Part-time Trading - Part 4.6

Continuation Formations:
First of all we must know that any type of continuation begins with a breakout. We learnt about Fake breakouts and reversal. If the price moves towards the support / resistance and breaks about or below the S/R without any hesitation then it is Continuation Formation. As I said before, the price MUST breakout for Continuation. There are lot of types of candlestick patters which indicates Continuation Formations. Let us learn on few types which give us good win / loss ration. Please mind these continuations can happen on Horizontal level of S/R or Diagonal Line of S/R or Range Boundaries or Fibonacci Lines.

Breakout Congestion Continuation:

In the above picture assuming the blue line as Resistance Line, you can see a Green momentum candle break beautifully and then there is a hesitation candle or sandwich candle after that a solid green candle which shows the price moving upwards. This patters may happen at all support / resistance but this specially happens on RANGE BOUNDARIES. These are best suited at flat top or flat bottom triangles for best win/loss ratios.

Breakout Congestion Continuation patters is usually made up of 3 candlesticks just like it's name, 1 breakout, 1 congestion and 1 continuation candle stick. Very important thing we must see a full length breakout candle (small wicks and very long body) on the S/R line on diagonal or horizontal line. The Congestion Candle must be a small one preferably either doji or spinning top. Please keep in mind that this congestion candle must close above the resistance line or below the support line. It must never get below the resistance line or above the support line ever. It must show you that the market is remaining above the resistance level or below the support line. The continuation candle will be our trigger candle. We will trade on this candle.

We trade here exactly like we traded our reversal formations. We wait for the congestion bar to close. We place an entry order (2 lots) 5 pips above the congestion candle and stop loss will be at  5 pips below the congestion candle. Please don't try to trade aggressive way as the congestion candle will be very small in size that's the reason why we give stop loss little higher that the usual conservative way. We are going to close 50% of the trade at the closing of the first candle and the remaining after the second candle. Off-course we are going to adjust our stop loss after closing our first 50% to break even.


Breakout Pull-back Bounce:

In Breakout Pull-Back and Bounce Formation, it is almost similar to the Breakout Congestion Continuation Formation but the Breakout candle takes the price little more higher from the breakout point so that it takes little more candles to form for the price to pull back towards the resistance level (or support level) to base our entry.It may take two candles or 3 sometimes for us to take an entry. In the above picture we see two candles are not enough to retest the breakout point. Here you can find a spinning top / doji or a hammer to confirm a trade. Hammer some time is like a fake breakout. Here please keep in mind you are not going to see doji/ spinning top and hammer together. If we see a spinning top or a hammer we trade like above, 2 lots 5 pips above the high, stop loss (5 pips below for spinning top or doji / 50% candle length of candle if it is hammer). we close 50% trade on the first candle and 50% after the closing of the second candle.

Full Swing Reversal:

This is same like the reversal formation with one key difference. In the reversal formation we use it as COUNTER TREND entry signals. But here it is a reversal to follow the trend. Again we are going to trade IN THE DIRECTION of trend in a reversal fashion. We trade in the same way like we trade the reversal formations with hammers, railway tracks, doji, spinning tops, outside bars & inside bars.

Now we learnt different types of Candlestick Patters, Different types of trading Se-ups. From the next week onwards we will start to trade on real charts.

I will post my part-time trades here. In the future we will learn about Intra-day Trading and News Trading too. For all the posts related to Part Time Trading please click here.


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Part-time Trading - Part 4.5

Fake Breakouts:
When the price tests a support / resistance three possibilities can happen. 1. Continuation 2. Reversal & 3. Fake Breakout. We learnt about reversal in the previous post. Now let us learn about Fake breakouts. If a price moves towards the support / resistance and tries to break above if it is resistance and below if it is support but cannot hold longer and forms reversal then it is fake breakout.

If you see in the previous post (examples for reversal patterns) the first example itself is a good fake breakout. Where you can see the price tries to move up wards but cannot hold longer and forms a hammer which indicates for a good short (sell) entry.

Good Luck.

