The Good
In the April results post earlier this week I mentioned I had one profitable trade already. This makes up "The Good" part of the title. A short position on NZD/USD that quickly became one of the shortest (time wise) trades I'd taken in a while. I've got used to holding positions over night and sleeping soundly through them in the process. I wrote a post i'm happy with on Forex Factory during the week so i'm just going to shamelessly copy most of it to here.
NZD/USD 1hr PnF
I don't think I could find a better example of a set up if I tried. I took this NZD/USD short on Tuesday and closed the position when it hit the target later in the day. This is a great example of how i'm combining volume analysis, volume zones and point & figure.
The starting point for this trade was of course the creation of the high volume zone. Price pushed up and out of a previous zone between the 5th and 11th of April. As this was a whole weeks worth of data the volume is huge on the move up indicating some heavy selling. (Remember a PnF column can represent multiple days of data therefore the volume is cumulative). We get a reaction on the following bar which in turn gives a downside price objective of 0.8310 (which is yet to be hit).
1. This is the first signal at the 50% of the zone, a triple bottom sell. Fortunately I didn't see this in real time otherwise I would have been stung as it pushed up and tested through the 50% again.
2. This is a triple top buy signal. I did see this live but made the decision not to buy considering the high volume zone in the background. It did go for about 40 pips from what the entry price would have been but it did it with a nice spike in volume.
3. Further weakness had come in to the market and this was again proved as the market was knocked back down on the next column. We travelled sideways for the next few days before producing another sell signal at 4.
4. This is my favourite signal, it's a variation of a triple bottom with the middle column staggered from the outer columns that make up the pattern. With the high volume zone, 50% and further high volume on the break through attempt I was pretty confident in taking this short.
Entered the market at 0.8480 with my stop above the previous column at 0.8530. I've only been aiming for 1:1 lately whilst I try and achieve some consistency. Interestingly, the next reversal column can be considered a No Demand into the high of the previous high volume zone for a further short.
The Bad
I call it bad, but that's a bit of an overstatement to be honest. I stuck to my strategy and went with what I thought I was seeing. Also, that was the title I came up with for the post so i'm sticking with it! I tried a short position on EUR/JPY and got stung almost as fast as the Kiwi trade that came good on Tuesday!
EUR/JPY 1hr PnF
The chart is wide screen so you will probably need to zoom in a bit. The upper zone is the zone that formed the basis of the trade. It's a zone from the 12th April and the highest volume in this area. Again, cumulative volume based on the PnF columns. The first and third marked ones have green zones and the other two marked bars (second and fourth) are columns of interest. I didn't highlight them in green to avoid clutter.
The second marked column is weakness at the 50% of the upper zone and the market fell from here. I figured we had a similar scenario with the fourth marked column but unfortunately not.
I got my numbers wrong on the chart, but the 1st marked yellow box is where I took my short, a triple bottom sell, like the NU trade I posted earlier I thought this was a rejection of the 50% and we were pushing down from here.
My stop was 60 pips and I got stopped as it formed the triple top buy (second yellow box) breaking through the 50% and heading north and north.... and north.
I decided not to take the long as I didn't want to chase the trade, i've been caught before in a sideways market with sell and buy signals in quick succession so decided to sit it out. Turns out I should've taken the long signal!
As far as I what i've learnt from the trade. Looking at the 1hr / 15min HLC chart now, I thought I was seeing weakness, but looking again, it's not the clearest to me. As well as this, there's the up trend on the PnF chart from the low, there was a lot of buying on that lower zone and I think that came in to play here. The 50% of the second and fourth bars are pretty much where the market stopped at the low today. So there was a lot of strength at this area as was later proved.
The Confident
After I got stopped out of that trade yesterday and saw the distance it went from the buy set up I had a very strange feeling. Or should I say non-feeling? Nothing, absolutely nothing. I couldn't have cared less. This was an absolute revelation to me. It had absolutely no effect on me, like many trades have done in the past. I believe i'm really on to something with the method i'm using. Losses are inevitable and i've finally become aware of that. I have this new found confidence in me that i've been striving for from day one. All week my mind has been ticking over with ideas and potential tweaks for the strategy. I'm always looking to improve. I'm so close.
As my Dad said to me this morning, it's another milestone in my trading.
And it feels amazing.
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