EUR/JPY Daily candle

The newest EJ candle has formed a candle that looks alot like another classic reversal candle. When a candle opens BELOW the close of the previous day and then closes more than half way up through previous day candle THEN it is called a piercing candle. The candle that was just formed did not actually open below the close of yesterday's candle, so it is technically not a piercing candle. However, I think that it is so close that is may be perceived and treated as a piercing candle.

Being that it is not actually a piercing candle I am not buying it at market price. Rather I am looking for the candle to 'prove' itself by placing a buy stop somewhat above the highs of the last two candles. I am using a 'buffer' that is about the distance of the ATR(14)/10 which equals about 16 plus the spread of 4. I know this sounds a technical and stuff but really its just a way of finding a comfortable 'buffer' distance for my buy stop. I am also using a SL based on the ATR(14) so my stop is 160 pips and the lot size has been adjusted so that I am comfortable with the risk to my account.

This is not a trade recommendation. Should you decide to trade be sure to use risk management or use a demo account.

USD/CAD and EUR/JPY Live trade update. . .

So far FX trading has looked very easy. Luckily I've decided to start this blog just at the right time and a great setup came our way! If you are not new at trading FX you will know that it does not always work out this great. If you are new and have learned something. . .well that's great because that is my goal - to help anyone interested in learning. Remember though that risk control is of utmost importance if you do decide to enter the market. Never risk more than what you are comfortable losing, period.

The above picture shows my current position in U/CAD and E/J both have moved very nicely in the predicted direction and both have profits locked in. Currently I am using a trailing stop (TS) to follow the price action. There are more than one way to use a TS. For instance if you get into a trade and it moves nicely in your direction you may want to manually adjust your trailing stop. When you do this you might choose to set the stop behind resistance or support areas that price action (PA) has recently passed - the idea is that once PA has passed such an area it will have trouble bouncing back to take out your position. Another way to use a TS is to set a TS based on pips in profit. You can do this on your trading platform if you are using MT4 (and many others). What I have done in this instance is use a TS based on pips in profit using a distance determined by an indicator called ATR. ATR stands for 'average true range' and can be used as gauge to tell you how many pips the market is moving at any given time. ATR calculations are really not that important but if you need to know just look on the net and you will easily find how it is calculated. As I said I am using it as a gauge of market movement at any given time. The whole point of this is that I have been using the daily ATR(14) as a TS for the past while to try and let the two trades run as far as possible before taking profit. You will see in the above picture that this method has served me nicely in this case. . . one note on using TS on the MT4 platform - your computer must be running as the trade progresses, if not your TS will not be updated!

Look for good trading setups and control your risk. . .

Live EUR/JPY trade

This is how I entered the market based on the bearish engulphing candle we spotted earlier.

At the close of the candle I placed a sell stop order just below the low of the signal candle. Of course I did use a stoploss and my lot size was small enough to keep the risk to the account well under 1%. So the idea is that the candle would be a strong signal and that price would continue to move down, which is what happened. Today I saw that my trade is in profit and I have moved my stoploss towards the current price. This has effectively 'locked-in' profits and I will continue to move my stop if the price continues to move down.

I could of course also simply close the trade now and book the profits at the current level. There are as many ways to manage a trade as there are traders. Another way some people use is to close a portion of the trade and then trail price. You will have to find out what you feel comfortable with. The method I am using gives the trade potential to run into higher profit than if I chose to close it at any given point, the trade-off is that I will lose any of the pips between the current price and my stoploss when price does stop me out.

Forex Entry Signals - EUR/JPY Continued. . .

So we got a nice looking signal on the daily chart - now what??? As it turns out after the signal we spotted price did move down (this does not always happen, which is why we use stoplosses!) - so what are some possible entry points if you had wanted to take a short(sell) position?

In the above chart you can see the daily chart on the right with the previously mentioned signal bar marked with a triangle. The chart on the left is a 1 hour chart and I have marked some potential entry points which occured the day after that could have been used and depending on your trade management all three could have booked profits. With practice you will learn to see these entry points. . . and again I think having a look at japanese candle stick reading would be helpful. The idea would be to place a sell stop order just below the low of the hourly signal candles. Many people will place their stoploss just above the same signal candle. It's really up to you though just be sure to use proper risk control, as I said earlier not all signal candles will play out as nicely as this daily candle did.

Did I take a trade based on the daily signal candle we saw? You bet I did! I entered on a break below that original daily candle. Check out the next post to see my play on the signal. . .

USD/CAD update - moving stoploss to protect profits

This is an example of moving the stoploss up past the entry point (break-even point) to 'lock-in' profits. Now if the price should move lower I will still be in this trade unless it moves all the way to my stoploss. Of course I am looking for the price to continue in my favor and that is why my stoploss is not closer to current price action.