Part-time Trading - Part 4.4

How to place the Trade?


Let me explain it with an example.

In the above picture, you can see AUD/USD on daily time frame. you can see that I have drawn a resistance line and the price touched there forming an inverted hammer.
Here as soon as the candle closed,what I do is I will place an entry trade for say 2 lots. I place the entry trade to sell AUD/USD 5 pips below the low of the previous candle (Inverted Hammer) and the stop loss will be 5 pips above the 50% of that candle. That is a conservative trade set up.
An aggressive trade up will be I will take trade immediately after the closing of the candle a sell trade and the stop loss will be 5 pips above the high of the candle.
To close the trade, we wait for the new candle to close (that is next day) and close 1 lot out of 2 lots (50% trade) and the rest 50% trade we will close on the end of  next candle AND here we are going to make a small change in the stop loss, i.e, we will change the stop loss to break even.

Let's take another example.

In the above picture, we see EUR/CAD on daily time frame. You can see a nice red inverted hammer on the resistance line. We do the same thing. If we want to trade conservative set up, then we place a sell order on EUR/CAD 5 pips below the low of the inverted hammer and stop loss will be at 50% length of the candle. If we want an aggressive trade then we place a sell trade immediately after the end of the inverted hammer and our stop loss will be 5 pips above the high of the candle. we close our 50% trade at the end of the present candle and remaining 50% at the end of the second candle.

Please note that the trading set up will be same on any time frame on any currency pair. But it is up to you whether to take conservative trade or an aggressive trade.

Let us see an example of outside bar candlestick pattern:

In the above picture you can see CAD/JPY on daily time frame. You can see that outside bars forming at the support line. If we took a long trade, it was very good winning trade. You can see two consecutive green long candles.

Let me just show you how railway tracks look on a real chart:

In the above chart I have marked two circles in Gray where you can see nice railway tracks. Eventhough there were no trade set ups, I thought it was good for the future reference

That's all for now, Have a great day.

Part-time Trading - Part 4.3

Continuation to Candlestick Formation:
As I told you before we are only interested in the candlestick formation that happen in the support or resistance line. So it is very important to draw the support / resistance line in correct place. Please click here to read again about Support / Resistance and here to know how to draw them. Please remember these support and resistance lines are decision taking levels are very import. As traders we just cannot ignore them at all. Traders around the world are looking at these support / resistance and accept the price to re-test the level for continuation or breakout. So any signal we get around that support / resistance is very significant. The direction of the trade is also important here. Remember the direction of trade doesn't depend on us. We must wait for the market reaction to trade and we are going to trade only on the direction of the market.

I again repeat, we are going to trade in the directing of market, depending on the price patterns around the support / resistance either to continuation or reversal .


Reversal Candlestick Formation:

As discussed before we are going to look for reversal opportunities only around Support / Resistance. Now look at the above picture carefully and these are the candlestick patters we are going to look before we place our trades. For the learning purpose we consider the line I have drawn as the resistance line drawn in monthly time frame (Please remember that this line can be a horizontal line/ diagonal line (trend line)/ Fibonacci lines / support or resistance line and we can use daily or weekly time frame also). So here if the price moves around the S/R levels and if we see any (not all) of the above candle stick formations (railway tracks / hammer / doji / outside bar / inside bar) then we are going to look for a bounce (reversal).


Here we are going to wait the candle to close before we place our trades. By taking the above trading example, if we get one of the formations, we are going to place a sell order. Here we took the example of monthly chart, so we are going to wait for the monthly candle to close at the end of the month and then we place entry order. Say for example we get a hammer on our S/R level, then when the candle closes, we take a sell order at 5 pips below the low of the hammer and the stop loss will be at the 5 pips above the highest point of the candle (hammer). The profit taking will depend on the upcoming bar (we are going to close our trade at the end of the next candle stick). We are going to see this with example in the coming post (I know it is a bit confusing).


