Back from holidays and a little slow to get into the blog writing.

A trade setup tonight on the Euro which has some unique characteristics.

Long term viewers of the blog and those that have done Alexander's Pride Trading course know of it as a pump fake trade.

The trade does enough to give longs hope with price making a higher high but the major trend is down.

This price action nails the retail bottom pickers looking for reversals.

As buyers fail to push price up any further sellers take the batten forcing long traders to cover and setting up a down move with the trend.

This trade needs to be traded in the right context to get high win percentages consistently.  As do all trade setups.

In partnership with Alexander we have been developing an analytical system for traders.

I have been using a beta version successfully in live trading and the execution of this euro trade tonight is an example trading 3 contracts.

I am aiming to have a fully functional version ready for my ATAA presentation in Brisbane providing any bugs are sorted with our engineers in the US.

Nothing better than putting my head on the chopping block in front of a crowd.  Should be fun.

pfa.jpg (95.32 kb)

When taking on a new trade it is well known that we should have a plan for stop exits and profit taking.

This is a great way to quantify risk on each trade and create consistency in trade samples.

From this we can work out our edge ratio and the winning/losing amount per trade.

As our experience grows I think there is a few extra steps required to attain a higher level of skill in the markets.

There is a fine line between good and exceptional trading returns and that requires extra practice for refinement.

Reviewing trade execution and practicing through replay simulation can improve and sharpen our skills.

Timing and confidence in pulling the trigger are a result of repetition.

I don't count myself as an expert but many newer traders that have seen me trade live, comment on my execution without any hesitation.

This has been made possible by trading intra day with tens of thousands of executions over the past 10 years.

I would rather go through an operation or have a house built by someone who has repeated the process many times than a newcomer.

This is where using something like Ninjatrader or Esignal for replay trading can give traders the practice in executing.

The other thing that improves results is the ability to pull or alter a trade as price information changes the risk/reward of a trade in progress.

Adaptability is the next level of trading skill and one of the most difficult aspects of trading to conquer.

It is the acceptance of the fact we have no control over price movement only that we are merely following footsteps of past executions.

I am still coming to terms with this and will be for the years to come. This separates the 10% from the other 90% in my experience.

Again the skill is built through practice and review.

If only I could copy a trader in a chat room or do a 4hr course with my laptop at a nice resort. Easy is an illusion.

Below is an example of a trade setup that may have been adapted as price movement became apparent.

Price action on the Dax had made a double top and pushed down to a lower low.

The retracement had moved up to a resistance area where the candle tail had probed and then failed to push through.

A trade short could have taken place here with a possible target at the 5025 area.

Chart 2 - Price then probed the lower low but rejected the lower levels with buyers changing the dynamics and closing the bar at its high.

To turn a stopped out trade into a scalp winning trade would have required the trade to be closed early on new price information.

Only trading a little this week as I will be heading back to Australia on Friday and have a few meetings.

Traded the dax again today for the first hour of the US open, and then traded the ES near the close.

All up today profit was US $850.

Looked to fade the trend on a reversal bar at 4665 but there was no follow through and I was stopped out.

The second entry was as price stalled at resistance and a triple top held.

This bought me back to break even.

At 9:37am the entry to buy looks like a dumb trade taken on a stretched upward move which it probably was!

I Was looking for the ES to hit Resistance at 884 and a stop run for the Dax to 4700.

When that didn't happen I traded the short off the top, closing out the last contract at 4666.

A few smaller trades with the micro trend down gave some little extra profit.

Dax trade 13-7.PNG (114.66 kb)

This is a video of my ES trade near the close today.

I entered for a breakout trade and scalped 2 positions, aiming to get the last position on a 3 pt run.

This is quite a long video but I didn't cut it so that viewers can appreciate the price movement.

My stop at 894.75 was just below 895 where large orders had been taken on the move up.

http://www.screencast.com/t/WIFJs0umZJ