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How to Combine Price Action with Multiple Timeframes

One of the simple yet powerful techniques I use to allow me to quickly identify trading opportunities with minimal time and effort (typically 15 minutes a day), is to use this Excel table which combines price action with multiple timeframes.

To create this table, I observe the daily and weekly charts of various products (forex, stocks, cryptocurrencies, commodities, etc), and list down whether I think it is bullish or bearish on each timeframe. For the weekly chart, I only need to update it once a week, and for the daily chart, this takes me a few minutes a day.

Here are some chart examples:

This is the daily chart of the EUR/USD, and you can see that it just completed a pullback and is looking bullish. So under EUR, I mark it as bullish. For most products, I always benchmark them against the USD for easy comparison.

 

This is the weekly chart of the EUR/USD, and you can see that it is also very bullish, and rebounding off a large trendline. With the alignment of both the daily and weekly trends, this make the EUR/USD a very good long trade to be in. And since the GBP is also weak, going long on the EUR/GBP is also a good idea.

 

For the S&P 500, the long-term trend is bullish, but the short-term trend is bearish. In such a scenario, we will pass and wait for more price action. The goal is to take the best trades, not take as many trades as possible. Quality over quantity.

3 Crucial Lessons From Jesse Livermore – The Greatest Stock Trader of All Time

Jesse Livermore is known to be the most prolific stock trader. Several books have been written about him and his trading track record is legendary. His profits were so great that he was reported to have owned mansions in various places around the world, each fully staffed, complete with limousines and steel-hulled yacht for his holidays.

Some of you might have read that Livermore was worth $100 million after shorting the 1929 great market crash.

Above: Some of the books about Jesse Livermore, available in major bookstores.

What Guidelines Did Jesse Livermore Follow As A Trader?

Among the many quips he had about trading and investing, I’ve picked out some of the key ones that could make or break your trading account.

While many complain about the difficulties in trading forex, stocks, or commodities, there is a good minority that makes consistent profits in the markets.

What sets Jesse Livermore apart from his peers?

 

  1. Buy rising stocks and sell falling stocks.

The above seems obvious, but many people fail to adhere to this rule. Many people like to ‘pick tops’ and ‘pick bottoms’. Now, professional traders do occasionally try to pick tops and bottoms, but they do so with very strict risk management, and always have a contingency plan for when the trade doesn’t work out.

Beginners often makes the mistake of trying to trade against the trend. While this can be profitable for some, talk to anyone in the trading industry and they will tell you that trend-following is the major money-making strategy that every trader uses. It’s simple, easy to add positions on, and it’s stress free. The problems come when beginners make a buck from trading with the trend, and start to explore ‘new ways’ to trade and invest.

 

2. Keep trades that show a profit, end trades that show a loss.

Jesse Livermore is famous for his humongous profits, but behind every profitable trader is the admirable ability to deal with a string of losses. It’s one thing to know that you need to cut losses, but it’s another to actually cut your losses when you are wrong. George Soros famously quips that it is not how many times you win or lose, it’s how much you make when you win, and how much you lose when you are wrong.

Cutting losses is a psychologically hard thing to do in modern society. We’re ingrained to be always correct, and never admit that you messed up, because it reflects badly on you as a person. However, with investing, no one is marking you for the number of losses; the profit that you make is the final report card that matters, and that’s where we want to be focusing on.

 

3. Never average losses by buying more when your stock has fallen.

Too many people refuse to be wrong on their investments or trades.

I have heard of people say this statement: “Even if the stock drops a lot, I’ll just keep it because I’m buying for ownership and dividend cashflow, not just for capital gains.” Sure, but what happens if the stock you hold drops by 70%? 80%? You’ll buy more?

Buying more when the stock has fallen is a sure-way to get your trading account to zero. It’s taking more risk when the odds are against you.

 

Think About This: Which of These 3 Guidelines Have Brought You Losses in the Past?

Many traders soon realize early in their career, that their trading accounts could have been profitable if not for silly mistakes. Avoiding these silly mistakes requires experience, maturity, the correct knowledge, and of course, proper mentoring.

