With another week in the books, it’s time for a recap of my trading activity over the last 5 days. As you all know, I recently got into the world of Forex swing trading, and I have decided to log all my trades on the blog in order to share my journey with you all. Last week I posted my third log, which chronicled my third week in the exciting currency-exchange market.
Today I bring you my fourth forex trading log, which covers my trading activity from 11/15/2015 to 11/20/2015. Hope you enjoy it!
|RISK/REWARD||1 : 2.5|
|ENTRY TIME||4:26 AM|
|EXIT TIME||6:37 PM|
The NZD/USD had been in a clear downtrend, and I entered this trade on a bounce from the trend line (drawn in yellow) after a short upward retracement. My target profit was the nearest previous resistance level, which I suspected could act as support now. This target also gave my trade a fantastic 1:2.5 risk/reward ratio, so I entered without hesitation.
As you can see from the chart, the price did indeed tumble down all the way to my target, and then, as I suspected, it forcefully bounced off the resistance-now-turned-support and ended up even breaking upward through the downward trend line. UNFORTUNATELY, my target narrowly got missed by a mere handful of pips (like, seriously just 2 or 3 pips). I honestly didn’t expect the price to bounce upward with such force and speed, and by the time I realized that the downward momentum had fully reversed, the majority of my unrealized profits had been erased.
I can’t express into words just how frustrated I was by the fact that I didn’t reap the full profit potential of this trade. I predicted everything down to a tee, and it was simply a case of extremely shitty luck. Since I am not able to monitor and babysit my trades 24/7 because I have a full-time job, by the time I did take a look at what was happening the price had already shot way up.
I ended up manually exiting the trade once the trend line had been decisively broken at a price very close to my entry price, thus snagging only a tiny small profit (this was a break-even trade for all intents and purposes).
🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁 🙁
|RISK/REWARD||1 : 1.6|
|ENTRY TIME||6:26 AM|
|EXIT TIME||7:41 AM|
The setup for this trade was pretty much exactly the same as the previous one: a bounce from a trend line after a short pullback. If you’ve been reading my previous Forex logs, you’ve probably noticed that a lot of my trades are based on this setup. And that’s no coincidence; that’s actually the core of my trading strategy which revolves around trend-line trading (either bounces from, or breaks of trend lines), and which I plan on outlining in more detail in a future blog post.
Anyway, back to the trade. The price bounced off the trend line, so the next step was to search for a suitable target at a distance that would give my trade at least a 1:1 risk/reward ratio. There weren’t any kind of important previous support/resistance levels nearby, but I noticed a nice, round, “psychological” number that would give my trade a risk/reward ratio of 1:1.6 or so.
So I took the trade, and it didn’t take long for the price to tumble down to my target, at which point I booked a nice profit of $49.
|RISK/REWARD||1 : 1.3|
|ENTRY TIME||7:25 AM|
|EXIT TIME||7:18 AM|
This trade was interesting because it was based both on a trend-line bounce and on a trend-line break. As you’ll notice from the chart, the Aussie dollar had been in very clear downtrend against its green counterpart, but that downtrend was actually a retracement in the scope of a larger uptrend. The price had recently reached the upward trend line and bounced off it, which was a strong clue that the downward retracement trend was about to end.
The break of said downtrend was the confirmation of my hypothesis, and with this confluence of signals both suggesting that the price was indeed going to go up, I entered the trade with full confidence that I was going to make a profit.
I actually entered a bit too late into this trade, as you can see from the chart, but what can I say; I really wanted to wait to see the price break that downward trend line by a decent amount to really maximize the probability that my prediction would be correct.
Now, normally, I would have set my target right below the nearest previous resistance, as that is the safest bet. However, given my late entry into the trade, such a target would have yielded a pretty low risk/reward ratio in the vicinity of 1:0.3, which sucks ballsack. Since the price had just recently bounced off of the upward trend line in the bigger scope of things though, I felt confident that the price would most likely shoot higher that that resistance level, so I set my target a little bit above it, for a much better risk/reward ratio of 1:1.3.
The trade went my way (yay!) and I collected a cool 35-dollar profit.
|RISK/REWARD||1 : 1.3|
|ENTRY TIME||6:57 PM|
|EXIT TIME||12:03 PM|
This was easily my best trade of the week. It’s not every day that such a perfect setup forms, so when one does form, you better take advantage of the amazing opportunity that the Forex gods have bestowed upon you and make it count!
I mean, look at the chart. If that isn’t the most beautiful bearish wedge pattern you’ve ever seen, I don’t know what is! The Euro had been falling down relative to the New-Zealand dollar in a very clear downtrend for quite some time now, but the price had been consolidating for the last month or so, in what was clearly shaping up to be a rising wedge.
It was thus just a matter of waiting for the price to finally break through the bottom resistance, and when it finally did, I didn’t hesitate. I risked a little more on this trade than I normally would (though not a stupid, unreasonable amount mind you) because I was that confident in this trade’s odds of success.
As you can see from the chart and my time of entry, once the price closed below that bottom slope, the bearish momentum just exploded over the course of the ensuing 24 hours. I set my target profit right around the low of the wedge, which is a pretty standard place to place your exit for this pattern. And then I just let the market do its thing.
And do its thing it did! This was the last open trade I had remaining this week, and it closed out right around noon on Friday to finish off the week strong with a juicy profit of $66. Yum! 😀
Whew! What a killer week of trading this was! Even though it started out with an infuriating backfire, the tides eventually turned around and I managed to finish off Friday with a ridiculous 24.71% return on my account balance, lol. The close of this week also marks the end of my first month of live trading, which has yielded a total return of about 50%, which I’m pretty happy about. Since I am about as likely to consistently reap 50% monthly returns as I am to spontaneously combust into flames, I’ll savor the moment while it lasts.
Oh, and another thing. You’ve probably noticed that my charts this week look extremely clean; they are free of noise and the price movements are very fluid and clear. That’s because I have been experimenting with a lesser-known, less popular method of charting called “Renko Charts”. Just like regular candlestick charts, Renko charts were invented by the Japanese (is there anything these awesome mofos haven’t invented?! I mean seriously. Candlestick charts. Renko charts. Nintendo. PlayStation. Pokemon. DBZ. Manga. Anime. Ninjutsu. Quartz clocks. Blu-ray. Flash memory. Hentai…I mean, errr….)
So how do Renko charts work? Well, they take away the element of time and are instead purely based on price action. Renko charts form “bricks” every time the price moves by a certain amount, which you set to be whatever you want. Every brick on the chart represents the exact same amount of pips, and a new brick will only form when the price has moved by that amount in that same direction, or twice that amount in the opposite direction. It could take 1 minute or 1 week for a new brick to form; the only thing that matters is the price movement. In doing so, you are able to effectively eliminate all of the noise that is present in regular, time-based charts. It makes detecting patterns and trends much easier, and it allows you to, in my opinion, trade with much better accuracy.
After all, if you really think about it, why would we split up charts by arbitrary amounts of time? The only thing that really matters in Forex is price movement, since ultimately that’s all that Forex is: price movement. Time doesn’t really play a role here, and as such it makes sense to disregard it. Obviously I’ve only just begun playing around with Renko charts so it’s still too early to tell if they will be worth sticking to, but so far I have really been enjoying using them.
Anyway, that just about wraps up this post. I know I’ve been posting a lot of Forex shit lately, but I have also been doing some equity shopping in November, so you can expect a post or two about good ol’ dividend-investing to come out very soon.
Stay tuned! 😀