Saturday, May 13, 2017

Trading Key Reversal Bars and How To Squeeze The Best From Them

Key reversal bars can be interpreted in many ways. Every trader has their own ideas about their significance and how they should be used. Here I’ll discuss some of the best ways to trade them, and the various patterns that you’ll see time and time again on your trading charts.

The problem with key reversal bars is they can often look very similar to an outside day, a pin candle or hammer candle. If you’re a candle watcher you’ll be familiar with those.

Identifying the significant patterns takes more than just eyeballing the formation of the bar, the ones you need to watch are the reversal bars that form at significant highs, lows, support, resistance or after a chart pattern has played out, or is about to play out.

For instance, this is a standard definition of how a key reversal bar looks, the high is above previous day high then it squeezes below the recent lows, and closes up.

key reversal bar

If you swap this out to a candle chart display, you can see it looks much like a pin or hammer candle.

pin candle

Key reversals can also look like an outside day. Here is an example as a bar.

key-reversal-outsideday

And here is the same bar displayed as a candle, a true outside day.

candle-outsideday

So how can we define which ones will be worthy of a trade, and which ones not?

Follow on and I will show you some ideas that will help, and ways to detect them.

The Continuation of Trend Key Reversal Bar

You like trading trends? After all the trend is your friend, as they say.

Key reversal bars give you a great way to enter the trend with an obvious place for a stop, and unlimited profits if the trend is strong. That’s great risk versus reward.

In our example earlier I showed you a key reversal that was also like an outside day. This happened whilst there was a clear trend formed, and the price had stalled to consolidate for a while.

Then they key reversal bar appeared. It went up to go higher, which was rejected, then went lower, and wasn’t rejected. To enter you sell the break of the key reversal bar low the next day.

Your stop would be above the previous day high. And you can pull that down to evens when price begins to accelerate, cutting out the risk.

See this example chart.

trend-continuation-reversal

Reversals at Support or Resistance (Swing Points)

Picking any high or low just won’t cut the mustard. You want to see these reversals either squeeze a new recent high or low that is rejected, or retest the support / resistance and fail.

Here’s some easy to understand examples, and ideas for trading them.

In this example you see on the left of the chart what is commonly referred to as a swing high. These are great patterns to watch for, as key reversal bars will often squeeze toward a swing high (or low) and get rejected as no volume is found.

You can then trade the break of the key reversal bar, moving away from the resistance or support zone. For support, the exact same method applies in reverse.

reversals-at-resistance

Lower Risk Trading Reversals

The above method can sometimes make the initial risk quite large. As the outside day bar (which is key) can be long.

If you identify a key reversal, one less risky way to jump on the move, and have a tighter stop is to wait for a hesitation in the trend right after the reversal.

To find those short hesitations you only need to identify an inside day or bar.

And inside day is the exact opposite to the outside day. It means the current day high and low has been within the high and low of the previous day. This signifies that the market is not sure what to do next. But you know, as well as I do, that trends will often continue.

With that in mind, you will wait for an inside day AFTER a key reversal bar, then sell the break to the direction of the trend.

Here is an example of the same key reversal bar as above, but then we wait until a small consolidation forms, look for the break of the inside day.

inside-days-example

Conclusion.

These patterns are easy to spot once you begin to look for them. They offer plain as day places to put a stop loss, and allow you to lower your risk fast if they run in your direction right away.

For novices, try using the inside day reversal method, as it is more assured and offers lower risk. Once you get accustomed to finding the reversals, you can maybe try a trade right of the break of one.



from
http://www.daytradingsite.com/trading-key-reversal-bars-and-how-to-squeeze-the-best-from-them/

Friday, May 5, 2017

Using Volume To Help With Trend Trading

When you’re trend trading, you want to be in as long as you can, but in addition you may also want to add to a position as it begins to be profitable. Once you have entered and removed the initial risk from your first stop loss, here is a way to find great levels to move your stop under, and to maybe add small positions into the trade.