Railway Tracks:
Railway tracks which are also called as tweezers consisting of two candlesticks of almost same length but different colours. Sometimes they may even break the line move little upwards / downwards (also called fake breakouts). Some times they may not touch the line but come as near as possible to the line. 


Hammer/ pin bar:
Hammer is a candlestick pattern made up of single candle with long wick and short body. We must remember that these hammers or pin bars or inverted hammers doesn't always touch the S/R line. Sometimes they may even break the line move little upwards / downwards (also called fake breakouts). Some times they may not touch the line but come as near as possible to the line. Also note that the longer the wick the better and the colour of the hammer doesn't matter. It may be green or red.)


Outside Bar / Inside bar:
This is the candlestick formation consisting of two (rarely 3) candlesticks where one candlestick will be smaller than the other and the hight of the candlestick will be inside or outside the other candle (look at the picture). In the outside bar, the second candlestick will be close higher (total length will be bigger) than the previous candle and in inside bar, the second candle will be smaller than the previous candle.


Doji Spinning top:
Spinning top is a candlestick formation where the body and the wicks are very small in size and Doji just looks like a plus sign.


In the future post we are going to see some examples of these reversal formations. For the older posts if you have missed any please click here or go to PipBase
Good luck.

Part-time Trading - Part 4.2

We are learning about Price Patters. Yesterday we learnt about Candlesticks. Now let us go through about Candlestick Formations.

What are Candlestick Formations:
By definition, Candlestick formation is a formation of different consecutive candlesticks that shape up in one particular way. This formation (as a whole) is called Candlestick Formation. These combination of Candlesticks or Candlestick formation gives us the PRICE PATTERS to trade. Some of these patters give us continuation or reversal patters. Here you must note one thing. This patters are formed by one to three Candlesticks. Most important thing is we are going to look only for the candlestick formations around the support/resistance levels (ONLY AROUND THE SUPPORT / RESISTANCE LEVELS).
Market is not about PREDICTION it's about REACTION. As Forex trades,r our job is not to foresee the next market moves but to react as soon as possible to the market swings / move that's is happening on our charts. It's just not possible to see the next market moves. So our job is to wait for the market moves to react (trade).

The Conclusion is, we are going to trade in the directing of market, depending on the price patterns around the support / resistance either to continuation or reversal .

In the next post I am going to write about the different types of Candlestick formations that we are going to consider for our trading.

Part-time Trading - Part 4.1

As promised before we are going to learn about Price Patterns. We are going to place our trades on the support / resistance with the help of these price patterns. These Price Patters are nothing but the Candle-stick formation.

What are Candlesticks?
Candlesticks are used to describe the price action during the given time frame.
Candlesticks are formed using the open, high, low, and close of the chosen time period.

• If the close is above the open, then a green candlestick (usually displayed as green or white) is drawn.
• If the close is below the open, then a red candlestick (usually displayed as red or black) is drawn.
• The red or green section of the candlestick is called the "real body" or body.
• The thin lines poking above and below the body display the high/low range and are called shadows or wicks.
• The top of the upper shadow is the "high".
• The bottom of the lower shadow is the "low".

That's all for now. Let us continue about the Price patters in the next post.

Part-time Trading - Part 4

I promised you I will write about the price action in this post. But before going there, let us talk about something else.


What we do in the weekends when there is no trading? 
In the weekend we prepare ourselves for the coming week by doing some research on all the pairs that we are going to trade. This may take around half an hour to one hour if you choose to trade 28 pair (the best for trading). This is the best time to do your research as the markets are close, there is time for you to go through each currency pair personally. You can choose any day of the weekends (Saturday or Sunday) and any time. In this time you are going to check the currency pairs on different time frames (M, W, D) and most important thing is, you will be getting ready for the coming week. This is important because, this will minimise the time you are going to spend on the week days for trading.


