Week commencing 21/09/15

Since last posting I have used volume price analysis with success but added tools I have learn’t from the Inner Circle Trader, a former commodities trader I have been following on twitter. He uses a very successful approach and the degree of success for entries is somewhat staggering.

I have spent the last 6 months testing his strategies and how his tools are used on differing timeframes. Although the 15 minute time frames help set up trades for the day and have shown success I feel that I am more suited to the larger timeframes. This is due to other commitments to be analysing the market every morning at London and New York open.

I am therefore going to apply his tools which I have hugely benefitted from along with volume price analysis to confirm/negate an entry.

Order Blocks

I will be using ICT’s order blocks to help me find areas to enter a trend. This helps me get in at good points. The idea is that when a large move has happened, the people behind it are the smart money. When price returns to this point the smart money will be interested in this price area again. ICT uses the top of the wick to the top of the body of the bearish candle before the upmove to identify where most of the buying has taken place.

I have added a chart here which shows the EUR USD with the wicks of the down candles before the upmove highlighted so you can see the reaction as price reaches.

Here you can see how instead of chasing a move you can be patient and wait till price returns to this area.

Another way in which I will be looking for entries is to use volume price analysis. Here I analyse candles, body size and wick size in comparison to volume. This is then compared to candles around them and we zoom out and analyse the big picture.

An example would be that if we see a large up candle with large volume then this is a valid move. A large up candle with low volume would be suspicious and a potential trap move or stop run.

In an uptrend we would hope to see increasing volume and price rises and decreasing volume on retracements to show a lack of selling interest.

Here is a chart I have recently analysed:

It may look a little complex but it is really worth the time understanding as is the work of the InnerCircle Trader. This analysis comes from Anna Coullings Volume Price Analysis book which is probably the best £15 I have ever spent.

I will be using a host of other tools from the Inner Circle trader who uses smart money divergence, the USDX to great use, his market maker model, along with a way of thinking like the smart money.  An understanding of why price is going whrere it is and for what reason.Where are the stops? Where is the liquidity.

He has been a great insight and a great help.

I am going to use this blog to document my trades and reasons behind it, simply as I feel I analyse better when I know people may be judging my decisions. I am sticking to the higher time frames, mainly 4 hour and daily with the odd 1 hour trade. This is again because I feel I am less likely to become emotional and trading decisions are more logical and with the long term bias.

Below is an example of a market maker model. This is a buy model where price starts and pauses in consolidation several times before smart money reversal. We then have a safe buy area and our target should be each stage of the down move. As you can see the model completes by reaching for the initial price and then the stops which are placed above it. The fact it dipped straight back in the range suggests that this was a run for liquidity and we could now see the pair go lower again.

This model is seen throughout the charts on all time frames and I think it is always important to know what stage of the model we are at and what type of move we are expecting. For example, after the smart money reversal where the lower highs and lower lows are broken we would change our outlook to the upside.

We can then use order blocks for entry on daily 4 hour, 1 hour or even 15 minute charts.

Week commencing 2nd february 2015 Trade Reviews

Trade 1 – GBP/AUD

This trade worked out perfectly as I entered at key support of 1.92030 and exited after the pair had already rebounded once from the 1.9610 area and was about to again. The pair had broken a major resistance level at 1.92 area and now has the potential to test the 2.05 mark.

If I could have done anything  different with this trade I would have entered two positions, one taking profit as I did, and the other to allow the trade to run as finding the correct entry is not always easy.  I will not add this as a long term trade for the upcoming month as a BUY as long as the price action and pullbacks occur offering good opportunities.

Long term Positions from the Weekly/Monthly chart

I am a new trader who has only been trading for around 4 or 5 months and studying for just over a year. I have a great interest in volume and volume price action. I will be using this blog to note down trade ideas and hopefully improve my own trading and skills as i progress. I will be trading on the 4 hour timeframe upwards and on the odd occasion using the 1 hr timeframe (usually for entry).

Objectives – To hold trades based on the Monthly and Weekly charts. As successful trades progress, add to positions on each break of Support/Resistance and retest.

I will attempt to use volume price analysis to help with my trading decisions and use this more as my skills enhance.

This entry is to establish long term Biases which I will update Weekly identifying(or attempting to) stopping volume, Buying and Selling Climaxes, Accumulation and Distribution etc.

Price pattern recognition

Use Pivots to define congestion areas.

Falling and Rising triangles

Triple tops and triple bottoms

Price Action with confirming volume at support and resistance.

Doji, Tweezer top, Shooting star, Hammer,

Breakouts from congestion zones.

Volume and its relationship to each candle(confirmation or anomoly). volume and candles relationship to other candles around them(increase/decrease).

This is just notes to give a rough idea of what my strategy entails.

Long Term Trade Ideas

AUD/USD Monthly chart

The AUD USD monthly chart has fallen sharply over the last 3 months with each bar being larger than the last. Volume has above average and there has been little resistance to the last three monthly bars.

The pair is currently at 0.78605 and there is a fairly strong/key line of support at around 0.7800. This held as resistance in  February 2004 and again in February and March 2005. It was used as support in August 2007 to send the pair shooting higher and again in July 2009.

Price currently sits very close to this point. However, at each point in the past a reversal has occurred when price has approached this area with caution. As we can see on the chart,  Big monthly bars approached this level from the upside in August 2008 and again in May 2009 and both times the key level was broken.

Looking at our last 3 monthly candles they are long with fairly small tails, signalling little fight. They are increasing in size, albeit only marginally each time. We have no signs of stopping volume.

Risk on trade. I think this trade offers a medium risk and this is due to the major area of support approaching. If this key area is easily surpassed it would then be downgraded to a low risk trade.  I will be looking to trade on a pullback to 0.8500 with a stop around 0.83226 and two targets, one at the key area of 0.7719 to take some profit and should that be hit my stop will be moved to break even on trade 2 with a long term target of 0.71.