Volume Level Strategy

Important levels also have high volume or thin volume. High volume means more activity took place at the price, thin volume usually means price went straight through easy, re-rating to a new value.

When you are trading in a trending move, you may be looking to add to the winning trade.

As price progresses it will always retrace, sometimes not much if there is a lot of momentum, sometimes it will chop around for quite a while until positions have shifted and operators can take it further.

Most traders will simply add on a dip, and then end up negative for a while on the extra trades. This is often unavoidable, but here is a nice method for eyeballing the levels that may offer a better dip to buy.

In all honesty, it’s basically the same as what a volume profile indicator would show you, but by simply using your eyes you can see the levels.

Take a look at the chart below.

See each high volume area highlighted, and subsequent retraces into the volume (or value) areas see a bounce.

trend-volume-trades

While the price kept moving up on this 1 hour chart, during the trend price retraced intraday several times to re-test the previous days value area. This is the area where the most volume took place.

This can be a good place to watch and be ready for a bounce in a smaller time frame, and get a lower risk “add on” to your trend trading.

You also have a place to move your stops. Directly underneath each “value” area.

This allows your trade to grow with the trend, and if it decides to fall through a volume area, then it’s probably best to be out anyway.

What About Forex and Volume?

When people trade forex with a broker that doesn’t offer direct access to the market, then any volume you see will be broker tick volume (more often than not).

While this is not “true” volume, it’s still a great guide to where the most activity took place.

Tick volume counts the amount of “ticks”, or price changes, during any timeframe bar.

So, if the area has high tick volume, then quite obviously a lot of activity was happening there. You don’t get an indication to the size of the trades (as you would with real volume), but you’ll know that this is where most of the trading occurred that day.

It works on forex also.

Here you can see the tick volume areas, and the small re-tests price made into each one, before falling further.

forex-trend

Take some time out and add the volume to your charts, if your style is trend trading over a longer term, or swing trading, it can offer great places you reduce risk and increase position size.



from
http://www.daytradingsite.com/using-volume-to-help-with-trend-trading/

Thursday, April 27, 2017

Ways To LOSE Money In Forex – Don’t Make These Mistakes

I thought I would take a different approach, rather than writing about how to make money with Forex I decided to go in the opposite direction. In this article I will ask you, how many ways are there to lose money in Forex trading?

Depends on whom you ask I guess. Probably about as many different ways as there are to make money in Forex trading. There have got to be at least a few books out there written on the subject.

Let’s start by looking at three of the ways about how to lose money in Forex when trading foreign currencies:

Not staying on top of important market changes
Bailing too early on an underwater trade
Failing to use a stop loss

Not Staying On Top of Key Market Changes

Individuals are attracted to Futures and Forex currency trading first of all in part because of the perceived big money, then the allure of something even worse..big, EASY money.

Not that big, easy money is a bad thing. Unfortunately, it doesn’t exist for most of us…or else everyone and their brother and sister would be making a killing in Forex.

So, why is Forex so popular if everyone is losing money?

We’ll I would say that everyone trading Forex is losing – but many do, as when trading any financial product that carries risk. This has been well documented.

A contributing reason why some Forex traders, particularly newer traders, quickly “learn” how to lose money in Forex is that this massive market is open for business all day long 24 x 5 (it’s closed on weekends).

It’s not like the Stock Market or other Commodity Futures markets that open at 9am or 10am, and close for the day in mid to late afternoon. The foreign exchange market is global in scope, open pretty much around the clock, 5 days a week. As such, it follows the sun so to speak, around the world. Where ever you live and when you are not awake, Forex trading continues somewhere in the world.

Why is this important to you, as a Forex currency trader in learning not how to lose money at Forex trading?

For two reasons.

First, when trading stock or other Commodity Futures contracts..you don’t have to be that concerned with what happens overnight. If you leave your trade(s) open overnight as many traders do, generally no real price movement will take place until the markets open the next morning.

