Price Action Swing Trading - The PAST Strategy

[Nigel Price]

Morning All!

Price just came within a few pips of my stop there a while ago I see, as I sit down to the screen here, but my position just survived, with the high at 3819.

Analysis still valid now - short anywhere from these levels up to the highs - looking for a move lower today.

Just for reference, price is at 3801 as I'm typing this.

Good luck!

Nigel

 

[Nigel Price]

By the way - there was no magic in why I picked 3822 as my stop -

I could have just as easily been stopped out there. Sometimes the market works with you, sometimes it works against you, but over the long-term it evens itself out.

The traders who get frustrated and take things personally usually don't have the patience to hang around long enough to see that.

If you were trading this particular setup and your stop was a little tighter for whatever reason and you got stopped out - what's the big problem? It's only a small loss, and there is nothing to prevent you getting back in again now if you want! We don't have the massive transaction costs they did back in the old days - sure the spread on EURUSD is like 0.9 of a pip with some brokers!

The market is far too random to be able to pick perfect points for entries and stops and expect to be right all the time. There is no such thing as the "right" level, so don't waste your time trying to find it. The market tests levels and runs stops all the time.

Instead of getting annoyed, recognise that it happens, and work your trading around it. Adapt, Improvise, Overcome.

 

[Nigel Price]

Right guys, takes London to get going again before we see any real movement!

Price is nearly 20 pips in profit now so I'm bring the stop to b/e.

That's my job done now - the market will decide now whether this trade either grows or dies!

 

[stuart1984]

By the way - there was no magic in why I picked 3822 as my stop -

I could have just as easily been stopped out there. Sometimes the market works with you, sometimes it works against you, but over the long-term it evens itself out.

The traders who get frustrated and take things personally usually don't have the patience to hang around long enough to see that.

If you were trading this particular setup and your stop was a little tighter for whatever reason and you got stopped out - what's the big problem? It's only a small loss, and there is nothing to prevent you getting back in again now if you want! We don't have the massive transaction costs they did back in the old days - sure the spread on EURUSD is like 0.9 of a pip with some brokers!

The market is far too random to be able to pick perfect points for entries and stops and expect to be right all the time. There is no such thing as the "right" level, so don't waste your time trying to find it. The market tests levels and runs stops all the time.

Instead of getting annoyed, recognise that it happens, and work your trading around it. Adapt, Improvise, Overcome.

Morning Nigel

I'm glad to see that you managed to get an entry here and that the trade survived the night. Prior to your comments yesterday I had made two attempts to get short, the original trendline break and the first re-test. The first was stopped at BE and the second at a small loss. I took my third entry from just about the same point as you yesterday and had my stop at 1.3822 also. We have survived the night and price action now looks like it may move in our intended direction for a while hopefully giving us the opportunity to move to BE soon.

I have incurred lots of small losses so far with this strategy but they are not having the same emotional effect as I have experienced using much wider stops in the past. I have also banked a few partial profits which has more than covered these small losses and I still left with some nice unrealised profits on both the EURAUD and XAUUSD trades.

This is always a learning process and I think I have probably been too aggressive with my entries resulting in small losses that possibly were not necessary however it is a double edged sword as the ones that have worked would now need a very signifacant pullback to take me out at BE which would most likely invalidate the whole trade anyway.

I am enjoying this strategy so far and can honestly say that I have felt far less stressed an emotional about trading since adopting it.

Let's see how the EURUSD trade pans out, good luck to everyone in these trades.

Stuart

 

[stuart1984]

I have now moved my stop to BE on the EURUSD.

Stuart

 

[Nigel Price]

I have now moved my stop to BE on the EURUSD.

Stuart

Nice one Stuart - as I said, thats the hard work done.

Take a second now to reflect about your risk position:

- Downside Risk - you could lose a small about amount of floating profit if price makes it back up to your entry and knocks you out. But overall, you will be no worse off than you were this time yesterday

- Upside Potential - going into an ECB meeting tomorrow (assuming the trade doesn't get knocked out before then) you have a free position in the market. What if Draghi announces something that triggers a sell-off? ENORMOUS upside potential. Could Draghi say something that triggers a spike to the upside? Of course he could, but that's not the point. It is the fact that you have put yourself in a position that you will either win big, or lose very small.

If we continually and repeatedly, day in, day out, manage to engineer ourselves into positions where the odds are skewed largely in our favour, as long as we have the patience to wait for the those odds to work out, we cannot help but reap the rewards that our hard work deserves.

I don't bet in bookies or casinos or anything anymore, because I understand that the odds are against me. But if I could engineer a situation with a bookie that limited my risk to such a small degree, but maintained the possibility of big big reward, I would be in the bookies all day long taking advantage of it. Sure that's what the bookies and casino do to their punters! Why are casinos in Vegas open 24/7? Because they all love working nightshifts? Not at all - they are having the patience to allow the odds work in their favour.

