Trading with Dukascopy and learning a foundation

FuLuShou

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8
Hi everyone,

I started this journal as a tool to understand and apply correctly the theory I'm learning. I will post the trades I do with Dukas JForex platform and the analysis of each pair before the opening and after the closing enumerating the lessons learned, if any. For my trades I will not rely on news unless there are central bank intervention related and following Andrew Mitchem daily strenght and weaknesses.

Over the next analysis I will be using Steve Nison's Candle Charts trading method and four basic indicators. I'll try to analyze the trades as simple as possible since what I'm trying to do is lay a basic theory foundation and receive your comments and counsel about my trading decisions. My purpose here is receive views and opinions outside Nison's theory and check the validity of his claims since there are cases in which I found his theory is confusing and contradictory. I'll point out when I find one of those confusing points in his theory if I find them in my future analysis.

For users to have a grasp of what tools I'll be using on my charts here's a resume of what I've studied of his course contents (There's the advanced course which I'm currently studying and first want to incorporate the basic and see if I'm applying the theory right):

Why candles are a tool and not a trading system
Using real bodies to gauge force of current move
Spinning tops
Essentials of Doji
Basic Criteria
Market Implication
Using doji as a protective stop
How to help avoid buying on false breakouts
Avoiding a common misuse of the doji
Shadows
Why shadows must be part of your candle analysis
Using long lower shadows
Using long upper shadows
High Wave Candles
Basic Criteria
Market implication
Basic psychology behind the pattern
Starting to read the market’s message with single candle lines

Hammer Essentials
Construction
Basic criteria
Market implications
Basic psychology behind the pattern
Hammer and trend
As support
Dragonfly doji
Inverted Hammer Essentials
Shooting Star Essentials
Hanging Man Essentials
Box range trading- using candles to help predict direction of breakout
Single candle line essentials – bringing it all together

Bullish Engulfing Pattern Essentials
Basic psychology behind the pattern
Piercing Pattern Essentials
Bull Harami Essentials
Bearish Engulfing Pattern Essentials
Dark Cloud Cover Essentials
Bear Harami Essentials

Morning Star Essentials
Evening Star Essentials
Three Advancing White Soldiers
Rising and Falling Three Methods
Rising and Falling Windows
Definition
Construction
Using for maximum success
Common misuses of this signal
Breakaway gaps and windows
Fry pan bottom – definition, construction and uses
Dumpling Top – definition, construction and uses
How NOT to use candles!

How adding Western technicals improves trading success
Candles and trend lines
Sloping trend lines
Bull and bear channels
Horizontal trend lines
Bullish Change of Polarity
Bearish Change of Polarity
Crack and Snap as a bull signal
Falling Off the Roof as a bearish signal
Importance of looking at candles in context
Candle by candle example of East- West

Candles and Volume
Tall white candle and volume
Using Volume and candles to gauge shifting market psychology
Volume and engulfing patterns
Volume and windows
Volume and small real bodies and doji
Volume and crack and snap
Selling climaxes
Candles and open interest
Candles and Bollinger Bands
Candles and Oscillators - Introduction
Introduction to oscillators
Basics of how to use oscillators
Divergence
Candles and Stochastic
Candles and RSI
Candles and MACD
Candles and Dual Moving Average Oscillator

The Disparity Index
Definition
Construction
Using the disparity index to gauge if market is overextended
Record session highs and lows
Definition
Using to measure overbought and oversold levels
Candles and Retracements
Using 50% retracements
Using Fibonacci retracements
Candles and Moving Averages
Moving averages as support and resistance
When to use - and not use - moving averages
Candles and Price Patterns
Head and Shoulders
Inverted Head and Shoulders
Box range breakouts
Ascending and descending triangle
Swing targets
Bull and bear flags
Price targets and candle confirmation
East – West: Putting it all together
How candles and west called major market highs and lows
 

FuLuShou

Private
Messages
8
06/26/2014
Equity: 1000EUR
Default operation volume: 100EUR - 10000 units - 1 minilot

EUR/USD
Previous analysis
1 Day Chart
26.04.2014.daily.a.jpg
We establish a support and resistance line confirmed twice at least and we lay fibbonaci retracements which confirms several potential resistance lines, mainly at 61.8% and 23.6 %

1 Hour Chart
26.04.2014.hourly.a.jpg
My guess is that the chart is right at a support level ready to rally until 1.36758 a potential 50 pip profit. I'll wait for a reversal candle signal near 23.6% fib. line and as a stop loss I'll put 1.35977, a potential 22 pip loss.
Result Hourly Chart
26.04.2014.hourly.b.jpg
The SL was triggered. Lessons learned:
* Always wait for east and west signal convergence. I didn't wait for a candle confirming a MACD crossing or at a strong support line.
* Fibbonacci retracements and bollinger bands are not always reliable.
* MACD is not reliable when ADX, that is to say market's volatility is high. Only reliable in lateral markets.

Equity: 982EUR

06/27/14
GBP/USD
Previous Analysis
Daily Chart
27.06.2014.daily.a.jpg
* We find a resistance from 2009 so it gives a high probability of a turn of the bullish trend. If we consider a slight bearish trend before the last three candles they can be considered as an Morning Star which may point to a rally until de resistance line over the next days.
* We establish a 1st support line given by the Piercing Pattern and a higher support line tested several timeswhich gives us a high probability support area.
* The objective is make a short trade near the resistance line with a trailing SL. And a TP1 at 150 pips below and the TP2 290.