However..with the Forex markets trading around the clock..leaving your trade position open unattended and unmonitored during that time…..well let’s just say that isn’t smart trading.

Not staying on top of specific market news, government news, economic news, monetary events, etc. things that may really move the foreign currencies overnight while you sleep – – – is yet another way of how to lose money in Forex trading.

Now, the Forex market may move in your favor overnight. If so, great! But, if it went the other way during your sleep time, you might be looking at closing your trade the next day at a loss ..and potentially a really serious loss.

Talk to any Forex currency trader this has happened to – you don’t want to learn how to lose money in Forex this way!

In addition to changing Forex market conditions from overnight news, events, etc. – – – there are several other factors that influence Forex trade outcomes, and they are part of what makes up a Foreign Currency trade. Find out more about this at what does Forex trade mean

Bailing Out of Trades Too Early

One area where many traders really struggle is when they see the Foreign Exchange market move against their position – whether quickly or in a more gradual move – causing their trade to go into the red, hopefully just for a temporary period of time.

No one wants to lose money. Watching ones’ trade get more and more underwater, hoping it will turn around soon..that is tough to take for many foreign currency traders, or any trader for that matter.

Let’s assume for the sake of discussion that in this hypothetical trade, you’ve allowed for a certain level of loss or drawdown potential. In other words, you’re giving the market room to breathe and move, in expectation of a desired or hoped for currency pair move in your trade.

Setting a stop loss is highly dependent on several factors – – – your analysis of a trade’s risk/reward potential, your money management style, your account balance size, trade sizing, your overall risk/loss tolerance level and your specific trading / trade strategy style, etc.

However, most traders bail out of a trade far too early and quickly when their trade has started to travel south. Which is a good way for how to lose money at Forex trading…unless you have very tight money management trading rules you play by and you find that overall, employing a consistent tight stop loss strategy works for you.

The result? Not always, but many times, the trade turns around and moves back into profit, and sometimes takes off on a major move, creating serious profits. That’s the good news.

The bad news is that this is only good news only if you’re still in the market and didn’t exit your trade too early.

Another classic way how to lose money in Forex.

Pattern interrupt here. Fear. Learning to balance your fear in trading foreign currencies is a true art. It serves a valuable purpose by hoisting the warning or danger flag when the Forex market moves against your position, alerting you to be watchful.

But fear can also kill profitable trade potential if you let it start to dominate your thinking and trade strategy, and worse, let its powerful emotion take over.

Work on mastering your trading fears/fear of loss, etc. At the top of this article we touched on the question of why is Forex so popular if everyone is losing money at it?

Greed and fear. Greed is a key reason why Forex is so popular and why so many get attracted to the Foreign Currency trading game. And fear is a big reason why traders come to how to lose money at Forex.

Not Using Stop Loss Orders

use-stop-lossWe talked about the stop loss briefly in the section above. We’ll explore another aspect of how to lose money in Forex below, by opting not using a stop loss order in your trading.

(This is not recommended for new/newer traders or those without DEEP trading pockets).

Using our above example of a trader bailing early on a trade that’s gone into the red…..some Forex traders prefer to trade without a stop loss, so they don’t get prematurely stopped out of an anticipated trade move.

However, trading without a stop loss can result in suffering a larger loss than if you had traded with a stop loss…marking this as another way how to lose money in Forex.

Trading without a stop is very, very challenging. You must be highly disciplined and coldly realistic to trade without a stop. This is sometimes referred to as trading with a mental stop.

As traders tend to hope an underwater trade will turn around let’s give it just a little more time or room, they think it is very easy for a trader to incur a larger and larger loss, continuing to “hope”, rather than exiting the trade at their mental stop loss point.

(Note: hope is another way how to lose money in Forex).

When you trade without some sort of protective stop loss in place, and your trade goes south moving against your position, you must live with what’s called a drawdown until the market (hopefully) turns around and moves back into a profit position for you.

