Intra-Trend Day Trading Confirmation Entry EUR/USD 10/06/2011
After yesterday’s day trade during the ECB Press Conference it was important for me and the rest of the forex trading room to have a good day going into the weekend. It’s never good mentally when you do not recover a loss going into the weekend. This is exactly what we did! If someone is going to become successful at day trading it is going to require unshakable confidence in not only your forex trading strategy, but your ability to execute it as per the rules.
It’s not how much profit a day trader makes that will determine his level of success in the forex market, it’s how they recover from a loss. A professional forex trader who used to work on the Floor of the CME as a market maker said, “it’s not how much you make as a trader, its how much you don’t lose”. It becomes much easier to make a mistake after you have already made one, which is why he said those words above. With those words in mind we came into today looking to get back some of the profit we gave back yesterday.
In the trading room today we took 2 trades, both of which were profitable. The first trade was on the EUR/USD, and it was a short position. Anyone who follows this blog is more than likely very familiar with the confirmation entry, however this is what I call the intra-trend confirmation entry. The same candle formation of a confirmation entry is used in this forex trading strategy as well, only the trade is not taken in expectation of the market turning direction, rather it is in expectation of trend continuation.
What I look for is the market to as always come into resistance of support, and in this case the market was coming into support on the EUR/USD. As normal I want to see the candle touch the support and then close above it. Normally we would look for the second candle to close above the body of the first candle, and that would be our confirmation candle to go long. However in this forex trade setup the next candle (candlestick #2) closed below the support level thus telling us the market broke that support and was going to continue down. Therefore candlestick #2 was the confirmation candle down. I always mark support and resistance with the bodies of the candles rather than the wick. If the market closes below the previous bodies then that level is now broken in my opinion. What happens during the candle is not used to determine weather or not that level is broken, rather the close of each candle is used.
As per a normal confirmation entry we take the entry on the third candle. When the third candle pulled back into the body of the reversal candlestick (candle #1) this is where we got short on the EUR/USD. This trade ran for about 100 pips, however we closed it a bit early just to be safe and managed +40 pips which wasn’t to bad. After this trade we had a correlation day trade on the USD/CHF. Everything was pushing towards USD strength, but the Swissy (USD/CHF) was still in its same range. Because of this we went long on the USD/CHF in expectation of it coming back into correlation with the rest of the forex market. This trade got with half a pip of our 15 pip stop loss but then ran in our direction. When we left the room I said I would like to close this trade 5 minutes before the 5PM EST close, and therefore this trade ended up getting closed for +10 pips. Overall for the day we managed +50 pips.
The best way to in-vision this trade is to think about a normal confirmation entry setup. If you were to take those 3 candles above and put them at the top of a move up it would be an extremely clear confirmation entry. This is how you have to picture it, and soon you will begin to see intra-trend confirmation entries as well. Explaining things such as this over text is a bit difficult so I hope it came across clear. If not your always welcome to email me at email@example.com and I will be more than happy to help you. This goes for everyone weather you are a member of the service or not….either way I’m willing to help those that wish to learn to trade forex. I hope everyone had a great week of trading as well, and I hope you all have a great weekend!