My Eur/Jpy Trade journal

[ndnole]

Ater several years of nonprofitability I have finally come to grips with the need for a trade plan and the discipline to stick to it. To anyone who is new to trading or failing if you read nothing else please know that longterm success is not possible wihthout a well thought plan. I have learned the hard way and will never ever trade without a plan. With that being said here is my plan. I have not back tested per se but I have looked back over the pasy year and the plan seems solid and is a based off high probability entry. Your thoughts are welcome and no critic is too harsh. I will begin demo trading this starting this tuesday 5/15/12 Without further talking here it is below....

EUR/JPY Trade Plan


Indicators:
RSI 14
20 MA
Ichimoku (disregard kinjen sen, tenkan sen, chiku span) use only the cloud. (Chiku span may be used for future price direction)
2 sets of Bollinger Bands 20/2 and 20/3

Chart-Daily for trend direction, pivot point, support resistance and 4hr for entry and exit

Trade Rules
Start of trade week is Tuesday 4am (daylight savings-3am without) London Open
Enter Trade open of 4am candle of 4hr chart
Only Place trades in direction of trend
Do not place trade if price is within Kumo or about to touch cloud in opposite direction of trend
Do not trade after a daily doji
Check slope of 20MA on Daily chart for trend and price in relation to Kumo and sell only if below Kumo and 20MA Buy only if above Kumo and 20MA
Plot pivot point from previous daily candle, plot support and resistance as points of reference
Do not place buy trades near resistance of previous swing low, wait until broken (especially on Daily)
Do not place sell trades near support and previous swing high, wait until broken(especially on Daily)
If price action is trading in opposite direction of trend wait for price to hit .0382 retracement of previous swing and changing to correct direction before initiating further trades if price continues wait until .500 or .618 retracement and price shows change to correct direction (take special note of this if price is bouncing of resistance or support in confluence with previous swing low or swing high)
Minimum 2:1 risk reward

Buy Signal-Entry on 4hr chart On open of 4am Candle London open
Must be Above Kumo
RSI below 70
RSI above 50 or very near 50
Price above 20MA on open of 4am candle
Swing low Must be higher than previous swing low
Do not buy if current low is lower than previous swing low
Do not buy if price has touched upper BB3 band within 2 previous candles
Do not buy if price is touching upper band and RSI is 70 or above or very near 70


Buy Exit if:
Price touches BB3 upper band
Price target 60 pips hit (may place target higher if previous swing high is being broken)
Price goes below low of previous 4hr candle or hard stop loss of 30 pips whichever is first
Cross and close below 20MA
Exit position at 12pm London close or target hit whichever is first





Sell Signal- Entry on 4hr chart On open of 4am Candle London open
Must be below Kumo
RSI below 50
RSI above 30
Price below 20MA on open of 4am candle
Swing high Must be lower high than previous swing high
Do not sell if current high is higher than previous swing high
Do not sell if price has touched lower BB3 band within 2 previous candles
Do not buy if price is touching lower band and RSI is 30 or below


Sell Exit if:
Price touches BB3 lower band
Price target 60 pips hit (may place target higher if previous swing low is being broken)
Price goes above high of previous 4hr candle or hard stop loss of 30 pips whichever is first
Cross and close above 20MA
Exit position at 12pm London close or target hit whichever is first

 

[ndnole]

I must add this for those that like to day trade and not hold positions for a very long time.

 

[deebee1]

interesting strat... will be coming back to see how things pan out... good luck buddy....

 

[rsh01]

Hi ndnole,
How many trades you expecting to be placing roughly per week-what was the estimated average for the last year? Why eur/jpy? and why only one ccy?
Good luck with the trading / journal.
Look fwd to seeing some charts.
R

 

[ndnole]

I chose eurjpy because it seems to make around 100 pip move from london open to close when going in a trend and it has been pretty consistant respecting the 20MA. I expect in trending that there should be 2-3 trades per week if exiting at close each day. It seems that if holding beyond that someone could possibly make on trade and stay in it until the cross. I expect to get 90 pips a week give or take. I like RSI becuase it is used by many and trades are based off its extreme areas. RSI in tandem with double bollinger band screens out most bad trades and goes well with staying with the trend. The kumo cloud further screens out trades that are not optimal because general price tends to not do much within the cloud.

 

[ndnole]

For what its worth it appears GBPUSD will work well with this strategy to. The eurjpy price went down and target would have been met easily today according to plan if a trade was opened. Two reasons why trade was not opened in relation to plan.

1. It is monday and I like to see price action coming off the weekend before entering a trade so no entry on first day of the week.