While still in your trade, a drawdown – – – (which is how much your trading account is drawn down or reduced by the Forex brokerage house handling your trade, when any open trade is in the red)- – – may be considered a paper loss because you’re still in the trade.

On the flip side, if your trade is in the black, you could look at it as a paper profit’.

The downside is that the market may move against your initial trade position sometimes just for a little while, and other times for quite a bit longer – before the trade turns around and becomes profitable.

And if the market keeps moving against you, that drawdown/loss gets bigger and bigger. If you close that losing trade out, your ‘paper’ loss account drawdown becomes a very real loss…or a hard earned lesson in how to lose money at Forex.

Thus it is suggested that only traders who have well financed trading accounts trade without a stop…..which allows them to weather large negative account drawdown’s while they wait for the trade to take off. Or to be able to sustain a large loss if it doesn’t.

In both scenarios, the trade loss or profit doesn’t become realized until you actually exit the trade.

But in the event of a drawdown, you still need to plan for that loss to become realized should the market not recover in your favor. Otherwise you’re not looking at the trade realistically.

So, please be realistic. Don’t play the hopeful trading strategy game, because it is anything but that. Know your limit of risk and loss on any trade, and don’t exceed it.

Sure, trading with a stop loss can cause you to get prematurely stopped out of a good profit move from time to time. But by using a stop loss when you trade, you eliminate losing previously locked in trade profits, that would vaporize if you’d didn’t have a protective stop loss in place, and the market reversed on you.

More importantly, using a stop helps you minimize taking a larger than necessary loss in losing trades. It helps you NOT to learn how to lose money at Forex trading.

Strongly consider trading with a stop loss. Unless you have a very well capitalized trading account, don’t experiment with mental stops and how to lose money in Forex.



from
http://www.daytradingsite.com/ways-lose-money-forex-dont-make-mistakes/

Use Mini Commodity and Futures Contracts And Cut Your Losses!

Many futures traders, especially those starting out, aren’t aware of mini commodity contracts. They’re a great way to learn and hone your futures trading skills while radically reducing your exposure for trading loss…allowing you to stay in the commodities game while you learn sound, fundamental trading practices and gain experience.

In this article we’ll discuss mini commodity contracts, what they are and their trading benefits and advantages. We’ll also tell you which commodity futures have a mini futures contract counterpart and talk about the following topics:

– Mini Contracts Defined
– “Mini Futures” Advantages & benefits
– Online trading Mini Futures – same liquidity/less profit

Mini Commodity Contracts Defined

Quite simply, mini commodity contracts are smaller fractionally sized versions of full futures contracts. They may 1/3rd, 1/5th or even 1/10th the size of a regular sized commodity contract, depending on the commodity.

The cost to purchase mini commodity contracts and get into a trade is also proportionately smaller, as are the potential returns…but don’t let that dissuade you. There are a myriad of advantages you can realize by trading mini commodity contracts…not the least of which is risk capital retention, minimizing trade loss potential.

Mini Commodity Contracts – Advantages & Benefits

First, they’re inexpensive! A solid advantage of trading mini commodity contracts is that the cost to purchase mini futures…like their fractional size vs. full size futures contracts…is also proportionately smaller.

New or less experienced futures traders with a relatively small trading stake to risk or an aversion to larger risk, can get started futures trading in a far more economical fashion. Heck, with some of the lower priced commodities, you can get into a trade with one futures contract for around $100 vs. $400 or more for a corresponding full size commodity contract.

And on $10,000 of risk capital, instead of trading one or two contracts MAXIMUM…(you do exercise conservative money management, right?)…you can trade 4,6 or more mini commodity contracts if you so choose, on a reasonably sized, yet limited trading account.

Another key advantage of far smaller contract sizes and cash outlays to trade, is the ability to learn proper futures Position Sizing…a very important aspect to solid money management. That’s a topic for another page.