What is a Forex entry signal? EUR/JPY example

There are many ways to determine entry signals in forex. Some people use signals generated by indicators or moving average crosses. Other people rely soley on price action. The above is an example of a price action signal. The candle that is forming now is considered a reversal candle using the art of japanese candle stick reading. Rather I should say that if at the close of this bar it still looks like it does here then that would be a signal to consider short (sell) entries. This type of formed bar is called a bearish engulphing bar and may indicate a reversal of the up trend. Have a look back thru your charts and see how often the signal holds true. Read up on the art of japanese candle stick reading, I believe it will be worth your while.

This not a recommendation to trade this signal, however if you decide to play it after the candle has finished forming either do so on a demo account or if your trading live be sure to apply proper risk management.

Why trade Forex?

I trade forex because of the leverage. Again for a very small upfront investment I can control a large position. I would like to say that there is no commissions but since you 'pay' the spread on all your transactions I really can't say that. However, it does seem like a painless way to pay to play.

Key to taking positions is understanding how much you are risking when you entering a trade. This is a great reason to trade demo for a while, it will help you to understand what different lot sizes over different pip amounts will cost the account if the stoploss is hit while the trade is not in profit. For instance if .01 lots result in 10cents/pip then a 100 pip stoploss against my position will cost me $10.00
So if I want to keep my risk down to say 1% for any given trade I will need to have at least 1000 in my account for every 100pips risked at .10/pip. Once you have mastered how much risk any given stoploss represents to the account you can beging looking for entry triggers.

USDCAD Update

I don't want to see a trade that has moved this much in my favor to turn into a loser so I've moved my stoploss up to break-even +4 pips.

Current Forex Trade

Currently I have a position in USDCAD (closed at 1.0523 on friday). I've gone long at 1.0357 and my stop loss is currenty sitting at 1.0187 (170pips). If my SL is hit my account will lose less than 0.5%

Why am I in this trade?
To be sure the current trend for this currency pair is down. However we are at a substantial resistance level which is apparent if you look at a weekly chart. I am looking for this pair to take a bounce up off this resistance level. If this happens I have the option to move my stoploss up to lock in profits.

This is not a trade recommendation.

How do you get started?

There is ton's of information available on the internet. A great site for learning about investing in stocks and options is Investopedia.com, at this great site you can learn all kinds of things about investing from basic definitions to trading systems. Investopedia also has a fantastic trading simulator you can use for free. Create an account and join a game in the simulator and start to practice trading.

An excellent source for learning the ropes with Forex (FX) is babypips.com here you can learn alot of the basics regarding forex for free. There are also free public forums regarding forex trading, ForexFactory.com (FF) is a popular one that I have been posting in occasionally over the last 1.5years or so. My handle on FF is andante9.

It is a simple matter to set up a demo account in which you can practice trading forex. Just visit a broker site like FXDD.com and download a demo. Metatrader4 (MT4) is a very user friendly trading platform and is easy to set up.

A demo is a great way to learn the basics of what types of trades are available and how to place and modify and close trades. Make no mistake though there is a big difference between demo and live trading. First of all the demo feed is slightly different then the live feed - but that is not the main issue. In reality you will be dealing with the pyscology of live trading - mainly fear and greed. These are the enemies of a trader and when you go live you will learn all about them in great detail. For instance check out this link it is an online account anaylizer to which I've attached a demo account https://www.myfxbook.com/portfolio/members/andante9 In this account I've taken a demo account from 5000 dollars to over 7500 dollars since August. Why then can't I do this in my live account? Well fear is the answer here. You see in this demo account I have been trading with no stoploss so I could lose most of the account with one bad trade. (edit: I hit that one bad trade! LOL! There are other accounts there with better money management)

All that being said if you want to trade/invest read as much as you have time for and set-up a demo account and start practicing while you save for a live account.

Why This blog?

I've been working on investing for some time now. I will be using this blog to share what I've learned. Forex has been the center of my attention for the past two years. Currently I have a Forex trading account with FXDD. Also I have investment accounts with two other brokers. I am currently opening a Tax-Free Savings Account (TFSA) at one of my other brokers as well. TFSA's are a great tool for generating interest and capital gains because, well you guessed it, they are tax-free! The FXDD Forex account has been my focus for sometime now.

Let me say right now up front that I am no guru. I simply want to share what knowlegde I have gained with anyone who is interested. My purpose here is not to give anyone direct trading advice. Please do not mirror my trades. I am not responsible for anyone's trading success or failure, they are - just as I am responsible for my own success or failure. However I will be sharing positions that I have taken for the purpose of keeping a record of the thought process and reasoning, at least I hope there will be some reasoning!

Thank you to anyone who particpates in this adventure with me. Trading and investing will prove to be a life-long learning experience I'm sure.

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Getting Started is the hardest thing to do.

Dan