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Live Forex Room Update October & 7/11/2011 Day Trade GBP/USD

Hey everyone! I hope trading is going well for you all. In this recent trade update we are going to wrap up last month and then get into the trade setup that we had today. October ended up with a gain of +265 pips. We didn’t win every trade and we had a few losers in a row but as you can see what matters is the monthly profit or loss. I think one of the biggest downfalls of most forex traders new to this market is there inability to lose their short sighted point of view. Often traders get so wrapped up in the here and now they lose sight of the big picture which is monthly profit. Losing sight of the big picture leads to over trading, revenge trading, “system jumping”, ect ect… Hopefully by sticking with the simple idea of only identifying what smart money is doing, everyone will be able to improve in their trading and finally crest the hill of profitability!

Again going back to day trading strategy outlined in the article series learn to trade forex with smart money….accumulation, manipulation, followed by market trend. That’s all we need to understand.  Today we had the first two steps come together quite clearly, we just never happen to enter a clear defined market trend. As you can see the GBP/USD came up and spiked above previous resistance (off screen). This showed a clear stop run at resistance, therefore showing a high probability of the accumulation of sells. Normally I like to see the stop run at the end of the accumulation however we had it at the beginning today.

As you can see I have the accumulation marked in the red square. This is clear sideways price action that is often mistaken as a market lacking momentum, but as we know these periods are often times smart money accumulation areas. The market took off to the downside and we did not catch the first move down. After the first run down I said I wanted to take either the EUR/USD or GBP/USD when/if it pulled back into the accumulation area. It’s worth noting that once the market break out of the accumulation area, it will more often than not pullback into this point. This is why I stress not chasing a market but rather letting it pullback at a later time.

These pullbacks are part of the manipulation. Think about this for a second. If the accumulation was the accumulation of sells which the first move down showed, then why would smart money drive the price back up to the same point. What do you think most indicators looked like as the price was coming back into the accumulation areas? More than likely everything was starting to turn up for a buy, and this is exactly what smart money’s intention was. By creating the belief in further upside traders are more likely to buy thus providing supply for smart money to sell into….clear manipulation.

The EUR/USD showed the same thing as the GBP/USD. We took the EUR and it unfortunately pulled back past the accumulation area stopping us out. The EUR/GBP just happened to turn up which caused a quick spike in EUR strength, and that was enough to stop us out. Had we taken the same exact trade on the GBP/USD it would have been good for up to 40 pips initially. Later on we did end up taking the GBP/USD. We took it after the second test of the accumulation area go rejected. This trade is a bit tricky, let me explain.

I had set before we left the room that I wanted to move the stop loss to break even when this hit +20. With an average entry of 27 it would have hit +20 on some brokers and not on others. It personally hit +20 on one of my brokers but not the other. Therefore some could have ended up break even and some it could have hit the stop of -20 pips. I’ve got 2 emails thus far both saying break even but I’m sure some did get stopped if they weren’t around to see what happened. Thus we will split the difference and call this a -10 pip trade. Today ended up down, but we have a lot of month left. Every month we will have losing trades which is why we learn to accept them, move on to the next day, and this is how we consistently turn a monthly profit!

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