I hope you’re well and had an enjoyable weekend! Got to meet up with an old friend I hadn’t seen since 2015 yesterday so that was great!
Anyway, you’re not here to learn about my life, and if you are, it’s kinda creepy. Just ask.
I executed a gold trade LONG on Friday, as mentioned on the watchlist I was waiting for a clear entry and it has since then reached TP for 1.55R.
I’m happy with the execution, even more so since it gave me the time and a boost to collect more data in a recent backtest.
This trade was basically a picture-perfect example of the type of trades I want to be executing in the future
I’ll start this up with mentioning gold since that’s where I literally just picked off.
We’ve broken the descending trendline – ideally, I’d like to see price action remain above the area of demand and trendline for one extra day without touching either of them, but in any case, it’s looking good for a potential reversal in my books
Now back to real FOREX and not commodities, oops 🙂
Aussie Canadian is getting closer to a counter zone / an area of supply.
I’m keeping my eyes on it to see how price reacts to this zone – it’s quite a nice area since it also kinda fits with the descending trendline, so we have a couple of confluence factors there.
Aussie Swiss seems to really like this trendline, it remains on watch in case we have a strong breakout, but only time will tell so I’m being patient here
Canadian Swiss is also approaching an area of demand combined with a trendline, so it’ll be interesting to see what happens here.
You folks that come here regularly must be starting to get sick of me mentioning GBP/AUD on my watch, but it remains there! I’m patiently waiting to see if price heads lower for one final move before a reversal
Quite a few pairs are on my watch today, so let’s have a look! I hope you guys didn’t mind me not mentioning any yesterday, but figured 3 trades recap ought to do the job!
Let’s dive straight into it?
Aussie Swiss is on my watchlist for a potential trade today or Monday. Once we have a clear break of the trendline we’ll also create a new area of supply so it’ll be an interesting pair to keep my eyes on
Canadian swiss has recently broken an ascending trendline giving us a rather clear area of supply – we are getting a lot closer to an area of demand tho, that fits perfectly with the trendline. I expect it to be rather good!
Pound Aussie has spent the majority of the month going sideways, however, due to the share amount of time it’s spent going sideways I believe it has validated the creation of a new area of supply due to the trendline break
Dollar Swiss is also on my mind, while I’m not expecting a set-up to happen any time soon I just wanted to share the chart since it is a rather clear set-up to me
Dollar Yen has been on my watchlist for a decent amount of time now, it’s just a question of when will we reach an area of interest?
XAU/USD is also on my watchlist for a potential short term play based on pivots, EMA, a previous high retest, and a fib retracement.
I can tell you the entries many strategies available for free are profitable. Heck, if I shared this strategy, which is pretty darn straightforward you could generate a profit
Yet, I can guarantee you that if you were to implement it straight out of the box without testing it & trying to develop a few filters & figuring out a clear exit plan you won’t go far.
Now, before I start diving into it, I shall mention one thing:
A technical analysis/trading plan to enter trades isn’t the only thing you need to develop to become a good trader.
You’ll need to develop clear exit rules.
You’ll need to develop a strong mental understanding of your strategy.
You’ll have to come to accept that you will lose money (from time to time).
You’ll have to continually work to either refine or even only execute this strategy.
Where to look for potential reversals
To make it easier we’re going to look at a daily chart with an indicator I have developed
This removes all discretion and we can be sure that every single zone will be created following the exact same rule
The chart represents the Australian Canadian Dollar from August 2020 till today with a single indicator.
Now before going on too far, let’s just explain what I am trying to highlight with my indicator
The indicator objective is to highlight areas where the price is likely to reverse
The logic behind their creation is to find days where the price saw quite a lot of hesitation in terms of direction (creating wicks that are bigger than the body of the candle) that are then engulfed on the following day
You’ll probably notice that it happens quite a few more times than where my boxes are created. Some appear to have been “missed” the reason for that is that I want those zone to be created either close/below (for demand zones) to the HMA to avoid having zones created when the run is rather extended and in need of a pullback.
This logic was to reduce the number of zones & improve their likelihood of success.