Currency Pairs:
There are different currency pairs to trade. But you must choice the ones which suits you in different ways. The main currencies which are most heavily traded are - USD, EUR, GBP, JPY, CAD, AUD, NZD & CHF. So you are going to concentrate on theses heavily traded currencies in pairs (EUR/USD, GBP/USD, USD/CAD, USD/JPY, AUD/USD, NZD/USD, USD/CHF, EUR/GBP, EUR/JPY, GBP/JPY etc. You can get 28 pairs.) But for some of you, you will not get all the pairs you want to trade. So you can select the ones with  lower spread (The spread is the amount of pips between the bidding price and the asking price is called the spread. The spread is what forex brokers use to make money on every forex trade placed through their network. For example, the forex broker may be paying a price of 1.3600 for buying or selling. The broker will then allow you to buy the currency for 1.3601 or sell it for 1.3599. The spread always stays around the actual price that the forex broker is paying. So when you buy, you get one end of the spread and when you sell you get the other end of it, and vice versa. By the time you close your trade, you will have always paid the spread.), more conservative pairs.


What we actually do on the weekends is go through the charts of each currency pair we want to trade (usually 28 pairs). First we remove all the lines we drew before. We start with EUR/USD monthly chart.

In the above picture what we see is EUR/USD on monthly time frame. What we see there?

What we see in the above picture is there are few support and resistance lines. I know there is one more in the extreme bottom - I didn't mark it because it is very far at the moment from the current price and I don't want to make my chart too crowded. You can see that the price is nowhere near the S/R. So let us move to weekly chart for the same pair.



In the above picture, you can see a beautiful Trend-line, Few Support and Resistance. Can can see a trade forming around 1.334 with the trend line. But there is also a resistance which was broken up-side before. As you already know, Horizontal line give better quality signal than trend-lines, Let us watch and see the price pattern (I will write regarding price action in my next post) and accordingly we will place the trade. Now let us go to daily chart.

In the above chart what we see is EUR/USD on daily chart we have our trend line, S/R also. But look closely. the price is not very near any of them. So what we do is, wait for the right opportunity either the price has to move up near the resistance/trendline or near the support  so that we get a valid trade set-up.


So the same thing we do with all the other currency pairs we want to trade. We start from monthly time frame, weekly then daily and draw out lines. Some times, we may not have any trades at all. 


Important thing is we maintain a trading dairy. We must note down what we observed on our weekend research. We must note down if we are waiting for any future trades on particular currency pair. This will be helpful for us in the week days and save us a lot of time. (For example: in the above research on EUR/USD, we observed that, there are no trades on monthly time frame. But on weekly there is an opportunity. On daily time frame, well not right now. But there is more movement in daily. So we may get in future as the price is not very far from support/resistance.).

I hope this was helpful.

Part-time Trading - Part 3.3

Basic Principles of Support and Resistance Trading:

1. You need a clear Market Direction
2. Avoid Alien Zone
3. Search for highways
4. Follow the Trend
5. Always remember Long-term trading is better than Short-term trading.
6. Use proper time frame
7. Horizontal S/R is better than Diagonal lines (trend lines)
8. Don't try hard to find a trade. If you don't find it, it is not there.

You need a clear Market Direction:
Please make sure the direction of the market before taking any trade. Always remember there are only 2 possibilities. {For example: If you have an up-trend you can search for either continuation moves (up) or breakout (down)}.The same thing goes with range boundaries.

Avoid Alien Zone:
The Alien Zone what I call is when the price is very far from the S/R levels. If the price is nowhere near the support or resistance, stay out of it as there is no clear direction.

Search for Highways:
Search for highways free of traffic. Here traffic jam represent the support / resistance. If you are driving in a highway with plenty of cars (horizontal & diagonal lines of support / resistance) it is just painful to drive (take trade on those charts) as there is lot of confusion. Likewise wait for the price to show you a clear direction and trade where there is more room for your trades.

Follow the Trend:
This is very important. Buy of support and sell of resistance. {For example: if you have an up-trend and has a resistance line drawn before, if the prices breaks upwards and follows the trend, wait for the price to retest the support (former resistance) then buy of support line or if the price breaks below the support (former resistance will be stronger and again acts as resistance) then sell of the resistance}.Don't sell of support and buy of resistance. Specially you must not sell against long term support or buy against long term resistance.

