Trading Rules

Below are my trading rules and plan which you can freely adopt, however, it is more of discretionary than mechanical (i will post some mechanical rules in my next few posts)

1)Check Upcoming News @ http://www.forexfactory.com/
- This is used more as defence, mainly to avoid unpredictable major annoucements which may cause big moves
- This can also be used to ride the reaction after the news. A possible break up trade.

2) Check Weekly, Daily and 4hr chart to decide on the main direction i will trade
Bullish when:
- Price Above Moving Average
- Moving Average moving up
- MACD Histogram turing positive

Bearish when:
- Price below MA
- MA moving down
- MACD Histogram turning negative

3) One direction is decided, look for opportunity to ride the wave using:

3a) Reversal Technique:
- Candle Sticks touches either (Support/ Resistance, Fibonacci lines, Pivot Points, Trendlines)
- Candle Sticks patterns
- Slow Stochastic overbought/ oversold
- MACD bullish/ Bearish

3b) Breakout Technique
- Breakout from support or resistance of last high/low
- Slow Stochastic overbought/ oversold
- MACD bullish/ Bearish

Initial Stop based on technicals (Risk to Reward must be more than 1)
Profit Exit based on either TP or Trailing Stop

Money Management rules: Risk no more than 2% of capital.
(Will take 2 positions of 1% risk each, one aiming for TP, one aiming to ride)

Advice from Greeksman on my trade

Sean,
Based on what I saw on your chart (a 30 min chart), for this type of BOT (Break-out trade), and imgaine if I were to take on this trade, I may use risk/reward of 1:1 to go in.
I roughly saw the SL be round 65 pips, and thus my first PT will be around 1.3550.
After this, I will exit half of my position, and move the rest to breakeven.

Another way is to set PT to be say 35 pips (65/2 rounded up), and if this is hit, I will exit half of my position, and guarantee a risk free trade no matter what by moving the rest to breakeven.

Either way, I believe is doable.

Now, here is my additional $0.02 as to why I trade not just based on technical but also fundamental.
We all know FOMC interest rate annoncement to be at 2:15am EST (just a few hours later). So, since there is an expection of at least 50BPS rate cut, USD by right will be sold off before annoucement.

If you are trading EUR/USD or even GBP/USD, you should expect both currency pair to go up. This is the time whereby I will rather pick EUR/USD and GBP/USD than EUR/JPY and GBP/JPY because USD is weaker than JPY and thus, trading currency pair is better than carry trade pair.

With this expectation, I may want to ride on the trend if it is going to be strong.

So, this is where the stop for the remaining position becomes tricky.

Since you are trading a 30 mins chart, you may wish to consider using 1 bar reversal or 3-bar reversal depending on your risk tolerance.

When you are getting more advanced, you may consider using not even lots but triple lots. The last run is the real "home run" and wow, once a while you can really laugh to the bank.

Well, I don't think I should go into that kind of details at this point.

However, these are the things as a professional forex trader I would consider when deciding:
1. Which pair to trade - normal pair or cross or carry trade pair (fundamental outlook)
2. When to get in and what kind of stops I am looking at (lot size and money management)
3. When to get out (in case the market gives me a home run and I will eat it).

Good luck!

EUR/USD 151208

I have been back from my overseas exercise since 13th Nov and have been looking at charts everyday, but i just couldn't "pull the trigger" even when i saw potential trades... (even on virtual trades!!!)

Did i lost confidence, or was i getting more picky on my trades?

But as i read through Conrad's forum, i gotten back momentum and trade my first trade ever since i am back!

All the longer time frame chart (4hr, 1hr) showed obvious uptrend.

I set 2 similiar orders in BUYSTOP at 1.3500, which is slightly above the previous high and set a stop lost at 1.3425 which is the nearest support line.

Risk = 75 pipsReward = ?

When the trade went my way, I exited the first position at 1.3526 for a 26 pip profit and adjust the stop to 1.3517 which is the low of the 30min candle.I am not sure if i shoud have exited the first position, since i was risking 75 pips and exited only with 26 pips.. seems to be a lousy risk to reward ratio.
I got stop out when it hit my (manual) trailing stop.
Greeksman is right, i am laughing my way to the bank on this trade.
This is one of my best trades so far.
But the amount i win this time has got nothing to do with my skills, i just followed my rules and just ride the trend up.
Still felt that it was luck. Well, the trend seems to continue and who knows where it will head towards.

Pips Gained
From 1st Positon = 26 pips
From 2nd Position = 191 pips

But got to improve on my plan as suggested by Henry and Greeksman.
i Have yet to decide on a "timeframe" which i would trade.
I thought i just let it ride as far as possible (of course most trade dun turn out like this one).
And stop loss, i based it on technicals and reduce vol to fit 2% of my account. And was happy with my exit so far, but perhaps consider if i want to lossen my trailing stop so i can ride the trend further?