Or in business - what do insurance companies do? They engineer themselves an edge and exploit it, by betting that nasty things won't happen very often, and if they do, they will have collected enough premiums to take the hit and still have a profit left afterwards.

Venture capitalists? limit the downside on the small losers that don't work out and then run the winners. A couple of big winners will pay for all the small losers - a couple of Facebooks or Googles will pay for a LOT of small losers, and still have profit left afterwards.

We are just doing the same thing on a very micro scale in the markets.

Hope this makes some sense

 

[stuart1984]

Hi Nigel

This makes a great deal of sense.

Thanks

 

[Nigel Price]

Update

EURAUD is slowly moving to the downside, but in the absence of any rally it doesn't look that compelling to me yet.

As far as the EURUSD is concerned, I'm in at 3808 as described yesterday, stop at break-even.

Here is my current chart of EURUSD:

It seems to be settling on another shorter term trendline now, but with the markets quiet until tomorrow, I'll not be doing anything tonight.

The ECB is up tomorrow so I can't imagine much happening until Draghi gets going. Happily I'm out all day tomorrow, so I'll either come home to being knocked out having lost nothing, or with a nice big profit. I'll take that offer all day every day

 

[Nigel Price]

ok that chart is a bit big, not bad for a first go though!

 

[Nigel Price]

ok that chart is a bit big, not bad for a first go though!

hmmm, chart has done a runner somewhere....

 

[stuart1984]

EURAUD is slowly moving to the downside, but in the absence of any rally it doesn't look that compelling to me yet.

As far as the EURUSD is concerned, I'm in at 3808 as described yesterday, stop at break-even.

Here is my current chart of EURUSD:

It seems to be settling on another shorter term trendline now, but with the markets quiet until tomorrow, I'll not be doing anything tonight.

The ECB is up tomorrow so I can't imagine much happening until Draghi gets going. Happily I'm out all day tomorrow, so I'll either come home to being knocked out having lost nothing, or with a nice big profit. I'll take that offer all day every day

I agree Nigel, I wont be taking any more trades until after Draghi has spoken tomorrow. I'm risk free on all trades at the moment, no need to add risk for the sake of it.

The way I see it, if the market decides the news is EURO positive then we will get stopped at BE on our EURUSD trade. Positive EURO news might also prompt a more meaningful retracement on the EURAUD trade as you have indicated you are looking for. If this is the case, it may provide an opportunity to go short again at a better price. We will need to wait and see.

If the market interprets the news as EURO negative, we will be in the money. Simple.

XAUUSD bulls have been strong today so we will wait and see if this is a retracement to encourage more sellers in at a better price. Worst case scenario, I will get stopped at BE. I took part of the position out at 1278.7 so the trade has already paid for itself.

I'm off to London for my 30th this weekend so I probably won't be doing very much to my account over the next few days. I'll check how we close the week, but until next week, I'm really in the hands of the market.

Good luck for the rest of the week everyone, happy trading

Thanks

Stuart

 

[stuart1984]

I got stopped out EURUSD at BE during the volatility surrounding ecb press conference. Never mind, nothing lost! I wont be chasing to get back in either, going to wait and see how things settle.

Stuart

 

[Nigel Price]

Me too Stuart - although it wasn't by much! I'm fairly sure that it was the broker spread that got me and not the price but sure that's the nature of the game we're in.

On the plus side, the EURAUD trade seems to be continuing to move in the correct direction.

There is very little we can do in a week that you have the ECB meeting and the NFP back to back - no movement on Wednesday until the ECB on Thursday, then a big untradeable spike, then no movement until the NFP on Friday, then another big untradeable spike, then nothing until Monday!

If trading was easy everyone would be doing it! Days like today are sometimes a bit hard to take but they separate the men from the boys! There'll be a time when the market just storms off in our direction, we just have to protect our capital to make sure we are there to take advantage of it when the opportunity comes.

Enjoy the birthday! Make sure to give your 20's the send-off they deserve now!

 

[russian30]

Hi All,

I just wanted to say a quick thanks (especially to Nigel) for the informative posts and guidance you guys provide. I been following these post for nearly 5 months now and they've made such a drastic improvement to my trading. This strategy fits really well with the way I trade and I'm actually becoming profitable for once!!

stuart - Unlucky with the stop! it must of been within 1 or 2 pips!! Happy birthday by the way.

Also, I just wanted to ask you guys how you trade? do you use spread betting or a forex account? mt4?

I'm gona make an effort to actively contribute more to the forum when I get the opportunity or have something to add.

Keep up the good work. I'm sure there's more people here who appreciate your efforts.

Thanks

 

[Nigel Price]

I been following these post for nearly 5 months now and they've made such a drastic improvement to my trading. This strategy fits really well with the way I trade and I'm actually becoming profitable for once!!