2. At time of entry london open price was bouncing around support, could have gone either way.

If not for these two points a trade could have been entered and I would have awoken to 60 point winner. Alas I dont feel bad because often enough a trader can be over agressive and take the trade and lose because he did not follow EVERY step in the plan. This is no small issue and I will not break from this as I have read many many times that sticking to the plan and not including emotion is the way to longterm success. I simply take a little happiness in know that the plan pretty much worked today and that I won on 2 fronts.

1. Today I had the discipline to not take a trade despite the fact I knew it would probably be a winner because it did not meet all of my required signals. I believe this will save me from uneccessary losses if i continue this approach.

2. I won today because the method to which I decide to make a trade worked.

Of course this is just the start but I am encouraged this first day.

 

[ndnole]

Whats a trading strategy without a name? So I will dub my strategy "The London Dance"

 

[ndnole]

Well there seems to be a make or break point right now in this pair. I will have to wait and see. It is nearing the daily close of candle and here are some things I have plotted in prep for the trade at london open. It appears that it will close 102.46 or thereabouts.It is currently stalling at the 61.8% retracement of the last swing which leads me to believe there could be buyers here. If it breaks this support102.53(61.8%) retracementthen there is not much stopping it below.


3rd resistance is 104.31 (which is also very near 50% retracement of major swing)
2nd resistance is 103.84
1st resistance is 103.16 (which is also right on the 20MA)
Pivot 102.69
1st support 102.01
2nd support 101.54
3rd support 100.86

The plan for the day
Likely to be no trade since several rules are not valid.
Daily RSI is below 30, 4hr RSI is below 30 and has touched the lower BB3 band

What I am hoping for is a bounce from this level to at least the pivot of 102.69 but I would love for price to reach near R1 of 103.16 I dont foresee it passing that. I hope it takes 2 4hr candles to do that. I am hopeful this will happen because there is upward divergence on 4hr RSI making a higher low while price has made a lower low, should be some upward movement from here considering bounce off lower BB bands and RSI below 30. In this case the expected retrace will have taken place and allow me to consider a sell if all requirements are met.

The less desirable scenario would be for price to range inbetween pivot and S1

 

[ndnole]

Here is what my chart looks like after 8pm prepping. Please see attachment

 

[ndnole]

Did not take trade at london open. German GDP came in positive and price did move above pivot but not to R1. Price moving off of Lower BB3 meant that there was not a lot of downside potential worth the risk. Took a small short trade at 8:30am after 30 minute candle closed below 20MA but price moved above and I closed trade for a small loss. This entry was not within the rules. Sometimes you need a small smack in the hand to remind yourself to stay firm in following the plan. Only a loss of 7 pips but a reminder not take a trade outside of rules again.

Price should continue to move upwards with the 'supposed' good news out of germany but I believe it still wont surpas R1 by much. I am hoping it stays near the 4hr 20 MA. In that case I should have a decent setup for London open if all things line up.

To any reading.........DONT diverge from your plan even if you think its a good call. YOu will get lucky sometimes and more oftn than not you will get burned.

 

[ndnole]

Another note to remember for myself. Had I not been so technical and sold at London open I would have gained my 60 pips for the day. London open was 102.82 and at this time 9:24 est price has gone as low as 102.15. Target would have been met. However I am still ok with not taking the trade because there were indications of upwards movement plus news out of germany. In fact the reason for the steep drop in price was due to news that a meeting did not go so well with greece. I choose not to guess which way the news will take price as it could easily have gone the other way. Best to stay out of those situations and leave it to the pros. All the same I will call this a win because at london open 5/15/12 all requirements were met or close.

Stat update

Win-1
Loss-0

 

[Mr Woozel]

Another note to remember for myself. Had I not been so technical and sold at London open I would have gained my 60 pips for the day. London open was 102.82 and at this time 9:24 est price has gone as low as 102.15. Target would have been met. However I am still ok with not taking the trade because there were indications of upwards movement plus news out of germany. In fact the reason for the steep drop in price was due to news that a meeting did not go so well with greece. I choose not to guess which way the news will take price as it could easily have gone the other way. Best to stay out of those situations and leave it to the pros. All the same I will call this a win because at london open 5/15/12 all requirements were met or close.

Stat update

Win-1
Loss-0

I am confused with what you are actually calling a win. You did not open a trade and you had your reasons for that. So, as there was no trade, there was no target, so what are you actually calling a win? If you don't take a trade that would have hit you stop loss, are you going to call that a loss?

 

[ndnole]

Further note. Double Bollinger bands really show the limits to where price will go. The touch of BB3 tends to be the max either high or low in price action, if price does continue past it it does not do it by much and then it pulls away in the opposite direction. Because of this I will continue to adhere to not making trades too near the Lower and Upper BB3 bands and in fact will make these level hard take profits permanately. If price touches upper BB3 on 4hr or daily before take profit I will exit trade no matter what.

