So, of course, what do I do? I go overboard!
The previous night, Jordan had mentioned fractals. That got me thinking: fractals = repeating patterns, right? Right. So maybe I'd been looking at too short-term of a time-frame. Time to stop "not seeing the forest for the trees", I thought.
So, I looked at the EUR/JPY. On a 15-minute time frame, I really couldn't see much of a fractal pattern, although I definitely can see trends and can recognise the patterns like the 3/5/13 emas and the pivots. But maybe there's more. So, off I went to look at the hourly time frame. Not really seeing a fractal there either. But wait, what if I zoom out a bit more? Aha - something is certainly happening. So, I zoomed out even more. At the 3 month level, I finally could see the pattern clearly ... wending its way in a broad trend, moving up relatively fast to form a peak, then slowing down, doing up to a 60% retracement, then zooming up again to form another peak, slightly higher than the previous one, and so on.
We may have a winner here, I thought. So, just for kicks, I looked at the 4-hour timeframe
and the daily timeframe as well.
Yep, as expected, that pattern did hold true on the higher timeframes as well. Okay, time to take the trade. Got in at 165.91, with a stop at 165.13 and a limit at 167 ... that's more than a 100-pip move if it works. I know the account will likely be in draw-down for part of this trade, just because of the pattern. But the beauty is that I'm getting in during one of the valleys rather than at a peak. I'm anticipating that the next true peak will be a little above 167, but resistance should kick in at the change of the whole number.That being done, I idly looked at the USD/JPY hourly chart, just in case the two have similar fractals. I think I've noticed both these currency pairs trending together before, so maybe their fractal patterns are similar, too?
Hmph. There's a vague similarity, but the two pairs are not actually trending together. Well, that's another comfortable assumption demolished. However, what I'm seeing on the 4-hour chart
is a very identifiable, obviously repeating pattern. And it again looks like I'm at the bottom of a valley ... good upside potential in that trading range I've drawn there. Confirmed it on the daily chart as well, just to be on the safe side:
So, yes, you guessed right: I took the trade. Got in at 117.22, with a limit at 118.5 (yes, I do actually believe I could see a 100-plus pip move here!) and a stop at 116.85 (a one-range stop, as Jordan calls it - placed just below the nearest support level identified by the "S"). That's a potential 1:2 risk-to-reward ratio. Not the best, but hey, I'm not brave enough yet to set my stop closer or my limit higher.Two trades? I'm feeling really good. Then I did the unforgivable - I looked for a fractal on the EUR/USD. And found one.
And discovered another valley on the 4-hour chart.
This one's actually started the upswing, so there's less risk here.Again, confirmed one more time on the daily timeframe:
So, of course, in I went. Yet another trade, but a smaller one this time given where in the pattern I am - got in at 1.4158 with a limit at 1.4220 and the stop at 1.4120. Again, an okay risk-to-reward ratio: nothing stellar, but wide enough apart to give me confidence that I am not too likely to get stopped out because of fear. And the stop is not set so far away that I am afraid to lose a ton of money.---------------------------
That was around 2 in the morning. I then obsessively watched my account head into a draw-down and finally decided that watching the trades wasn't going to get me anywhere.
The three trades:
---------------------------Analysis: Am I getting too cocky now? I took three large (for me, anyway) trades within an hour of each other. On top of that, instead of following one of the patterns that Jordan and Ty have been teaching us, I wound up setting my stops and limits based on the fractals. On the FRACTALS? Where do I get off doing that? Who's to say this will actually work? What do I know about fractals, other than that they occur all over the place in nature? I've got to be hallucinating - this has to be a fluke. Better check it out with Jordan. I guess one way of looking at is that these fractal patterns are all about spotting the meta-pivots and predicting where the next one is going to occur, based on the wholesale and retail lines (the trading range in the current trend, that is to say).
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Okay, here's the update from this morning when I woke up and watched my trades obsessively again. I'd already made a net 120-pip profit by around 6 a.m., but the totals kept jumping up and down and all around. So I kept busy until around 8 a,m. - since I was managing these trades on the 4-hour timeframe, I figured I'd see strong price action around 8 am, which should be when the next candlestick starts to form in each of these charts.