On this chart you can notice that out of the 16 zones that were created since August 2020 9 of them showed a rejection or at least a small reaction.
That doesn’t mean too much, it may only be Aussie Canadian Dollar that is as successful, but it highlights that the areas created are interesting.
The aim of these daily zones is purely to highlight potential areas of reversal
I am not looking to take a trade purely based on these boxes my indicator creates.
This is where multi-timeframe analysis comes in.
Using multiple timeframe analysis
While it is perfectly fine to use only one timeframe to find areas and potential entry levels, I personally prefer to use a different timeframe to find the confirmation I am looking for.
This enables us to ensure that all the timeframes are “speaking” the same language.
If the daily shows that price has reached an area of reversal (a box) that is great, however, I’ll only know that the level has been respected a few days afterward.
Instead of waiting multiple days I prefer to dig into the hourly (or even 4hour) chart
Using the hourly chart, I decided to use a rather simple indicator showing highs and lows according to a formula as to keep it as mechanical as possible (this however has a delay of three candles for a confirmation)
Let’s pop up the hourly chart on the main screen to make it easier for your eyes
As you can see each time a cross is created we can see that the high or low was respected for a few candles afterward/before.
Since we already have areas on the daily where we are interested in a potential reversal, I will be using these highs/low as my entry method.
A break and a retest is a nice quick and dirty set-up to analyze so let’s dive into it.
(If I wasn’t using my daily chart to find areas of interest, this strategy would require a lot more fine tuning to be profitable, that’s why multiple timeframe analysis is key)
My daily chart shows potential areas of reversal
My hourly shows a break in the current pattern of lower highs / or higher lows.
Both indicate that a potential change will take place in the market. That is the strategy I am looking to use.
When I backtest I want to be as precise as possible with details, to be able to
Find flaws in my model
Find potential filters to increase the average return / strike rate
Understand if I can change my target method or exit strategy
Get as much data as possible to build a true probabilistic understanding
Have clear rules once I implement it live
For example, in my recent backtest, I decided to add 3 filters based on the daily chart.
The hourly is still relatively new so I wanted to build a large data-set and let my unconsious learn as I went before diving back into it and adding filters.
Here’s an example of how I set-up my initial excel (or google sheet) before I start adding comments / screenshots / analysis of my filters etc.
It then tends to look like this
As you can see, I track the set-up, the daily filters and the return, I’ve personally stopped taking screenshots since it reduces the speed of my workflow, I find it easier to look back on the charts (Alt G) on TradingView.
These trades represent price action since 2018 till today.
A few examples
Now I’ll be honest, I do not want to go into too much detail about my targeting or stop placement or even trade management.
I’ve spent over a hundred hours into this so far (my regular trading plan is over several thousands of hours)
So if you want access to the really detailed information I’ll invoice you the number of hours I’ve spent on this with my consulting rate 😉
However, you’re able to notice a rather clear multi-timeframe breakdown
On the daily we reached an area of interest for a potential reversal
On the hourly we broke below one of the crosses which enabled me to place a short order
The two timeframes were sharing the exact same information, the same story so I felt comfortable executing a short.
We can see that it successfully ran 1R, actually 2.2R if the stop was at the high
It doesn’t mean the trade was a success in my trading plan, however, it does show the potential.
This was only one example, the most recent area of interest on the daily, so let’s look further back
Daily was interesting but the hourly failed to confirm the edge so no trade
Let’s look at the one before that?
Daily fit the story
Hourly (took a long time and went quite far before pulling back) also fits the same story, another 1:1 if you were to execute it and decide it was worth placing an order even tho it had ran quite far
The previous one?
Daily fits the story
Hourly fits the story as well, another 1:1
I’m not going to go all the way back, my objective isn’t to show you if the strategy works, and if I use a 1:1 set-up, the objective is to show the importance of collecting data
While I was testing a few other things while collecting data here’s a breakdown of the numbers I collected
The breaker 3 set-up is the one that is of interest to us.
