My first trade - critic my Technical Analysis

[mray]

Hi,

I made my first trade today, I have included a chart which pinpoints certain reasons for the trade. It is strictly technical analysis, I do not have knowledge of any fundamentals with respect to this currency pair. Anyways, thats probably a recipe for disaster in itself but here is my thinking on the trade:

I usually watch a 15min Chart and a 1min Chart.

Pictured is the 1min Chart.

The first thing I noted was there was some support at 17:50-18:00 - this can't really mean much considering the 1min chart and it's the only time it has reached this barrier but it was pushed up from this area and then remained fairly stagnant (sideways) from 18:20 to around 19:20 where the downtrend begins. I had already made a mental note to watch for a possible long position if it was to hit the previous level of support - by possible, I mean, I would check other indicators.

As I watched the chart move I could see it seemed to be in a real downtrend, as you can see from each selling interval the sells usually had the price even lower before being pushed back up a little - so seemingly, there was still plenty of sellers (imo, my analysis, w/e).

The pair hit very close to the previous mentioned "level of support" again, it's hard to call it that with this timeframe but the 15min also seemed to lend it credibility.


When it got close I started to keep an eye on MACD and RSI indicators, both looked to be favorable for a long position. MACD was crossing in an uptrend and RSI was hovering in the lower 20s.

I then bought at: 89.853. I put a TP @ 90.005 and a SL @ 89.700 (150 pips either way).

Reasons for my TP at 90: It had closed at or above 90+ a few times before around the 18:10 - 18:20 mark and the 19:00 to 19:20 mark before being pushed down. Looking at it now, I should of had my TP lower. Maybe 89.950

My SL was terrible, way too low. It should of been something more like 89.780. I think this would of given me enough leeway to manager a further decline and stil get into the forthcoming uptrend while managing to not lose so much if I was completely wrong.

So, yea, that was my thinking. I'm sure most of it is wrong and misappliedbut I'm looking for people to let me know what I've done wrong and what I can do to fix it. (ie: The indicators I'm using, are they flawed in anyway when looking at a 1min chart as oppossed to a 15min or a 1 day, etc?)

Picture Legend:

Red Arrow - approx entry
Blue Arrow - approx closing
Green Circles on the chart - areas of suppor
Green Circle on MACD - MACD crossover seemingly identifying a possible uptrend
Green Circle on RSI showing the market undersold and identify a possible long position

 

[nine]

1. You have way too much stuff on your charts.
2. Except maybe at a breakout to clear space you should never go down to 1m on currencies.
I'd go with hourly or if you must then trade the 15m. 5m can be meaningful although some would disagree.
The less experienced you are the more important it is to keep the decision timeframe long - 60m or 240m.
3. Maximum number of indicators would be two mas. Maybe only one or none.
4. You don't need an RSI to tell you if its going up or going strongly (just look ... is it going up as many points per xx bars as it was before - train yourself).
5. A macd is just another momentum indicator really so you are a) duplicating the rsi and b) you didn't need them anyway.

If I get bored in the next few hours I'll pull up jpyusd and see what it looks like and post how I might have traded it with less stuff on it.

 

[mray]

1. You have way too much stuff on your charts.
2. Except maybe at a breakout to clear space you should never go down to 1m on currencies.
I'd go with hourly or if you must then trade the 15m. 5m can be meaningful although some would disagree.
The less experienced you are the more important it is to keep the decision timeframe long - 60m or 240m.
3. Maximum number of indicators would be two mas. Maybe only one or none.
4. You don't need an RSI to tell you if its going up or going strongly (just look ... is it going up as many points per xx bars as it was before - train yourself).
5. A macd is just another momentum indicator really so you are a) duplicating the rsi and b) you didn't need them anyway.

If I get bored in the next few hours I'll pull up jpyusd and see what it looks like and post how I might have traded it with less stuff on it.

Hi, thanks for the reply - a few questions:

Why limit it to 2 indicators(MA = max or MA = moving averages?)? Obviously indicators can't tell you how to trade but if you can have multiple indicators confirming what you suspect may happen, isn't that helpful?



Are MACD/RSI completely redundant? I've understood it so that they are not redundant, while they both may be used to identify a trend you can have different results from both. I mean, they can compliment eachother and confirm that what you're seeing isn't some kind of outlier/anomaly and is indeed a trend. Is that wrong?