Long-term trading is better than Short-term trading:
If you get two trading signals on different time frames, always remember long time frames are better and safer to trade than the short term time frame charts. This is very effective for your win/loss ratio.

 Use proper time frame:
You have to search for the price patterns (you will know about this in next post) in the same time frame where you drew your Support/Resistance. If you have your S/R on Monthly time frame, don't try to enter your trade based on Daily or weekly time frame just to sharpen your entries. That is called micro-managing your trades, which are most of the times, fake entries end up in losses. Wait for the proper time entry point on proper time frames. The sharper the S/R the better.

Horizontal S/R is better than Diagonal lines (trend lines):
As a trading set-up, the signal you get from horizontal lines of S/R is of higher quality than that you get from diagonal lines (trend lines). But it doesn't mean that you can consider diagonal lines as bad set-ups. If you get two signals on one pair, one each from horizontal line and diagonal line, you better go for horizontal line S/R as the quality is better.

Don't try hard to find a trade. If you don't find it, it is not there:
Be Selective of your trading set-ups. If you don't find it, it is not there. Don't try too hard to find a trade just for the sake you want to trade. Wait for a good quality set-ups and pick the proper charts to place the trades for better win/loss ratio.

That's all for now. In the next post we will talk about price patters which you want to trade on the Support or Resistance.

Part-time Trading - Part 3.2

Hello,

Yesterday we discussed about how to draw support / resistance, trend-line, range boundaries & Fibonacci retracements. Few of you who checked the post through email, didn't get the chance to go through the video regarding Fibonacci retracements. Please click here to check the same.

In the mean time, let us have a look at an example of support lines and trend-line in real time charts.

In the above picture you can see GBP/USD daily chart, on a up-trend. The diagonal line I have drawn in blue is the trend line. The green horizontal lines are the support lines. The red horizontal lines are resistance lines. You can also see that I have marked some circles. The blue circles (you will not draw them on your actual chart, it is only for information purpose) shows exactly where the trend line have been marked. The red circle shows the previous swing low where the trend line was marked before. I know I have drawn lot of lines there, they are only for Information purpose. In the real trading, I will not draw so many lines because as I said earlier I don't like my charts look ugly and confusing.

We will see one example of Fibonacci retracements:

In the above picture you can see AUD/USD monthly chart. You can also see that the price was in a good up-trend and it went down to 38% Fibonacci and bounced back upwards.

 

The above picture, you can see the same pair on the same time frame. But here we have to wait for the price to move downwards between 38% to 61% to bounce back so that we can have a valid trade.

Let us look one example of Range Boundaries:

In the above picture you can see USD/CAD on daily time frame. It was a beautiful Range boundary formation there.

I hope you will do your own exercise to understand how to draw these important lines.

That's all for now.
Have a nice day.

Part-time Trading - Part 3

Hello

Yesterday we learnt the the important factor for successful part-time trading is long term support / resistance and price action around that that support and resistance.

Today we are going to learn how to draw those key levels of support / resistance in the long term charts (daily, weekly & monthly time frames)

The trades we are going to look for are, bounce trades, continuation trades or breakout trades.

Support / Resistance (S/R): when you look into the charts, you will see many swings (zig- zag patterns), but you are not going to draw lines for all those highs and lows of the charts but only to the significant highs and lows. Please note not to make the mistake of drawing too many lines as the chart looks ugly (*_*).

If you have two swing points to join together to draw a line then it is a stronger support / resistance (also known as double tops or double bottoms).

Trend-lines: You can only draw trend line (diagonal line) only if you get two swing points in the direction of the trend. If the trend line is below the price then it is up-trend line and if the trend line is above the price then it is the down-trend line. But always keep in mind the trend lines should begin from the very beginning of the new trend. Also you can draw only outer trend lines of a trend.

In both the cases (trend line or simple horizontal S/R line) wait for the price to move towards the lines and based on the price pattern (You will know about it in future posts) you are going to place your trades (entries).

