Thanks for the question Todd, and I hope this answers your question.
Greetings!
I just "stumbled" onto your blog. I'm a relative newbie...Your post "Trading Update" from Friday July 28 06 has me intrigued. Could you perhaps elaborate on your position trading method, i.e., explain what's going on in the chart, especially the price patterns you're looking for and your entry/exit points/rules. Thank you. I think it's good portends great things that I came across your blog.
Have a great weekend.
Sincerely,
Todd
This is the chart Todd is referring to....
This was a play off of support. It was pretty simple and straight forward. Earlier in June 06 there was a pretty decent reversal which took place pretty close to the Murrey Math MM -2/8 line. I marked the line on the chart with the green horizontal line labeled 1.2471. As we move to the right you can see that in July 06 that price once again came down and tested the line. It ended the day with a small real bodied candle with long shadows or wicks. This alone tells me that once again the green support line and MM -2/8 is causing some hesitation in price going lower. It also tells me that there are a lot of buyers there willing to buy in that area. This area was also the 50% Fibonacci retracement line. I also know that the Murrey MM -2/8 line is an extreme and represents a buying condition. By the way we also have MACD divergence, which is not showing on the chart.
On the day that the red small real body appears I have a possible trade setup. Now when do I enter? The small real body is really not enough for me to enter the trade, and this is something I have struggled with in the past. I'm sure a lot of other traders have to. Cause if I wait until the following day, price is well above where I wanted to enter. Emotionally this is hard to accept. I've identified a good setup, and now price is running away without me. Not to mention the fact that the recommended stop loss would be below the support line and MM -2/8, so now i have 100 pips more of risk. So what do you do? Looking through my journal it appears I entered this trade in 3 different phases. I took 1/3 of the entry on the close of the small dark body day. Emotionally this works for me. I have minimal risk, and I'm not going to get left behind if the train leaves. The next 1/3 came when price dropped below support. When I saw price drop below support and that sellers could not push the price any lower I know my odds were getting better. So I waited until price pushed above the high of the previous candle and entered. The last 1/3 came at the close of the bullish engulfing candle. Keep in mind that my % risked never exceeded my money management rules. I just divided it up in 1/3's. So if my money management has a 3% risk rule I would be risking 1% with each 1/3. This procedure is still something I'm fine tuning today. It's a work in progress and it keeps evolving.
Now for setting the profit targets. I could tell by looking at the chart that price was making Lower-Highs. This is represented by the green sloping resistance line. So I knew I wouldn't be able to get greedy. I took profits on 2/3 at the MM 0/8 line and was stopped out on the remaining just below the 0/8 line.
I hope everyone keeps in mind that my style of trading works for me, and chances are it might not work for anyone else. It took me a long time to realize that i was not going to become a successful trader by a black box system or copying someone else trade signals. It was when I changed my motivation for visiting forums, blogs, and my discussions with other traders that changed my life. I no longer try to imitate them or copy their systems. Instead I try to pick up on their successful qualities that support who i am as a trader. It's all about finding out what works for me. I know emotionally there are only certain things I can handle while trading. So i have to pick the qualities from successful traders that support this. Just relate it to life for a second. I was taught by various folks. Including my parent, teachers, and grand-parents. The list goes on and on. Some of them successful and some of them not so successful. Well I didn't copy their personalities. I took experiences from each of them, and that made me into who I am. Don't you think the same thing would hold true with learning to trade?
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Trade Well....
Brent