The other side of the coin here is that you can dramatically lower your risk of loss trading a futures mini contract. Instead of a one cent move in Corn moving against you costing $50, you’re down only $10 bucks. Much, MUCH easier to deal with, when you’re on the negative side of a price move or trade, as noted here.

A 3x, 5x or 10x reduction in trading loss potential – is nothing to sneeze at. And as we said before, conserving trading risk capital will help keep you in the game longer and give you a better chance to succeed.

Learn more, faster

Trading mini futures allows a new futures trader more flexibility to learn more and varied trading approaches, certainly with less stress as mentioned above.

Without the constraints of trying to trade full size futures contracts on a very limited risk capital trading account, trading ‘minis’ gives you the flexibility and opportunity to try more things learning proper position sizing and good risk/money management strategies, trading multiple contracts, scaling in and out of trades and other more advanced futures trading techniques that many traders often don’t have when operating with relatively small trading accounts.

This can help new and younger futures traders to progress faster in their learning curve and improve their odds of potential futures trading success. With far less risk to their trading accounts.

And as a result, hopefully improve their odds of trading both mini futures, more successfully, and do the same with full size contracts, when ready. Taking the slower, more gradual approach that futures mini contract trading affords, can be far less stressful and more enjoyable (not always of course).

Trading Mini Futures – Lower Profit Concerns

Mini futures have been around for a while, some longer than others, some relatively newer to the futures market. Unfortunately, many traders don’t know of their existence. But now, you do!

But a word of caution is in order. Now that you have an choice – trading either mini futures or trading full commodity futures contracts – don’t get caught up with the internal debate of “With mini futures I can only profit by a small amount…but trading full contracts I make a lot more”.

The Greed Monster is quite persuasive. Put him on hold and back in his cage.

Remember, what’s the rush to burn your trading account so fast?

Learn gradually, experiment, try different things, and give yourself a chance to get good – on the cheap – before stepping up to the big time. Don’t let smaller profit potential trading with futures mini contract cloud your mind.

Stay focused on the main objective – protecting your risk capital and staying in the game.

Liquidity Concerns

With Online trading mini futures, you should be aware that there may be some market liquidity issues depending on the futures mini contract(s)> you choose to trade.

I’m not sure, but I’d think the volume of full commodity contracts traded is larger, potentially quite a bit larger than their corresponding mini futures. That could lead to some Online trading mini futures being ‘thinly’ traded. Liquidity has to do with the number of traders buying and selling – and the Open Interest – in a specific commodity market.

Basically, too few buyers (if you’re trying to sell), or too few sellers (if you’re trying to buy) may mean you’ll be stuck in your trade, and possibly not able to exit your trade position when and at the price point you want.

Could be a few hours, a day or days, or longer. You want to avoid these ‘thinly’ traded markets, especially when trading full contracts. If you’re stuck in a trade and the market moves against your position, your profit can turn into a loss very quickly…sometimes much larger than you want.

Always check with your broker to assess market liquidity, and ask for help/suggestions regarding same, particularly when brand new or early in your futures trading career.

Always look for highly liquid markets. They can provide very fast ‘fills’ on your trades, which is what you want. And definitely, avoid low liquidity markets.



from
http://www.daytradingsite.com/use-mini-commodity-and-futures-contracts-and-cut-your-losses/

Tuesday, January 17, 2017

Fast 1 Minute Trend Scalping System – Only For The Brave!

I’m a sucker for a fast moving trend trading system. I get bored watching long time frames, and like to be in and out quickly. So here is an idea I picked up along the way that is a really fast moving trend scalping system.

Now, please be aware, to be successful with this system you really do have to be in and out fast!

No holding for greed…

No “what if I caught the bottom?” thoughts…

Set your stop loss, and take your pips when you’re happy.

Do not bend the rules.

Also, this is not a 100% mechanical trading system. You have to use your eyes, and your experience.

To be sure it will work, test it on a demo, and see how you do.

