a winning trade because you chose to do nothing. What’s the moral of the story? Let the trade find its level.

You need to give the trade oxygen to breathe. You’re probably saying”But I want to make money NOW!” sorry, but  you can’t control the market by remote control. Just hang tight for a few weeks while the trade tries to find its level. The question is can you stay calm this way on a live account? That’s something you will have to figure out if you want to prosper as a forex trader.

With that out of the way let’s take a look at examples of the forex market hitting your targets versus you compulsively closing your trades. Image result for forex market hit profit target Ladies and gentlemen here is a classic example of how to stay in the trade using the GBP/USD pair.  If you didn’t know already  this is range trading with pivot  points. The bluish circle indicates  S1(Support level) surviving a  major hit by price. By that you’d have put your stop loss just below S1.  That’s because S1 managed to hold back price.

Now a little further up you set your profit at 1.4537. And guess what, your profit target takes a positive hit. See what a little patience does for your soul?  you waited for the market to take you out of  your trade, and you ran all the way to the bank laughing and smiling. Had you bailed out of the trade  you would have left a lot of money on the table and ended up with breadcrumbs instead. Here is a price setup  of a counter trend pin bar signal. rewward to risk trading exit strategy Take a close look at the bearish pin bar at  the 48 pip target. Now just because a pin bar goes bearish doesn’t mean you should jump ship immediately. As you can see, the bear immediately changed to a bull, sparking a huge surge. Just because a countertrend appears does not mean you immediately jump ship. Just use key levels as indicators of whether to decide whether to make your exit. So what’s the moral of the story? Don’t play Russian Roulette with your trades and avoid compulsive exits.

Instead let the forex market hit your targets. If you need help with how to take profits and stop losses look up  A Few Rules on Taking Profits and How to Place Stop Losses the Right Way. I can hear somebody asking…..

Are there Exceptions to This Rule?

Sure there are exceptions to this rule. In fact there comes a time in a man/woman’s life when you do have to exit your trade for dear life hen the tide turns against you. However the following conditions have to exist for you to run for dear life

  • Counter Trend – The formation of a reversal trend should be your queue to head for the border- FAST!
  • Pay the attention to the data on the price chart. It tells its own story… How did you close on resistance/support level? Or  moving average.These are important clues to consider when planning your exit
  • When the price signal you entered is not on the same page with the market as the market does a 360 closes  above or below the price pattern.

Now let’s look at an illustration of a trade where it really makes sense to run for dear life An_Easy_Way_to_Exit_Trades_body_Picture_4.png, An Easy Way to Exit Trades

Ladies and gentlemen  I present you a high probability  trade setup using an upward channel using  the NZD/USD pair. As you can see Take Profit has been set at 300 pips at .8140 mark. whereas a stop loss has ben set at 150 pips at ,7990 mark. The key here is setting these values prior to making these entries on the market. In deciding where you are going to place your trades, you have no doubt in your mind what to do once price hits these targets. RUN FOR DEAR LIFE

This concept is fairly straight forward.Why?Because you decide on these values prior to entering the trade. Once  you decide where you in advance where you are going to place these values ,you should be in no doubt as to what to do when  price massages  your targets.

That’s a wrap for ”Allow The Forex Market to Hit Your Targets.” As you can see, it’s possible to prosper as a forex trader by doing ABSOLUTELY NOTHING! By that I mean cutting down on playing Russian Roulette with your trades and compulsively exiting from potentially profitable trades.When you cut down on these two negative habits, you give your account a massive chance to grow.

That’s not to say you’ll never experience losses. Because the losses will come. All I’m saying is STOP TAKING THOSE COMPULSIVE LOSSES FOR NO REASON!They will slowly kill your trading account softly. And before you know it, you will have nothing left to trade with.  