And sure enough, as the clock ticked past 8, there seemed to be frenetic buying and selling of these 3 pairs, with my net profit advancing and receding like waves on the beach ... was the tide coming in or going out? It was hard to tell. But at 8:11 a.m., my limit on the EUR/JPY dd get triggered, leaving me the proud possessor of a 92% profit on that trade (lesson learned - in the EUR/JPY, one pip does NOT equal one percentage point of the trade!), The price continued to swing up and down around the 167.00 price point, but I needed to get to work, so had no time for further analysis.
By the time I get to work (a 90-minute commute - can anyone guess why I may want to not have a day job?), the US trade balance data will have been released. I'm not sure how that will affect the prices of the two remaining USD-based currency pairs I'm currently trading. I guess I will just have to wait and watch and see what's going to happen. No matter what happens, at least it will be a learning experience. I may learn that I can trust myself to make good choices even when it's 2 a.m., or I may learn that when I'm really tired, I'm not likely to be at the top of my form.
Either one. One thing that I've learned in this past week of trading is that if I pay attention to what I am doing and am willing to put aside ego and the "need to trade", I have a MUCH better chance of success - at least this way I'm trading based on the indicators (even if I occasionally misread a signal or two) rather than based on my emotions. One step further each week!
Side note for anyone who cares: When I started trading in late July, I thought I understood some of the patterns, but I didn't. This was rapidly proven by my account eagerly dwindling to less than 40% of its original value. I've been learning lots since then. I've had to force myself to be disciplined, always trading no more than I can afford to lose. I've lost some. Had worked myself back up to 50% of the opening balance in my account, then got too confident and went back to just below 40% right before the Sept 8 Fed announcement in the US. That, and the resulting volatility (perceived, not necessarily true) kept me out of the market for almost 4 weeks. Now that I'm back in, I'm taking things a little more slowly. Trying to really understand each trade. Looking for extra confirmation with wholesale and retail lines _and_ Fibonacci retracement lines.
All of this is paying off. By the close of that EUR/JPY trade this morning, I'm back at 60% of my opening balance. Of course, it's entirely possible that the reports due to come out today will result in a downward adjustment of that balance, but at least I'm not terrified that I'll lose tremendous amounts any more (I have reasonable stops now). Better yet, even if I do lose a large portion of the account, I have the confidence that rational, disciplined trading can help me build it back up to better than before, and I'll get to be a better trader as I constantly learn from both my successes and my failures.
Happy trading!
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Further update:
By 10:30 a.m., my limit on EUR/USD had also been triggered, and I was up by 62% on that trade as well. It then proceeded to climb up to 167.40 and probably higher, before retreating all the way to 166 again! I'm not sure what happened there, but am glad I had a modest limit, even though I was regretting not having been more aggressive while it was on the upswing.
The USD/JPY initially seemed to be doing exactly as expected, doing a fairly smooth and steady rise to 117.75 or so. I was fairly confident that it would get past resistance (if any) at 118.00. However, around 2 p.m., this currency pair started to go south at a dizzying pace! It wound up going down to below 117 (remember I entered this trade at 117.22!) I was now kicking myself for not having moved my stop into profit-taking range before I left for work this morning - but then realised that such an action, while it would have protectd my small profit, would also have almost definitely resulted in me getting stopped out on a small retracement. So, it's a toss-up. BBy the time i left work, the USD/JPY had gone back to just above my entry point.
When I get home, I'll have to make the call as to whether or not I should manually close this trade. I'm tempted not to, just to see what's going on. While I'd expected the US trade data, I'd not paid any attention to the other half of this pair: the Yen! The bank of Japan made some statements ths afternoon, and I'm assuming that's what triggered the selloff in the Yen. That theory would seem to be borne out by the fact that the EUR/JPY also took that same wild ride downwards at around the same time.
I will probably stay in this trade a while longer and see how it does, given that tomorrow is a US-results day: with the PPI data being released.
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Okay, I'm home now. Convinced I want to let that trade ride a while longer: Here are the end-points of the three trades (of course, USD/JPY hasn't yet ended ...)
The bright green circles are my entry points. The golden yellow diagonal lines indicate my anticipated trajectory, and the limit got exercised just below the fat green line in the case of the EUR/JPY and EUR/USD. As you can see, the USD/JPY is still nowhere near my ideal limit.
But I'm letting it run ... let's see how it goes.