Now, with all that aside, here is the nitty gritty.

Can You Identify A Trend?

As the sub-heading says, if you can’t zoom out on a chart and define whether price is “generally” trending up or down, then stop right here. Go do some analysis. Here is a 1 minute chart, and it is trending up. If you can’t see why or how, stop here.

1 minute up trend

In addition to picking an instrument that is trending, it also should be fast moving, and have a low spread. At the moment, because of the way things are in the USA with Trump about to become president, USDJPY and EURUSD are strong candidates for trading this system on, because of the volatility and low spread. But it’s possible you could do this on a stock, or index future (eMini or similar, you need to test).

The 1 Minute Trend Scalping System

Now we have our instrument, and have identified a trend, we can add the indicators. Here is a chart with how the template and indicators will look. You can download them in a zip file for MT4 at the end of this article.

1-min-trend-scalp

First, we want to see the 5 minute MTF Stochastic indicator up high. Above 50, and heading towards, or above 80. Coupled with an upward trend, this tells us the 5 minute chart is strong.

Next I want you to look at the shaded beige and grey blocks. This is an indicator which plots possible weak and strong support and resistance areas. If we understand the nature of support and resistance, we know that once it is defined, price will move away from it, when in a strong trend.

You will also see the bold red and green Parabolic SAR indicator.

Try see this.

When price is trending, and moves away from a colored support block, and MTF stochastic is high (above 50 preferably towards 80+), and the trend is generally up. If it either breaks past the last Parabolic SAR opposite color, or past the last high in a small sideways move, there can be pips on offer.

Here is the same chart but with the areas I have described above marked, and where you could enter.

the trend part

But hey, what about the choppy area right after this..?

I thought you would be thinking that, so let me clear the chart and mark that up.

the-consolidation-trend

As you can see, if we try to take only breaks that move away from the support (or resistance in a down trend) and follow the general direction, closely watching stochastic, more often than not you can bag some pips, and keep the losses low.

Stop Loss / Take Profit

Obviously this is a super important part!

If you look at each break, and entry on the charts above, the obvious place for a stop loss is a pip or two under the last small low ( or high in a downtrend), or just under the support block it is currently moving away from.

Here are where I suggest stops on the move up..

stop-losses

Take Profit?

Now this is open to much debate, and where most people fall down because of greed.

Me, I like to bag enough to be happy.

If I get what I call a “home run”, where price shoots away over the next few minutes, 6, 7, 9, 10, 12 pips.. then I close. As I don’t want to break even.

If it runs away 4 or 5 pips, and stalls, maybe pull your stop up tighter, or to break even. Then take what you can.

Or, if you really get a good feel for it, trail underneath the last major up candle. You know, the one that breaks higher each time in a move?

JUST BE SURE TO TAKE SOME PROFIT, and KEEP THE LOSSES TIGHT!!

If you act like a robot, and do that ^ above, you should be ok.

If you get emotional, and worry/hope when in a trade, you should close it. Your mind isn’t behaving right for a fast moving 1 minute scalp trend trading system!

Oh, and another thing to remember.. a trend is your friend until it isn’t. What do I mean by that?

Well, a trend doesn’t last forever. At some point, when trend trading, one of your positions is going to get stopped out. Maybe if you hit 2 or 3 wins in a row, you should give up for the day? Food for thought. You don’t always have to trade!

Be lucky, and share to download the tools needed below!



from
http://www.daytradingsite.com/fast-1-minute-trend-scalping-system-only-for-the-brave/

Wednesday, January 11, 2017

Trend Following Strategies: Indicators That Can Keep You In The Trade

While I never recommend using indicators as the sole method to determine an entry point, once you are in a trade there are some useful indicators for trend following which can help filter out the noise and fluctuations as trade begins to develop. Here are some indicators and ideas to help you stay in a […]

from
http://www.daytradingsite.com/trend-following-strategies-indicators-that-can-keep-you-in-the-trade/