There are three key components you need to have in your trading makeup.They are: accurate stop loss placement, accurate reading of price data on the charts and keeping a check on those    raw emotions. Those raw emotions,in particular, could cause you crash horribly,if you don’t put a leash on them. Some of you may be asking” How do I avoid compulsive losing?” First cut down on your risk per trade so that your emotions are not torn to shreds  when the price takes a swipe at your  stop  loss position. If it means learning stop loss placement,  and how to trade with price action by all means do that. But whatever,you do, stop taking compulsive losses just because you’re scared price is moving against your position or the market skewed sideways.

Til next time take care.

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Set Your Trade Forget About It And Get On With Life

Hello and welcome to another edition of the bulls versus the bears. If you want to keep your sanity as a forex trader, I have a simple piece of advice for you. Set your trade, forget about it and get on with life.  This is my own spin on a popular strategy simply called “Set and Forget.” Basically what you’re doing is you make your trade, go chill for a bit and let the market handle the rest for you

Set and Forget  has two humongous benefits. First, it helps you keep your emotions in check. You trade based on your trading plan and not like a casino gambler. Second,  it allows you to live a normal life. Instead of staring at  your PC screen all day over-analyzing the markets, to perfect your trading system, you can leave the house and   hang out at the beach while your trade makes you money. So that by the time you get back, your profits would be nicely tucked away in your trading account.

Now how do you set your trade and forget about it?

Make More By Trading Less

That’s right. To make more money you need to trade less.  There is one cold fact you need to accept. The forex market has a mind of its own. It pretty much does as it pleases. So if you think you can control the market then you’ve got something else coming. The forex market  doesn’t care whether you’re Bill Gates or Steve Jobs. If you try to use one of those called magic bullet trading systems to try to  swing the forex market  in your favor, you could end up blowing a huge hole in your trading account. Your job is to stick to your trading plan and see if your trading edge exits on the forex market. If your trading edge is present ,you set your trade  and walk away.If your trading edge is not present, you still walk away. Why?Because there will always be opportunities to trade. The forex market is never static. It’s always generating new trading setups.

So What’s The Logic Behind Set and Forget?

Do not go beyond executing your trading edge unless it’s absolutely necessary. Failure to do so could set you on an emotional roller coaster and do crazy things such as overtrading, bloating your position size, Stretching your stop loss further from your entry trade,or moving your profit target further upstream for no reason. These bad habits will almost certainly blow a nuclear hole in your trading  account. Why? Because you are gambling instead of trading. And you are trying to control the forex market-an absolute no no.

Let me show you a few illustrations about how not to get too caught up with trades.

Image result for Forex market retraces to near entry point

First we see a retracement  on the uptrend with the EUR/PY pair. Now most inexperienced traders would have exited the trade for just a small profit or near breakeven out of fear of losing their money. Instead of making a panicky exit, how about giving  your trading plan time to work?. exiting out of fear will cause you to leave huge profits on the table. That’s why you set your trade and let the market work for you.

Let’s look at another example

Image result for pin bar sell signal

This is a classic illustration of a pin bar sell signal  using the AUD/USD signal/ However, the market stalls as it get to the low of the sell signal and falls back in line with the bearish trend. Now if you can hold your nerve and not interfere with your trade,  you could go short and make a nice profit.  In so doing you take your profit and run based on logical trading, and not on greed and raw emotions.

That’s a wrap for ”Set Your Trade Forget About It And Get On With Life” Using Set and Forget creates positive vibes for  your prosperity as a forex trader. Instead of spending the rest of your natural life analyzing market data, Set your trade, leave the house and let the market do the work for you. That’s assuming your trading edge is present on the market.

If you spend too much time hunting for trades in front of your screen, you suffer the following headaches. First you resort to emotional trading which cause you to incur numerous losses. This of course causes you lost money and valuable time which is better spent smelling the roses. Letting the market do the work for you gives you valuable peace of mind that can’t be quantified. It’s almost like taking a nap while the market rakes in the cash for you. Not to mention the fact that it improves your risk management without you spending another cent. With proper risk management you  can keep all your brain cells one piece.

Til next time take care.

 

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