Hi all again, nothing on the bub front yet :) stubborn little thing ;). On the upside it meant another day of trading yesterday. Once again a day trading of the 4H charts, using essentially the same skills and methods I use on the 15M charts just ..... slower ..... and it so far has proved successful anyway.

A day where the EUR came under some selling pressure, and a breakthrough through the 1.2000 mark was seen, which was being touted as being a significant technical breakthrough if it happened. Today should prove whether traders share this view, with short being the possible way to go today.

Recently I mentioned about beginners and price action, and my opinion that if you don't understand the price action, it is very hard to understand the true meaning of any indicator of your choice. To elaborate on this, to me it doesn't mean you need to understand candlestick formations, or elliot wave theories or things to that degree, but instead, be familiar with what a retracement pattern looks like, what a trend looks like and what congestion is. If you can get yourself familiar with this, it will give you a big head start.

For example, how many times have you jumped onto a big drop in a pair, only to see it reverse and stop you out the moment you jump on, despite it having had dropped 20, 30, 50 pips previously? Is this bad luck? are you cursed? or is there a reason? More than likely you would then see it drop again just after you get stopped out, confirming your belief that you are indeed cursed and are doomed for the rest of your life.

Most of the time this is simply a "retracement" or a short reversal before a resumption in the trend. Why do they happen? well one reason can be profit taking, think about it, you got in at the top, it has dropped and you are +50 pips, what would you do? Quite often you would close, take the 50 pip profit and jump for joy. So if you were short ("sell"), and you take profits, you have to execute a "buy" trade to close it, if enough people do it, it pushes the price back up for a bit until everyone has their money and off partying, then the real trend continues.

All ..... ALL ... currencies do it, and the cries of anguish in the chat room (yes I am still there .. just not chatting as much) prove to me that many do not realise this concept (nothing wrong with that .. we are all learning :)). Above is an example from the EUR/USD this week, look at any chart on any timeframe and you will see this pattern.

So what does this mean, to me it means, if you miss the initial drop cause you were away, asleep or drunk (or all three) and you think that the trend will continue (which is why you initially wanted to jump in straight away right?), then wait for a retracement, perhaps using Fibonacci to help you find the turning point before entering the trade.

Ill go into the others another time, but remember this, and your win loss ratio should improve.

Ok here was yesterday's results, a good day again, signs are that bub is getting close, so wish me luck ;)


Happy trading!

Today's result: +109 pips | Overall: +432 pips

This entry was posted on Wednesday, October 12, 2005 at 8:33:00 AM. You can skip to the end and leave a response.