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.

July 8, Forex Market Recap

For Japanese yen, Tuesday (7/7/2009) was an inside day (ID) with a daily range of 75-pip. Since last Friday (7/3/2009) was a holiday, which qualify Tuesday as a narrow range day (NR7).

Yen broke Tuesday's lower boundary in Asian session, which put yen in a very bearish mood, since it's a NR7/ID breakdown. Yen formed a small range and remained below yesterday's low for the whole London session and early US session. The downside follow through happened around 11:00am, which was decisive and dropped 233-pip in two hours, that is 7.3 s.d. out of average daily range. The bears are laughing all the way to the bank. There is an instant 150-pip rally after yen hit the bottom of a downward channel on daily charts.

On daily point and figure charts, there is a double bottom breakdown at 94.00. Look at hourly PnF, there is a double bottom breakdown on July 5 at 95.50, the downward momentum continued and broke support at 95.00 and 94.00 on July 6, and July 8 individually.

So the forex strategies for narrow range and inside day is to follow which direction the market is leading and prepare for a trending day. There is no need to predict direction or put personal bias on the market.

04/07/09 London Session Forex Market Comments

All three major currency pairs reversed on hourly point and figure charts and took a breakdown of yesterday's low.

British pound also reversed on daily PnF at 1.46. The 1st downward target for pound is 1.4552, confluenced with 10-day ema 1.4553.

If euro touch 1.32, it will make a 3-box reversal on daily PnF too. The 1st downward target for euro is 1.3213. The 2nd target is 1.3117.

Japanese yen will make a reversal on daily PnF at 98. As long as yen stays above 100, forex trader shouldn't worry too much of current slide. The 1st downward target for yen is 99.44.

Japanese Yen Broke out 100 Key Level

Finally, Japanese yen broke out 100. Weak hands were shaken out by the temporary plunge initiated at the NFP, which stopped just 2pips shy to make a 3-box reversal on hourly point and figure charts. Japanese yen managed to crawl back and remain above 100 during the rest of day. On daily PnF, yen just made a double top breakout at 99. Surprisingly, Yen formed a narrow range bar (NR7) on the key 100 level breakout.




British pound made a double top breakout at the former double top resistance level 1.4766 on hourly PnF. On daily PnF, it's a double top breakout at 1.47. The key resistance level is 1.49 (former swing high 1.4978/1.4982). British pound made a new high in 20 trading days (H20).




Euro made a bear trap at the NFP event, then closed right above the pre-event level.

High Probability Forex Day Trading: Narrow Range Breakout

As a forex trader, the key of successful currency trading is to have a set of high probability low risk forex trading strategies. Trend following of a narrow range breakout is a reliable and frequent trading strategy in forex market.

Cable made a pin bar on 03/30/09, followed by a narrow range bar (NR20) on 03/31/09. The breakout of narrow range happened on 04/01/09. Yesterday was a nice follow through of this breakout, which recovered most of the down swing. On hourly point and figure chart, cable made a double top breakout at 1.4633 confluenced with a resistance trend line breakout.



Euro formed a narrow range bar (NR7) on 04/01/09 with a series of higher lows, which indicated the interest of support. The breakout happened two hours before the start of US session. The up swing took euro standing above 61.8% Fibonacci retracement level. On hourly point and figure chart, with an obvious support trend line formed at the bottom, euro made a double top breakout at 1.3333.



On hourly point and figure chart, yen made a double top breakout at 99.25. The up thrust took former swing high of 99.66, then met resistance, and remained below 100 key level during the whole US session with a raised bottom indicating support. In Asia session, yen touched 100 but without following through momentum.

03/31/09 Forex Market Comments

Both cable and euro showed reduced volatility today. Their rallies stopped at 38.2% Fibonacci retracement level. For cable, there was a pin bar on hourly chart at the rally top. Cable formed a NR20 (the narrowest range in 20 trading days). Watch out for tomorrow might be a trending day.



On hourly point and figure chart, yen made a double top breakout at 98.25 confluenced with the breakout of resistance line. The up thrust stopped at 99.25. Looks like yen need more time before made a decision how to attack the key 100 level.

03/30/09 Forex Market Comments

This is fourth down day for Cable. Usually it's time for swing trader to cash in. On hourly point and figure chart, 1.41 was the support. There was a pin bar on hourly candlestick chart pointing the swing low at 1.4109. It would be unwise to initiate a short trade. Too late to the party.


On hourly candlestick chart, euro had a MACD divergence signals the stop of slide.


Yen is still in the swing mode. The quick slide stopped at the beginning of London session, then snapped back. The long lower shadow on daily chart indicated the support.

Inside Day for Three Major Currency Pairs

Friday was inside day (ID) for three major currency pairs. Since there was no reduced volatility, we should be on alert about false breakout.

At the beginning of London session, euro made a triple top on candlestick chart, just 2pips shy of Friday's swing high. Noticed the divergence given by the MACD, even if euro did breakout, we wouldn't take a long position. There was a strong support zone just above 1.3500 (swing high 3533, Friday's low 3516, and 23.6fib 3524.) 3500 is today's downward average daily range. Since the uptrend was already established, the probability for euro to reverse is slim. The downward movement took Friday's low by 32pips, then crawled back. That's a classical stop hunt. Now euro formed a perfect top range from 3736 to 3516.