You can see I collected 151 trades
For a return of 80.5%
And an average return of 0.53%
If you recall the different filters I mentioned previously (it depends entirely on what strategy you are testing so don’t just copy the same ones as I am)
I tracked three different filters:
You can notice that using no filters whatsoever I had an average return of 0.53 so it isn’t really worth using the confirmation or before/after filters since they don’t have a big impact on the average R:R they just reduce the overall return and compounding
However, using only trades from the 1st zone I can see that my average return would go from 0.53% to 0.67% and only lower my returns by 7% over the four years while making me take 40 trades less (which means fewer commissions/fewer carryover fees/ less exposure to the market risk)
Using that filter appears to be worth it.
From there, I decided to look at the impact of combining the filters together in different combinations (there were a lot of combinations possible so I won’t share all of them)
An interesting combination for instance was having a valid confirmation and remaining in the 1st zone
This increased the average return from the original 0.53% and 0.67% for using only the zone as a filter to 0.74%
A return of 50.8% vs. 73.2%
You may be saying to yourself, why in the hell would I accept to “lose” 23.2% that’s nearly 50% of the return
Well, that’s entirely upon you.
Your average return & strike rate matters
I’m assuming most readers of this blog have a trading capital of 5,000$-100,000$, which means they want big returns and not necessarily “safe” ones
However, that also means that a lot of you are going to be using a “prop” firm to finance you, which is going to have a maximum drawdown.
Which is a great service, has a great team, and has always paid me when I invoice them very quickly. (P.S. They also have several scaling solutions I find interesting)
Anyway, this isn’t a blog post about how great they are (they are, just trust me, DYOR)
That means I have a maximum DD that I can accept before they cancel my funding
This means my strike rate is actually rather important. I do not want to have a large drawdown, hence a higher strike rate and a higher average return can be beneficial, even tho it may mean a lower overall return.
That being said, I want to use a caveat (is that the right word) here?
Do not search for the strategy that gives you only 5 trades a year with a high strike rate and high average return, well, you may, but the idea here is that the more trades you take the more compounding you’ll be able to achieve.
Using the exact same data
1 filter applied = Only zone 1 = 0.67% avg return
2 filters applied = Only zone 1 & valid confirmation = 0.74% avg return
Well, fuck that doesn’t illustrate well my example of reducing my maximum DD by increasing my strike rate, ugh. Anyway, IT USUALLY DOES!
The market isn’t perfect clearly ahah
However, you still see what I mean, the returns added up where respectively 73.2% vs 50.8%
Once you start compounding, a greater number of trades makes the compounding do its magic
Using one filter, you can see a 43% growth in the returns thanks to compounding, in the second filter, it’s “only” 28% growth from their starting numbers. So let’s keep in mind that compounding is magic, but it works only on a lot of trades, if you take nearly no trades there’s nearly no compounding benefit
All that to say
You want to collect a LOT of trades
To have more data
To know if your strategy is profitable
To know if it’s worth using filters
To know the exact benefit and drawbacks of each filter
That is how you end up with a trading plan.
Data is king
But keep in mind it’s not because a strategy was profitable in the past that it will necessarily be profitable in the future
Your next steps
Find a mechanical way to look at charts on two timeframes
Create a first set of hypotheses of stop placement & target (you’ll probably change them)
Good morning folks! I hope you’re well and had a fun weekend!
Just moved to a new Airbnb, I remain in Marseille for the week, and then I’ll hit the road!
Let us dive straight into my watchlist?
P.S.A.: Europe changed times, so I guess that means (if you’re European) the four-hour close is taking place one hour later!
(I just started writing good morning folks, I clearly need some coffee before writing this) — Now that I’ve got coffee let’s give this another shot.
We’ve recently reached an area of supply, yep, it dates back to 2015, but it has a valid daily and weekly stack hence my interest for a potential trade here!
Aussie Dollar reached an area of supply, this time a lot more recent than 2015, which makes me trust it a lot more as you can probably imagine!
While we do have a valid weekly stack I’ll be the first to admit I’m not a big fan of the current 4hour price action, seeing so much sideways action isn’t my cup of tea. Ideally, we’d see either a clear push higher before a reversal or a clear double top formation
Pound Aussie has reached the area of demand I’ve been keeping an eye on for a potential reversal.
