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Forex Trading Strategy – Live Day Trade On The EUR/JPY 19/04/2011

April 20
01:11 2011

Hey traders! Today we have a nice little half position long on the EUR/JPY from 118.05 that is currently about +100 pips up as of writing this. I now have the stop loss moved to +40 pips and the final take profit is set to 119.35 which is +130 pips.Before we get into this Fx trade I think it is only fair to point out the bad. First we had a half position long on the GBP/USD that stopped us out for -20 pips. I’m just gonna come out and say it….that trade was a stupid mistake on my part. In no way shape or form had it given a confirmation entry, nor had it meet the criteria for any of my other forex trading strategies. The USD/CHF was giving a confirmation entry to go short and the GBP/USD had only a reversal candle to go long. I jumped the gun and didn’t wait….and I paid 20 pips for my error.

I’ve been day trading for over 6 years, almost 7…and still from time to time my patience fails me….and this was a good example of that. This just shows why it is so important to wait for the market to meet ALL the criteria of your day trading strategy before taking your day trade. Equally important it shows how to recover from a stupid trade! We have all been there, and what is your first reaction….to get right back in and “show the market who’s boss” right??? Doing that will only result in further losses. After this trade we keep our head down, didn’t lose our cool, and more importantly stayed patient and waited for the next good day trading setup!

Additionally today there was a AUD/USD short. This trade on the other hand was a double confirmation entry short, and is a trade I would take every single time! The market gave us +15 pips at one point, but after seeing other correlating currency pairs start to head up we decided to exit this one for -4 pips plus the spread. That’s the beauty of the confirmation entry….even when the market isn’t going to move your direction, because your taking entries on pull backs you usually have time to get out at break even or a small loss. The reversal candle was at 8:30 AM EST if you would like to go back and look at that confirmation entry.

Finally we had our EUR/JPY long entry shown in the chart above. The red line on the chart represents the previous support the market had held on 4 hours or so before it came back and tested it again. Additionally this level was a previous resistance level before the market broke above it, thus making it a breakout continuation level. Once the market reached this level of support we then waited for the 3 candle confirmation entry to come together.

Candle #1 represents the reversal candle off of the support which is the first candle in this day trading setup. The second candle is the confirmation candle, and as you can see it closed above the body of the reversal candle thus meeting the criteria for a confirmation candle. Once these 2 candles closed we then knew direction, and simply had to wait for the third candle to give us a pull back. Preferably you want to see the third candle (pull back entry candle) pull back into the body of the reversal candle, and that is where you would take the entry long. However with this day trade setup you can see it never made that pull back.

If you look at the GBP/JPY chart around the same time you will see it had already given an entry up and was running hard. Considering this I pulled the trigger a little early on the EUR/JPY. If the GBP/JPY is running up more than likely the EUR/JPY isn’t going to be able to make a big move down, and thus we took the entry on a small pull back rather than waiting for the market to pull back into the body of the reversal candle (candle #1) as you normally would. No two trades are the same and therefore you have to be able to adapt. The entry candle (candle #3) is the one part of this day trading strategy that is not mechanical. You must use the other correlating pairs as your deciding when to actually take the entry.

On my Fx trading platform I have 6 charts up at one time.The top three charts are the GBP/USD, EUR/USD, and the USD/CHF. The bottom 3 charts are the GBP/JPY, EUR/JPY, and the USD/JPY. When taking an entry on one of the top 3 pairs I want to see at least 2 out of the 3 giving me the same reason for entry. The same is true of the bottom three pairs. Whenever I’m taking a trade on a Yen cross I always want to see at least 2 out of the 3 pairs giving me the same reason to take a trade. When only one pair is giving a confirmation entry I will not take the trade….the market must be correlating! That’s all the trades we took in the live forex trading room today, see you all for tomorrow’s session….until then happy trading!


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