Any comments on my TP/SL thoughts? Or is all of my analysis basically useless since I was mostly going off a 1min timeframe and just got lucky? (im thinking this is the case )

Thanks again!

*I'm hoping you get bored *

 

[nine]

One of the biggest problems in trading is 'wanting to know a little more' and hence the illusion created by multiple indicators etc etc. What you find is that people start off with lots of sxxx on their charts and (if they make it) get rid of most or even all of it over time.

I still keep one or two mas on a chart. Not because i need them to tell if price is going up (well is it?) or how strong it is (is it going further in a give time or not?). I like mas because if you look you'll find that there is a ma or two for any timescale which price is likely to come back to in retracement before it takes off again. The old 21=magic trick. But you have to find the one that works for you - the ones on this 5m chart are actually from an hourly chart which I switched to 5m so they are NOT optimal ... the close one should be a bit longer by the look of it.

Heres how I would have traded it if I was still into short term currencies. No exits are on the charts ... set targets or trail stops once profit reaches a certain point.

Note that for currencies the best trends are in the european morning or in the us morning if there isn't a shock caused by news. The asian session is rubbish on short timeframes ... too choppy ... and if there is a news shock this sort of taking advantage of the trendiness of currencies doesnt work.

 

[c_c405]

Right here is all you need

Checking back into this post I see some others have tossed in.

So there you go trader! You have a good foundation here in this thread to at least make one or two informed decisions on trades and formulate your own style, strategy, opinion what ever you want to call it. It is a necessary part of trading anything and only you hold the key.
Is my strategy aggressive? Is it a strategy or a method?

5 min chart? 1 min chart? daily chart? daily fx? T2W? google? thinking about it does not really DO anything about it.

Thinking about what your doing is far more beneficial. being afraid to get your feet wet will never learn you how to swim.

 

[nine]

mray, have a look at the floor traders method described in this thread:

http://www.trade2win.com/boards/general-trading-chat/29598-useful-things-i-ve-found-net.html

 

[PokerBrat]

One thing not already mentioned is your risk management. Having your stop and take profit at 150 pips, is a risk/reward of 1:1. This is not good enough and you will struggle to make a profit if you keep taking those trades. You should aim for a 1:3 ratio, then you can take profit much earlier than your target if the price action dictates, and you will still be showing a good risk/reward ratio overall.

You have alreaady noted that your stop was way too low, and infact it seems to be below the previous swing low, rather than below your support level.

If you identify support and are buying at this level, then your stop only need to be a few pips below. This way you have very small risk. If price goes through, then you know the support hasn't held up and your trade is wrong, and you get out for a small loss.

 

[mray]

Hi Everyone, thanks a lot for all the replies - Especially nine for going out of his way and showing me a look into his methods.

I have taken your advice and stopped trading 1 minute charts. I've moved onto trying to identify trends in the 15 minute charts and then moving to 5 minute charts when I think I've identified a possible reversal/trend forming to find my entry points.

This method just seems less volatile in terms of trading on wrong information/bad signals and seeing "trends" quickly turn around.

One 'signal' that I've seen work for me is to identify a trend on the 15 minute chart and to wait for it to hit an extreme (close above or below the top/lower bands) and then wait for 1 period of reversal - if this happens I'll move to 5 minute charts to see if the reversal continues, I'll try to get my entry in sometime during the 3rd 5 minute interval (so I'd be in on the second period on the 15m chart).


*note*
Please ignore the clutter/indicators - I am taking your advice and moving away from them, however I do find Bollinger Bands useful for quickly identifying when a pair is trading at one extreme or the other (atleast, for the past X amount of periods).


ex1:


ex2:


I'm sure this is nothing new and could be completely wrong and maybe I am just getting lucky.

I'm starting to realize the way to maximize any kind of profit gain I could have doing this will be money management and smart risk/reward ratios. (as mentioned by PokerBrat already)

This is something I've only started to really start looking at, I need to be setting my SL much tigher and giving my TP a little more room to run - or try to lock in profits when possible and buy back in etc.



btw, I missed a ton of profit in both of those trades, they both ran down much much further than my TP.