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Thursday, July 2, 2015

Forex Trading Techniques Applied to Bitcoin Trading



Here is a great example of how Forex trading techniques can be applied to a liquid digital currency such as Bitcoin. Pin-bar candle formations at extremes usually signify a lack of buyer conviction, and are a great indicators of impending market reversals. The RSI was also showing divergence, which is another great indicator of a weakening trend. Combine the two - and you got yourself a great counter-trend trading opportunity. The same chart formations that form on Forex/Bond/Stock charts, can also be very profitably exploited in the cryptocurrency markets. In this particular case, the ideal short entry would be right at $265.30, which is right underneath the bottom of that Pin-Bar candle.This type of divergence + pin-bar combo is one of my favorite type of technical setups. If you look through my previous posts you will see that I utilize this method very frequently in my forex swing trades.



Chart Source: https://www.okcoin.com


Sunday, June 28, 2015

Mario Draghi Vs Alexis Tsipras Cartoon

I know this is not exactly about trading, but I just could not resist! :)
Mario Draghi Vs Alexis Tsipras

Thursday, June 25, 2015

133 Pip Trade on XAU/USD

This XAU/USD trade is a good example of multiple time-frame analysis as I have outlined in my forex tutorial videos. This trade was actually one of the most profitable ones I have had in the last 30 days. I noticed that a bullish engulfing candle had formed on the 1-hour chart and I put a buy order just above the high of that bar. The risk on this trade was about 350 points (35 pips). When I looked at the trading action over the last few days, I saw that the $1204.00 level was where the market staged a pretty big reversal, and I thought that a take-profit order would be well placed somewhere underneath that area. I actually put my take-profit at 1202.60, but I exited manually the next day at $1201 (1330 points - 133 pips), when I opened up my platform in the morning to check the markets. I usually aim for a 1:2 risk-reward ratio, but this one gave me a 1:4, which was great! If you also notice, the market staged a pretty big reversal as it approached the prior resistance level at $1204. This is why I always place my orders with respect to existing support/resistance zones, otherwise I run the risk of a profitable trade, turning into a break-even/loser trade.



Although my decision to enter this trade was based on that 1-hour bullish engulfing candle, I also checked the daily charts prior to entering this trade. The daily charts were showing two very large bullish engulfing bars over the past 3 days - and to me - this seemed like the market was primed for a break higher. Checking the higher time-frames before entering a trade can really help in making a confident decision. If I did not check the daily chart - I am not sure I would have been as confident in taking this particular trade.


Wednesday, June 17, 2015

70 Pip Slippage on GBP/USD Trade During Non-Farm Employment News

I recently opened a live Forex trading account with Tickmill to test their live trading conditions. I previously had an account with Armada Markets and never really had any issues with execution. Tickmill was announced as the new broker to handle all of Armada's retail clients and I decided to test it out. I was looking over my trade history for the past two weeks and discovered one trade on the GBP/USD pair which looked very odd as it was much larger than my classic 30-50 pip stop, this trade was a horrendous -120 pips. When I plotted the trade on the chart, I saw that this trade experienced a 70 pip slippage on the stop-loss order during the Non-Farm Employment Change news on the 5th of June. The long entry order was also slipped by about 13 pips. The GBP/USD is probably the second most most liquid FX pair after EUR/USD, and I honestly would not have expected such heavy slippage on this pair - maybe on some of the other exotics - but not on GBP/USD.

I have been trading for quite a few years with various FX brokers and I have experienced slippage on heavy news events before, but nothing quite like this. It is well known amongst veteran and novice traders that slippage is a part of trading and has to be factored into the trading strategy, and I suppose sometimes these kinds of things happen. I guess I won't be trading around future Non-Farm news events with Tickmill anymore.

So far I have not had any other problems with Tickmill with regards to execution and trading performance during normal market conditions, but I will have to stay out of the news events because these kinds of slippages will take their toll if they start occurring on a regular basis.


Lucky EUR/USD Trade

Here is a nice example of a counter-trend pin-bar trade. The stop on this trade was just above the high of that long pin-bar formation (orange arrow). The take-profit for this trade was set near the 1.1178 area, as I considered this zone important. The 1.1178 was used as support and resistance and I figured this is where it might be a good idea to exit. The risk on this trade was roughly 60 pips, and the reward was approximately 105 pips. I usually like to maintain a 1:2 risk-reward ratio, but sometimes I can't do that if there are important technical levels in the way - as was the case for this trade. I kinda got lucky on this one as I got filled at the bottom of that big spike lower, but even if I didn't get filled there - the market did eventually come back down again.




Monday, June 8, 2015

Analysis: 103 pip GBP/AUD Trade

This is a perfect example of a proper divergence setup. I usually like to enter when a very prominent candle appears (e.g. large pin-bar or engulfing bar), but even smaller bars can be profitable in the right circumstances. This setup had a triple-divergence (three consecutive lower lows on the chart and three corresponding higher highs on the RSI), and I entered a long position at 1.9655. I had placed the stop just underneath the low of that small bar at 1.9614, about 37 pips. The take-profit order was placed at 1.9759, but it filled at 1.97689, so about 103 pips. A risk:reward ratio of almost 1:3, which is my favorite. Of course the market went much further and I could have made a lot more on this one, but there is no way to know this ahead of time, so I just set my orders and leave it.


Sunday, June 7, 2015

Forex Trade Analysis: 69 pip USD/CAD Short Trade

Some of the best entry signals happen just ahead of a major news release, and in some cases, right after. On this USD/CAD trade, the entry bar occurred right after the big Canadian employment news on Friday. I saw this huge pin-bar candle formation (blue arrow) and decided to enter a short position at the bottom of the candle bar. I have marked the entry with a green arrow on the chart bellow. I decided to put in a take-profit order near 1.2441.



The risk on this trade was 38 pips, and the profit was 69. So the risk:reward ratio was almost 1:2. I decided to take profit near 1.244 because that area was used as support about three times on the 3rd of June. I figured the market might stall there or maybe even reverse, so I just exited at this pivot zone.