 

[ndnole]

I am confused as to what you are actually calling a win? You did not open a trade and you had your reasons for that. So there was no target as there was no trade so what are you actually calling a win? If you don't take a trade that would have hit you stop loss, are you going to call that a loss?

You are correct it is technically not a win.

I call this a win not as a trade but a win in the method. I see that there are some things that will be subjective as to entry and exit such as will I risk taking trade even though there is clear divergence (I will not) or pending market news that could effect direction. However, I dub it a win in its plainest sense in that it meet the basic requirements and 30 pip stoploss was not hit before 60 pip target.

To answer your other question yes I would call that a loss if a trade hit stop loss. Only in its plainest and basic sense because that would mean the method failed. In the case above the method worked I just did not take the trade. Perhaps Is hould seperate wins for the basic method vs wins and losses for my actual trades.

 

[Mr Woozel]

You are correct it is technically not a win.

I call this a win not as a trade but a win in the method. I see that there are some things that will be subjective as to entry and exit such as will I risk taking trade even though there is clear divergence (I will not) or pending market news that could effect direction. However, I dub it a win in its plainest sense in that it meet the basic requirements and 30 pip stoploss was not hit before 60 pip target.

To answer your other question yes I would call that a loss if a trade hit stop loss. Only in its plainest and basic sense because that would mean the method failed. In the case above the method worked I just did not take the trade. Perhaps Is hould seperate wins for the basic method vs wins and losses for my actual trades.

You not taking the trade because of the news and your emotions IS part of the method. You didn't take the trade because you felt it would be a -ev play to do so.

I reckon:
Win 0
Loss 0

 

[ndnole]

You not taking the trade because of the news and your emotions IS part of the method. You didn't take the trade because you felt it would be a -ev play to do so.

I reckon:
Win 0
Loss 0

Noted. And agreed. Didnt really think of it that way.

Win-0
Loss-0

 

[ndnole]

Here is were disipline must take place. It is nowhere near London open yet I am itching to place a short trade at 102.16 which is the current price. This is right on support and not wise to place short here without proof it is broke. Too much bad news in eurozone will surely push this lower even with RSI at oversold levels. I will resist the urge to place the trade because I must be steadfast with sticking to my plan but I felt I should note my desire to deviate already. Very tough to not over trade when you see pips for the taking. There is pretty much no support below this point so a short here can go a long way possibly. But I am well aware that even though this is a pair to short it will not go down in a straight line. Price was pushed back from the 102.53 fib 61.8% so I feel further downside. However, I will wait and stick to the plan and observe price action til London open. After 8pm eastern I will formulate my strategy and prep with pivot support and resistance for the next day to see whether there is a high probability short.

 

[ndnole]

Ok, the daily candle has closed at 8pm. Now its prep time for LOndon open.

3rd resistance is 103.58
2nd resistance is 103.23
1st resistance is 102.75
Pivot 102.40
1st support 101.92
2nd support 101.57
3rd support 101.09

Price on daily is near lower BB2 which is fine. Bands are both widenning which signifies that price may well continue downward. Widenning BB bands generally show price movement in a volatile fashion. The state of the eu leads me to think that upside price action is not likely so downward is in play.

RSI on daily is currently 28.75 which is near enough to 30 as looking at past history has shown this pair to trade below RSI 30 pretty steadily.

All factors are in play on the 4 hour chart and RSI is 33.15 currently. I wont bend to much on RSI on the 4hr chart. 33 is acceptable in this case. Still some divergence on 4hr chart but RSI peak has made a lower high.

I hope for price to reach 4hr 20MA of 102.84 or that area which would give me some room to short, it lines up pretty closely with R1 which is ideal.

Likely price may rise to around 102.60 and flirt with R1. I hope to see some price exhaustion by London open if price is in this area. From there I can see price testing the first level of support S1 101.92 to possibly as low as 101.78. I may stay out of trade is price passes the previous daily high of 102.87 as this might mean a brief retrace which I do expect at some point on the otherhand if price reaches that point it could end up making this daily candle a fairly large wick with price to the downside but I do not wish for a gravestone doji.

The plan:
perfect entry for me would be touch of 4hr 20MA right before london open or right after with sign of exhaustion or price exhaustion before hitting 20 MA. A short of 1 lot will be entered because I am still fearful that resistance will hold up as it appears to be the last thing holding it in place. A long way down from here.

 

[ndnole]

4hr after prep.

Should cross pivot and hit at least R1 hopefully.

 

[ndnole]

Took short at 102.16 allrequirements met. Price is near resistance but broke it in previous candle down to R1almost to the pip. I beleive R2 will be tested which will give room for target to be hit.