Russian30 - this comment has made my Friday!

So glad to hear that you are seeing an improvement. Keep taking the small steps!

Have you ever walked up a mountain or a large hill?

You just keep slogging away, step by step. Sometimes for hours - you just keep going, always facing in the same direction.

Then you stop for a moment to stretch. You turn around and suddenly you are greeted with a magnificent view - and you are reminded how far you have come. It gives you the encouragement and impetus to turn around to push to make it to the top.

It's a bit like learning trading. You slog away at the charts, the books, the forums, and so on. Week in - week out. It might not feel like it but every single time you open a chart you are taking another small step up the mountain.

And every now and again, you reflect for a moment and it hits you - wow, I have actually made a lot of progress since this time last year/last month or whatever. And you use that as encouragement to push on further.

Have a good weekend!

 

[Nigel Price]

Also, I just wanted to ask you guys how you trade? do you use spread betting or a forex account? mt4?

I use Oanda as my broker russian30, and I use their MT4. To be honest regarding Oanda, they changed the way they do their spreads a while ago to a "dynamic" pricing model and I have to say, I'm not a fan of it!

They used to be very fair, but they have undergone some big changes recently, including senior management and so on, and so if I came across a compelling alternative, I would have no problems switching.

In terms of charts - I LOVE the charts from TradingView. The free account is more than enough for me, you only have to pay if you want additional features - most of which I have no interest in.

I'm gona make an effort to actively contribute more to the forum when I get the opportunity or have something to add.

Looking forward to it!

 

[russian30]

I'm spread betting with city index at the moment. Do you get charges for overnight financing with oanda? or any forex account for that matter? I'm not sure if its better to move to a forex broker like GKFX or FXCM or whether its all very similar!

With city index, the overnight finance charge on a 1 gbp per point buy trade on the GBP/USD is 80p per night (10gbp per point would be 8gbp per night) if your holding positions for long period of time like with PAST, this can add up!

They even charge you 10p/1gbp/pt to maintain a buy position on the NZD/USD! I figured the NZD/USD would be a credit but apparently not!

Is the charging structure similar with oanda or other forex brokers? I'm doing my research at the moment buts its probably best to ask people with first hand experience about account charges?

I would welcome any recommendations?

thanks

 

[Nigel Price]

I'm spread betting with city index at the moment. Do you get charges for overnight financing with oanda? or any forex account for that matter? I'm not sure if its better to move to a forex broker like GKFX or FXCM or whether its all very similar!

With city index, the overnight finance charge on a 1 gbp per point buy trade on the GBP/USD is 80p per night (10gbp per point would be 8gbp per night) if your holding positions for long period of time like with PAST, this can add up!

They even charge you 10p/1gbp/pt to maintain a buy position on the NZD/USD! I figured the NZD/USD would be a credit but apparently not!

Is the charging structure similar with oanda or other forex brokers? I'm doing my research at the moment buts its probably best to ask people with first hand experience about account charges?

I would welcome any recommendations?

thanks

Hi russian30

Most of the regular brokers, most of them as far as I know, will either credit you or debit you overnight based on the difference in the interest rates of the two currencies, or the "carry", as they call it.

So for a long AUD/USD trade for instance, you should get a small credit on the overnights, which is a nice bonus. Likewise if you were selling NZD/USD, you'll be incurring a debit on the overnights.

But the way I work, I don't pay all that much attention to these carry credits or debits, I find that they normally all just even themselves out in the end. I certainly wouldn't ignore a good trade setup just because of a negative carry.

I don't have any real serious experience with spread-betting, but what you describe there sounds to me like they are penalising you for holding overnight. Which, as you correctly say, will seriously eat into your profits if you are operating a longer term strategy, which PAST definitely tries to promote.

I guess you need to just do some sums and weigh it all up! I did read once that FXCM had a spread-betting account, I think they were trying to promote the tax advantages to their UK clients - might be something worth investigating if that applied to you.

If anyone else has any advice - don't be afraid to chip in!

Just remember, it's highly unlikely that a broker will make the difference between success and failure - it might make a bit of a difference to your bottom line, but you shouldn't be depending on a specific type of broker fee structure to maintain your edge. That would leave you very vulnerable to an arbitrary change by a broker putting you out of business, and that's not a healthy position to be in if you ask me!

Sounds like you are going to have to spend some time over the weekend reading up on the advantages and disadvantages of different brokers then - I feel very sorry for you!

 

[russian30]

I think I'm going to go with GKFX. They seem pretty sound. They also offer a 300gbp cash back in the first 30days if you lose!! A kind of no lose on your first 30 days of trading!! lets see how it works out.

Nigel - are you still in the EUR/USD trade?

 

[russian30]

I'm not in any of the trades at the moment so I'll looking at the entry's in the charts attached. They're all retraces.