Let’s see if we get a clear entry, but if we do, I’ll be quite happy since that would probably mean that GBP/NZD (a trade I am in) is going to turn bullish as well!
Gold remains on my watchlist since I guess it’s the thing we’re all after it, the only difference is that I want to short it 😀
I’m starting to think COVID / War / Inflation is priced in so we could see a reversal
Good morning folks! I’ll admit, I haven’t finished my coffee yet and I started off by writing Tuesday 25th of November, so if you see any glaring mistakes I must apologize in advance
I executed 2 trades yesterday / last night so let’s dive into them:
NZD/CHF Long OG entry
I executed a long on the 4hour timeframe for NZD/CHF – the zone was a valid counter-zone in my book, we reached the area of demand and then reached the weekly stack (the red line) and then saw a clear reversal. I executed the long
Once I was in the position, I started looking for a potential scale in:
NZD/CHF Long 1hour scale in
There was an opportunity after the daily close so I waited a while and placed my order an hour afterwards to make sure the spread was smaller (the spread was still meaningful when I executed the 4hour position but not too much so I was happy to execute 10minutes after the close)
I placed my entry slightly above the 20BB basis point and my stop at the 20BB lower bound. As one can see, there was the possibility to enter slightly lower with a live position, however let’s be honest, me being up at 2am was highly unlikely so I preferred to set an order overnight
Some of you may remember I did not execute the trade last week since it didn’t follow my rules, I didn’t like the price action leading up to the entry, however it’s now about to form a double top, so if we break the previous high I’ll be looking for a short position
Is approaching the daily area of demand
Has been hovering for a bit too long, I’d expect a move this week to either the upside or downside – I’d like to see a move lower into a move back higher – but sadly this isn’t Amazon, I can’t order something and have it delivered within 24hours
I’m not too sure what I updated you on yesterday so let’s do a recap of my positions:
EUR/USD Long x2
I am in two positions in Euro Dollar, my original entry and a four hour scale in rather looking forward to seeing a push higher if possible! The scale in was taken after
AUD/NZD Long x1
I am also in a long position on Aussie Kiwi – I’ll be looking to place a scale in soon enough! Haven’t placed on yet since the high keeps evolving so I’d have to adjust it quite a lot
USD/JPY Long x2 (well only 1 now)
We saw the price reach the area of demand, correct for a while and then give us a script entry for a long opportunity – there also was the opportunity to enter a 1h scale in which I did however sadly that position has been tagged out and I am no long in it.
Yes this position was basically a bet against my EURUSD but that’s okay, it was valid and I don’t look at correlation in my backtest
All that + some crypto trades that I won’t be sharing on this website for now, all in all this is the busiest we’ve been in a long time in the market!
Anyway, let’s talk about my super big watchlist?
This one is going to be a chart dump guys it’s too big otherwise so let’s go!
Good morning folks! I hope you had an amazing weekend!
I got to go and pick up on of my closest friends yesterday and had a really really really nice barbeque – with a fair amount of booze, well, let’s put it this way, I am definitely not excited to go running now because my head throbs 🙂
Anyway, let’s have a look at our watch>
Let’s start with Aussie Kiwi, it’s actually rather interesting at the moment in my eyes! We were able to break lower from where the price stagnated for a while which enables me to look for a trade now.
As previously mentioned this pair has a lovely weekly stack as well so I’ll be executing this trade when the time comes!
While Swiss Yen is definitely less sexy or at least on the daily chart than AUD/NZD I believe we can keep our eyes on it as well and see what happens.
There’s a clear weekly stack, the only drawback is that the daily zone isn’t the prettiest but, hey why not :0
Euro Aussie is also worth mentioning I guess? We are approaching an area of supply that’s rather clear to my eyes the only drawback is that this is more of a phase line break than a trend line break – we actually still haven’t reached the lower trend line oh and the weekly stack is definitely there for us so we might as well play it 🙂
Dollar Yen is worth mentioning, we may even get an entry today so I’m keeping my eyes wide open!