I was lucky to be mentored by veteran traders early on in my trading career. Their advice, based upon thousands of hours of market experience, contributed greatly to who I am today, and I never fail to mention, during trading seminars or public events, that by tapping on their experience, I was able to quickly attain a level of success that kept me profitable.

If you’re currently struggling as a trader, ask yourself this question: “Which mistakes have I been making?”

Acknowledging trading mistakes is a continuous process of learning and growing.

Full-house Turnout for Our First “Trading Foundation Workshop”! Thank You!

Yesterday, we conducted our first “Trading Foundation Workshop”, and the response was simply incredible!

Due to overwhelming demand, and many attendees who wanted to invite their friends and families, we will be running it a few more times, so that everyone can have a chance to kickstart their trading journey, especially those who are new to the markets.

And the best part is that every participant got to take part in the BONUS QUIZ and win up to $500 worth of prizes, and also take home a “Customized Trading Plan”, in addition to all the printed slides and training materials.

Once again thank you everyone for coming, and making this a fun and interesting session for me as well! 😀

For those who are keen to join us for the next session, there are 4 seats left at the moment, so do reserve early to avoid disappointment!
Check availability: http://synapsetrading.com/trading-foundation-workshop/

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Price Action + News Trading: 297 Pips Profits on USD/JPY in Record Time!

Last week, the BOJ surprised markets by holding off on more stimulus. But it also gave us a good chance to make some quick profits in the market.

To be more precise, it put 297 pips of profit right into our pockets.

Here is what led up to the trade, and the thought process behind it:

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Source: http://www.bloomberg.com/news/articles/2016-04-28/boj-holds-off-on-more-stimulus-to-gauge-impact-of-negative-rate

 

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Next week, in my free workshop, I will be sharing more about this trade and price action strategies, and why it is the only tool used by all professional traders worldwide.

See you there! Register: http://synapsetrading.com/events/training-workshops/

Australia dollar dives to six-year lows after RBA rate cut – Shorting opportunity now?

Yesterday, the Australian dollar tumbled more than a cent to a six-year low, after the Reserve Bank of Australia cut interest rates to a record low of 2.25 per cent. What does this mean for the AUD/USD, and are there any good trading opportunities?

Statement by Glenn Stevens, Governor: Monetary Policy Decision (Abridged)

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 2.25 per cent, effective4 February 2015.

Growth in the global economy continued at a moderate pace in 2014. China’s growth was in line with policymakers’ objectives. The US economy continued to strengthen, but the euro area and Japanese economies were both weaker than expected. Forecasts for global growth in 2015 envisage continued moderate growth.

Commodity prices have continued to decline, in some cases sharply. The price of oil in particular has fallen significantly over the past few months. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global output and temporarily to lower CPI inflation rates.

Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns reaching new all-time lows over recent months. Some risk spreads have widened a little but overall financing costs for creditworthy borrowers remain remarkably low.

The Australian dollar has declined noticeably against a rising US dollar over recent months, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.

For the past year and a half, the cash rate has been stable, as the Board has taken time to assess the effects of the substantial easing in policy that had already been put in place and monitored developments in Australia and abroad. At today’s meeting, taking into account the flow of recent information and updated forecasts, the Board judged that, on balance, a further reduction in the cash rate was appropriate. This action is expected to add some further support to demand, so as to foster sustainable growth and inflation outcomes consistent with the target.

Source:
http://www.rba.gov.au/media-releases/2015/mr-15-01.html

 

Daily chart of AUD/USD

Daily chart of AUD/USD

 

Looking at this daily chart of AUD/USD, we can see that the AUD/USD had traded nicely within a trend channel, providing many easy trades to short and take profit.

While this rate cut may have come as a surprise to some, it certainly did not surprise the price action.

Because while it may have hit new lows, prices rebounded nicely from the bottom trend channel line, after profit-taking by those who shorted near the channel top.

My profit target which was near that level got hit as well.

So, can I short this now?

While the AUD/USD is clearly on a downtrend, I would prefer to minimise my risk and look for a good pullback to go short again, perhaps somewhere in that yellow shaded region marked on the chart.

Remember, trading is about following the trend, but it is also about finding the best low-risk opportunities to enter the trend.

Good luck! 😀