Range Boundaries: Now let us talk about the Range Boundaries. Range Boundaries or Ranges are the price conjunction between the two boundaries or support or resistance. These Ranges can take horizontal levels of support or resistance or triangular shape (One S/R and the other trend-line). But the good quality ranges are horizontal ranges.

Fibonacci Retracements: One more type of drawing the lines are Fibonacci Retracements. There are plenty of videos who show you how to draw Fibonacci Retracements on your charts. But please remember we concentrate only on 38% to 61% area of this Fibonacci Retracements for the REVERSAL so that we can trade in the direction of the trend. Please note that Fibonacci Retracements are only valid on trending in one single direction. If there is no clear trend or swing in the direction of the trend, then there is no valid trade. Please go through the video.



That's all for now.

Good night.

Part-time Trading - Part 2

I hope you realised that part-time trading is not as stressful as intra-day trading and much more pleasant experience.

Important factor to succeed in part-time trading is:
Support / Resistance and Price action - especially LONG TERM support / resistance and price action around that support / resistance

What we do is to wait for the price to move towards the support or resistance (S/R) in the chart. Depending on the price reaction near the key levels (S/R) we are going to trade (Buy/Sell) always in the direction of the market reaction.

If the price is moving up (uptrend / bulls), it reaches a top of that trend & then it collapses down (bear), that swing high we mark as resistance level. After few days (daily time frame) or week (in weekly chart), if the price again moves upwards towards that resistance, we look for a trade either to sell or buy depending on the price formation.

Conclusion: we draw support or resistance (level) lines in our charts (daily / weekly or monthly) and WAIT for the price to move towards our levels either to breakout or bounce to place our respective entry trades. as simple as that.

Part-Time Trading - Part 1

Even though, Intra-day trading sound exciting and more fun, Part-time trading is much easier way of trading Forex. Let me tell you why.

1. It is easier to search the trade.
2. As we use long term charts (daily, weekly & monthly), the movement of chart is slow. So if you find a trade you don't have to worry about the trade as much as you do in intra-day trading. In intra-day trading, you have to make decisions quickly (in fraction of a second when you get a signal) to place trades and also to exit. Where as in part-time trading, you have plenty of time to take a trade and to manage it.
3. It is as much profitable as intra-day trading, it is more efficient with less effort.
4. Intra-day Trading carries a higher degree of risk than part-time trading because, in intra-day trading, the signals you get are of lower quality because you are using smaller time frame charts, price is volatile, validity of the signals will be very less.

Please click here know about basic concepts of Forex.
Please click here to get the user guide of the chart of my favourite broker.
Please click here to know how to draw lines (support & resistance) on the chart.

Part-Time Trading - Introduction

Hello Everybody,

Welcome to our new session of Trading. I hope you have opened the demo account with my favourite broker. As you all know the market is closed for the weekend, you can trade again on Monday (can't just wait to trade).

There are different types of trading, few of them I mentioned in my previous post. Few of them I didn't mention are Carry Trade, Range Trading, Trend Trading, Swing Trading, Counter-Trend Trading etc.. I mainly concentrate on few that I mentioned in my previous posts.

Part-Time Trading:
This type of trading is suitable for almost everybody, especially for those who have a full time job. You need around 30 minutes a day to trade.
In this type of trading, we concentrate on long term charts. If you check the market scope (chart), There are different time frames, we concentrate on daily, weekly and monthly charts.
In this type of trading we look for 200 to 250 pips per trade and around 8 to 10 trades per month, that's right you will not have trades everyday.
If you have a mini account,  200 pips = $ 200/- (EUR/USD) x 8 trades = $ 1,600/month
If you have a micro account, 200 pips = $ 20/- (EUR/USD) x 8 trades = $ 160/month
If you have a standard account, 200 pips = $ 2,000/- (EUR/USD) x 8 trades = $ 16,000/ month.

Now you realised Part-time trading is also a profitable type of trading.
That's all for now.

Please don't forget to visit my Blog PipBase for the older posts, in case if you have missed any.