While I will admit I’d prefer to take a short on this set-up there remains a lot of opportunity for us – we can even play a potential move higher from here.
The price is decelerating and has reached the weekly stack, so let’s wait and be patient
Those are the only pairs I’m really eyeing up for today! A lot of pairs are nicely shaping up so let’s be patient and execute when the time is right!
Good morning folks! Had an amazing day yesterday with an early getaway at a friends place, was really relaxing to enjoy the summer with friends recently.
That being said, I was still active don’t you worry 🙂
Trade Update: EUR/USD
I took a long on EUR/USD yesterday here was the trade:
The daily gave us an extremely clear set-up in my views and we had a gorgeous higher time frame stack. On the 4hour side of things price action was clean, and we got a valid trade entry which I executed without hesitation.
All in all glad with this set-up, let’s see what happens now
Anyway, let’s have a look at the watchlist for today
Aussie Canadian remains on my watch for this week, I’m interested in seeing a double bottom or the price drop a fair amount lower.
Just being patient
Aussie Kiwi is worth mentioning, we are hovering above the area of demand, we even reached it, however we haven’t seen a valid entry so far. The price has been rather slow to move so in order for me to be interested in it, we’ll have to see the price drop lower into the zone
Dollar Yen remains interesting, we are still below the area of supply so let’s be patient
Dollar Singapore is in a similar situation, let’s be patient
Have a fantastic day folks
Oh and I’m currently watching:
So if you have any recommendations on physics I’m always keen!
Good morning folks!!! Well that was a hectic week sorry for missing out on this blog but I decided I wanted to use all my time on more productive endeavours rather than updating this blog when my watchlist had barely changed
To keep you update with my “life” I was in Paris with friends from university, it was amazing to catch up with them, it had been three years I hadn’t seen one of them! Time flies by!
Oh and I’ll be flying to Montreal September 11thtill October 23rd, so if you’re around, definitely hit me up!
Anyway, back to the important stuff!
Aussie Kiwi is approaching, well has been hovering above an area of demand for quite a while now, sadly it still hasn’t been reached so I am waiting on the side lines for now.
The area on the daily chart is absolutely gorgeous so I am happy with this area of demand, it does have a valid higher time frame stack as well so all in all, just patiently waiting on the sidelines
Canadian Swiss is worth mentioning purely because we created a new area of demand today, we broke out of the recent mini descending trendline by having two consecutive closes above it. It’ll be interesting to see how the price reacts to the 50EMA
I won’t be trading it due to the lack of higher time frame support so far (if this week closes as a full weekly candle then that will change) but I wanted to share it:)
Euro Aussie does have a weekly stack tho so I’ll be happy to trade it if the opportunity shows itself! It recently broke a small ascending trend line in a rather clear fashion so I’m doing my best to remain aware of its current whereabouts.
I have an alert set at the beginning of the area of supply to be ready in case we get an entry over the next few days.
Euro Dollar is probably playing with us by hovering just above the area of demand as it currently is, we have a gorgeous daily area of demand quite similar to the AUD/NZD one the rice has been in a deceleration phase for quite a couple of weeks except for the last few days
So let’s see if we can trick people that are selling into this momentum and see a clear reversal from this area! Oh and the weekly chart is also gorgeous so all in all, count me in if we get a clear entry!
While Dollar Yen won’t be giving me an entry today I need to catch up for having missed two days, so just wanted to mention it! It’s rather pretty!
We’ve broken out of the ascending trendline and are moving towards the area of supply we created – at the same time if we do reach this area of supply we’ll also have created a new area of demand lower, at the beginning of this move higher.
All in all I’m happy with the higher timeframes as well so…. Yep should be a busy week if we get to see set-ups
Finally Dollar Singapore is on my watch, it’s a rather clear trend line break that could be see as a trend line break – we have a clear area of supply that fits with the weekly stack so it’s an area I am keeping my eyes on.
I know quite a few of you dislike trading this pair so do as you wish, but if we get a valid set-up you know what I’ll be doing!