Unlike euro, pound did breakout, but all three attempts failed, and formed a triple top.



Yen was staying in an upward channel, made a series of higher highs and higher lows. It retraced more than 61.8% of last week's slide. On hourly point and figure chart, yen made a double top breakout. Yen reached its upward average daily range 97.30.

03/20/09 Forex Market Comments

According to The Taylor Trading Technique
, today was a buying day for yen. After cleared pivot point (94.87), yen met some sell pressure at a confluence resistance zone - 95.65 (swing low), 95.60 (38.2% fib), 95.62 (50sma on hourly chart). Then yen achieved its average daily range at 95.98 (yen's 10 day average daily range is 184pips). Statistically, the probability of yen reaching average daily range is 46%. So more than half of the time yen won't go to the full stretch of its average daily range. Recalled what happened two days ago, yen's daily range was ADR plus 3.1std, that's a 3% probability for yen.

At the beginning of London session, pound formed a quick double top. There was a strong support at 1.44. Likewise, after a double top pattern, euro found its support at yesterday's high.

On hourly point and figure charts, pound met a double top resistance at 1.4566. A clear resistance line formed. Then a double bottom pattern at 1.44 offered support. We will watch this level closely.

Point and Figure Charts Compounded with Narrow Range Bars (NRBs)

As mentioned in Toby Crabel's book, Day Trading with Short-Term Price Patterns and Opening Range Breakout, range contraction days usually are followed by a trend day. The commonly used range contraction days are NR4/ID, and NR7.

Yesterday, we had extremely low volatility on all three markets. Yen, after a NR7/ID on 3/16/09, formed a NR20. That was the narrowest range in a whole month (20 trading days). Euro had a NR20 two days ago (3/13/09). And yesterday's daily range was just 7pips more than the bar of 3/13/09, it's alright to deem it as another NR20. Pound was a NR20/ID.

So we had the most promising contraction pattern yesterday. Today would be reasonable to anticipate a trend day.



Euro took off at 8:00am and surpassed both highs of last two days. So that was a legit NR20/ID breakout setup. On hourly point and figure chart, euro broke out from a double top pattern at level of 3066, which worked as resistance in January three times.



Yen broke down at 8:00am. At 10:00am the downside move took the low of yesterday and formed a double bottom pattern at 97.75 on hourly point and figure chart.



Pound formed a downward channel on hourly chart, and took the low of NR20/ID in London session. That's a double bottom breakout at 3066 on point and figure chart. At 8:00am, pound jumped back and sit just above the low of NR20/ID.

The ultimate move was triggered by the 2:15pm event - Federal Funds Rate. Yen's breakdown stop right at the former swing low 95.65, with a daily range of 317pips, which was a WS7 day with 3.1 std over the average daily range (ADR). Pound jumped from the bottom of the NR20 and surpassed its top, which indicated the breakdown in London session was a bear trap. Pound ended with a 454pips daily range, and a WS7 with 2.5 std over ADR. Euro's daily range was the highest - a whopping 511pips, which was 5.0 std over ADR.

All these breakdowns and breakouts are clearly illustrated by point and figure charts. That's the beauty of simplicity.

03/17/09 Forex Market Comments

Yen did breakout but without much following through momentum, and met resistance from former swing high 98.91. If yen drop under 97.54, which will null the NR7/ID setup. Today's volatility dried up and formed a NR20 (narrowest range in 20 trading days). On hourly point and figure chart, yen formed a triple top. Today's trivial breakout only surpass the triple top formation by one box (25-pip). There is a perfect support line when yen edged up. I will post the point and figure charts tomorrow.

Pound formed a NR20/ID too. Watch out when market approaches today's high and low levels(4135-3963).

Point and Figure Charts for Forex Day Trading

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What is Point and Figure Charts?

Unlike any other traditional charts, point and figure charts do not plot price against time. It applies alternate columns of stacked Xs and Os to track the change of price direction, in which X columns represent price rise, O columns illustrate price fall.

The Benefits of Using Point and Figure Charts

The primary advantage of using point and figure charts is to filter out trivial price fluctuation while removing time effects, which makes identify major support and resistance levels much easier.

Applying Point and Figure Charts to Forex

While point and figure charts are quite common among old timers in stock trading, it’s relatively new to the community of Forex day trading.

The old fashioned way to create point and figure charts is using graph paper and pencil. I use Excel to construct point and figure charts for the three currency pairs I am currently watching (USD/JPY, GBP/USD, and EUR/USD). For the day trading purpose, I keep two types of point and figure charts – daily point and figure charts (dPnF), and hourly point and figure charts (hPnF). For the daily point and figure charts, I use 100-pip box size, and 3-box reversal. For the hourly point and figure charts, I use 33-pip box size for euro and pound, 25-pip box size for yen.

The hourly point and figure charts are updated in real time. The daily point and figure charts are updated by the end of the US session. If you decide to use Excel to generate point and figure charts, I recommend get at least one year data to draw the daily point and figure charts, and at least two months data for hourly point and figure charts.

There are lots of patterns in point and figure charts. I found the most useful point and figure patterns are double top (DT), double bottom (DB), triple top (TT), and triple bottom (TB). It really highlights the tug of war between bear and bull, supply and demand, resistance and support. For more information, visit PnF Master.

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