Friday, August 8, 2014

AUDUSD - 6 August 2014 - Daytrade

I haven't done much trading this week. I contracted the worst flu / cold I've ever experienced on Monday. I had a crushing migraine over Monday and Tuesday which was so severe that I had tunnel vision and couldn't even walk. It was crazy. News reports about the Ebola outbreak also messed my head as I slept and sweated out a fever.

Yesterday the headache subsided significantly and I took the opportunity to trade during the European / US overlap session. I had marked down significant S/R levels using the 30M chart and the AUDUSD had been rising throughout the day. When price retraced to the S/R level I marked here, I looked for an entry signal to go long.

I've been following the course at for some time now, and decided to use the 1M chart to identify my entry. I entered on the break of the purple candle marked on the 1M chart, which was a HVLR candle. It fitted within the purple candle marked on the 5M chart. 

(click to enlarge)

Something that YTC recommends is that you should manage your trade, which is what I did. This would be the third trade in the last week where I exited prematurely. Something to bear in mind is that as price moves towards your profit target, it will move against you at times. Anyway, I exited after a few bearish candles appeared and took a 0.5R loss before price rebounded and hit my profit target. 

You may notice that I've shaded the area around each S/R level with a maroon / dark red colour. I found this easier to trade S/R with. Support and resistance levels aren't lines, but zones. The zones I marked have a range of 4 pips, so once price moves within such a zone, I can start looking for entry signals. This takes the guesswork out of using S/R lines only. 

Some thoughts about the trade:

+ I waited patiently for the retracement and traded with the overall trend. 

+ the S/R levels I had marked behaved well enough.

+ my original profit target was spot-on.

- I could've chosen a better-located entry signal. If you look at the 1M chart, I had entered a HVLR candle that appeared after a bullish candle, towards the top. This would suggest that sellers are moving in, which is what actually happened when price fell in the next four candles. A better candle would be a HVLR candle that appears after a bearish candle, ideally at a new low. That way, there is little doubt that the new volume and range contraction is due to buyers. I marked the "better" HVLR candles in blue.

(click to enlarge)

Also note the tiny bearish candle in maroon / dark red. This was a really tiny candle with an extremely high volume. Price fell after this candle, so this HVLR candle indicated sellers moving in. Notice how it appeared after a bullish candle at a local high.

- I don't like mismanaging trades. With no hard rules, I'm moving my SL or exiting trades based largely on subjective interpretation and most likely my emotion as well. I place my SL at logical places, with the rationale that there will be pending orders that'll trigger in support of my trade before my SL gets hit. If I exit prematurely, I'm not giving those pending orders a chance to work. 

+ I like using the 1M chart to identify entries. Since I trade mainly via the 5M chart, looking for entries on the 1M chart not only multiplies entry opportunities by five, but it also allows me to get in earlier and risk less. 

I probably won't be trading tomorrow. I want to sleep in during the Asian session and shake this accursed flu off. 

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