Friday, July 10, 2009

How I Made 500+ Pips via Forex Day Trading in One Day

Well, this is the first time I decided to post some of my real trading results. The reason I did this is to share the lessons I learned, and encourage those just get started - it is possible to make hundreds of pips in one day. Forex day trading is not rocket science. It takes dedication and hard work to master the art of speculation.

I will not go through the detail of how I made my trading decision. All the analysis and knowledge are scattered around on this blog - Forex Day Trading.

Forex Strategies for July 9, 2009

For Japanese yen: after the down trending day (July 8), the rally formed a double top pattern just below the pivot point (93.19), and dollar is weak. So I decided short usd/jpy.

For British pound: July 8 was a narrow range day (NR20). Pound made a breakout of yesterday's high at the beginning of London session, which gave me a hint July 9 would be an up-trending day. So I mentally prepared myself to follow the lead of any long signal market gave me as long as pound remained above the major resistance 1.6210. There was a double top breakout at 1.6266 on hourly point and figure charts.

For Euro: July 8 was a narrow range day as well (NR20). I had one long position which entered yesterday stopped out at the initial dip, which was still above yesterday's high, maybe I moved my stop loss too close. After the dip, there was a long signal generated when euro broke out the confluence zone on hourly chart - 200EMA, 10-day EMA, top of downward channel all lined up.

The Final Results for July 9, 2009

Yen hit my stop loss, I ended with a less than 10 pips loss. I closed GBP/USD when it approached its daily range + 3s.d. (1.6385), since there is only 20% chance of pound will reach 4s.d. according to my study. Naturally I closed EUR/USD at the same time as well. Five long transactions of EUR/USD were excluded, since the above screen shot only showed current opening positions. The final results are 780.9 pips for 14 trades - 7 short usd/jpy, 1 long eur/usd, and 6 long gpb/usd.

What Happened After I Close My Positions?

Yen is still in bearish mode. There is no downside follow through momentum though. I will keep my hands off yen.

It is proved that my exits of pound and euro were exact at the top of the up swing. I didn't enter any long or short position thereafter.

How Do I Generate My Trading Decision?

Before I pull the trigger, I would like to go through the following seven steps to make sure the odds are in my favor. The market would teach me a hard lesson whenever I forgot to do the analysis or missed some steps.

1. Market analysis: What the market is telling me now?
2. Trend analysis: What is current trend?
3. Momentum analysis: What is current momentum?
4. Pattern analysis: Any high probability low risk setup?
5. Timing analysis: Is my timing perfect?
6. Risk analysis: Does my initial protective stop loss make perfect technical sense?
7. Psychology analysis: Am I ready to take the trade?

I will build trades only in the direction of the trend, and scale in when the current momentum lines up with the direction of the trend. If the first trade didn't show my any profit, I won't add a second load. If the first stop loss was hit, I will go through the above process again to make sure I am still in sync with the market.

Best Trading Books That are Particular Helpful

There are some great trading books help me a lot on my journey of forex day trading. Most of them are listed at the left sidebar. I will make the list shorter here, hope it will be helpful to you too.

Japanese Candlestick Charting Techniques, Second Edition

Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications (New York Institute of Finance)

Point & Figure Charting: The Essential Application for Forecasting and Tracking Market Prices (Wiley Trading)

The Taylor Trading Technique

High Probability Trading Strategies: Entry to Exit Tactics for the Forex, Futures, and Stock Markets (Wiley Trading)

Trading for a Living: Psychology, Trading Tactics, Money Management

Street Smarts: High Probability Short-Term Trading Strategies

Final Words

1. Currency forex market trading is quite promising as long as you know what you are doing. You need to work out a forex system which suits your personality or trading style. Not every forex trade signal will turn out to be a winner.

2. Point and figure charts are particular helpful forex technical analysis tool.

3. Not every narrow range day will breakout, and not every breakout will follow through.

4. High probability low risk setups won't occur everyday. Be realistic with your daily trading performance.

5. I sincerely agree with Richard Dennis - the father of Turtle Traders, that trading can be taught and learned through strong dedication and hard work.


Lalchand Khatri said...

amazing blog post...Great
Gold planning

party said...

I have my own methods for trend and momentum analysis, but "market analysis" is a very general term. Can you clarify it? What do you do in general for "market analysis"? How is it different from trend and momentum analysis?

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