Last time I posted I talked about the Market maker model running to complete the model and this is why I was bullish. I have attached the USDX chart below and as you can see this has just about completed as expected.
This shows the MM model as previously described in an earlier post. Both blue lines are Order blocks which were used in the move down and now become my targets for the Bullish move up. The reason I target this are that once at these points the probability of price to continue moving higher may decrease.
Below is a 4 Hour chart.
This shows how once the highs were broken at around 96.50 (dashed line) price returned to the order block to make what most people describe as a double bottom. When in this area around 93.70 we seen a nice bounce indicating smart money was going to use this level. However we did not see huge volume at this level. I am still not an expert on volume but I believe that the huge volume at the first bottom on the daily chart was where they got in most of the buying.
My Trades this month
When I seen a bullish dollar I entered several setups in favour of the order block at order blocks on several charts. One thing I have found is sometimes price does not always run right back to the original order block but sometimes we see a smaller retracement. I decided to trade one of these but with the smallest position size and a larger stop. This in hindsight was a bad decision and something I have learnt.
Only one of my stops from 6 trades was hit but I had to sit through 2 weeks of drawdown until the full effect of the bullish dollar took its toll on my trades. This did two things:
- It increased my risk meaning I could only trade the smallest lot sizes.
- It meant I had a lot of drawdown
- It meant I could have risked more with a tighter stop at the original order block which would have kept my risk the same but doubled my eventual profits.
In future I will look to enter at original 4hr and daily order blocks if possible. Although in a trending environment I may miss trades this way.
Below is one of my winning trades. I entered at a great position with very little drawdown and exited around 5 times my risk.
Testing
I have been testing my strategy and tweaking my plan as I would like some statistics of what my average risk to reward would be in certain pairs. I have not gotten very far with this but here is an example of what I have been doing.
Although this looks messy and there are probably much easier ways to do this, this is how I am testing my strategy. It basically involved entering 5 pips above or below an order block(depending on if its Bearish or bullish) with the stop being the other side of that order block. It is also only traded on the first visit back to the order block. Order blocks used are ones which have resulted in a fast up or downmove as this is where buyers/sellers look to come in and get any remaining orders in.
My Entry and stop is the dark turquoise square and the lighter colour after this is the multiples of this risk the trade has run to.
So far on the AUSUSD I have tested 7 trades.
2 trades would have lost 1%.
1 Ran for 1:11 RR (11%)
1 ran for 1:9 RR (9%)
and the next 3 for 5-6% each.
Obviously I need to do months and months of testing of this strategy but during the last 2 months that would be around 33% gain just trading one pair. The aim here is obviously to cut the losers quickly, have a very specific entry and hopefully be in positions to let my winners run. The fact we are trading on 4 hour and using daily charts and order blocks as the highest probability followed by 4 hour means that I should get nice runs when I am right rather than being stopped out on shorter timeframes.
MONTHLY RESULTS
Below are my results for October. My aim is 6% per month to double my account by the end of the year. Ambitious but I feel it is achievable as long as I am patient waiting for entries and use correct money management to make sure I enter at the initial order block and manage my lot sizes so risk does not exceed 1% on a trade.
If I could improve one thing I guess it would be that I have made over 1300 pips in 2 months and this has only been a small amount of monetary profit because I have started with a small bank. If I can post similar results next month using this strategy I will consider adding to my account each month to help with growth. For now though, I feel my knowledge is growing with each trade and the combination of order blocks, USD index, Volume Price analysis, Market Maker models etc is giving me a good overall feel for the market rather than just relying on a technical indicator. It has been around a year and half since I first found forex and I feel I am learning and making progress.
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