Hourly Chart (Next day)
27.06.2014.hourly.a.jpg
* The MACD paired with a low volatility tells us that the bearish trend will keep throughout the friday so it's a trade that will be opened on monday if I see a clear rally towards the resistance line. I'll analyze the resistance lines and fine tune the trade in the next hours waiting for the monday session.
 

FuLuShou

Private
Messages
8
30/06/2014 Hourly Chart
01.07.2014.hourly.b.jpg
Opened one short order near the 2009 resistance line even though the MACD in the hourly chart indicated a bullish trend waiting for a reversal at the resistance line ponted by the bearish MACD trend on the daily chart.
When the estimation failed and a bullish breaktrough happened closed the position, took the losses and opened a long position which was closed at a new resistance line given by a support line before a steep drop in the GBP in 2009. The long order was given with too much delay due to not being in front of the screen at the time of the breakthrough.

Lessons learned:
* If a prediction doesn't happen, accept the losses and inmediately open an opposite order if the trend is strong enough.
* Monitor the trade using forex software for mobile phones if it's near a strong support/resistance line and you are waiting for a trend reversal.​

07/07/2014
Previous Analysis

Let's open two long term trades analyzing the daily charts. The volumes will be only 1000 units to experiment with long term trades and be able to cope with great losses without a margin call on the demo account:
USD/CHF
07.07.2014.d.USDCHF.jpg
* Here we have two possible reversal sloping lines and a strong horizontal line.
* Since the price is near the horizontal reversal line (Nison advice to always use horizontal lines for making trading desitions) and the MACD has a slight downtrend I put a short order waiting for the price to reach the bottom of the channel.

EUR/USD
07.07.2014.d.EURUSD.jpg
* Here we have a bear flag forming almost completely.
* The price is near a strong resistance and support lines so the price action may enter a horizontal channel for a while until reaching the bottom of the bear flag.
* I put a short order waiting for the bear flag to complete.

One of the problems I'm encountering with the theory from Nison course is about finding and establishing support or resistance lines and using them as Stop Loss orders. He says a strong line must be confirmed at least twice and better if there are reversal candles at the confirmations. His Risk/Reward advice is to put the SL slightly above/below the line in an amount of pips that a least if half the reward, so at least 2:1 RR ratio. But in practice those lines are broken several times above and below and the SL always end up triggering with losses although the price later goes the way I predicted in the first place. So what I find difficult is to put a small risk as Nison advices and not triggering it. That leads to the second incongruence in his theory. He says that if you have 2 of 10 trades right those two trades will compensate the eight losing trades and still give benefit. Having that poor sucess rate from the tight SL he recommends there is no way that 2 succeful trades can compensate all the other losing trades. Have anyone some insight about these questions?
 
Last edited:

FuLuShou

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Messages
8
07/14/2014 GBPJPY Previous Analysis (Monday)
Daily

19072014.GBPJPY01.jpg
* Two channels seems to have formed. The most reliable in the daily chart has a very reliable rising resistance line but the bottom rising support line has been broken. In the chart appears adjusted but if we raise it we see we have a more reliable one tested more times.
* We can be at two situations here. A daily crack and snap price pattern which will be very positive to out long trade or a change of trend and bearish break of the channel.
* We don't see candle pattern in the daily chart that point to a reversal of the bearish trend. But we see a smaller uptrend channel in the hourly chart in grey that doesn't as reliable and defined in the daily chart as in the hourly chart.

Hourly
19072014.GBPJPY02.jpg
* A clear uptrend channel has formed, waited to open a long trade at the bottom of it when a piercing pattern formed.
* Opened the trade after the open of the NY session which produced the bearish movement we see in the chart until it hits the bottom of the channel, missed that opportunity.
* The price may enter a consolidation phase due to possibly have reached the average daily range of price movement, need to study more theory on range trading.
* There can be a potential relief of the oversold condition and a bearish break of the channel could happen, a protective SL is in place.
* Since there's risk of a bearish break of the daily chart channel on the daily chart we just put a take profit of 55 pips towards the top of the hourly channel.
* In case of a bullish break of the channel and clear bullish signals on the daily chart I will open a new long trade or keep open the 1st trade at the bottom of the channel looking for the top of the 2nd bigger channel seen of the daily chart with potential for 230 pips of profit approximately.

Hourly conclusion
19072014.GBPJPY03.jpg
* Lots of things going on here.
* My first long trade didn't go well and hit the stop loss. Again I'm lacking a solid strategy when managing my stop losses.
* Since the price was near a rising support line I knew the price would most probably go up but first wanted to wait until the release of information by the BoE (Bank of England) regarding GBP (15th Jul.)
* Waiting for that release was a huge mistake since the a bullish candle appeared almost in a split second giving me no room to open any long trade before the bull candle formation.
* Since it was near the rising resistance line I tried to profit at least from the retracement of the price but since the price broke the line I started to distrust my analysis and wanted to get out of the trade as soon as possible. I put a take profit in the support line marked by the shooting start at the beggining of the chart hoping at least the price would retrace to that level if the trend changed to bullish.
* Again, that was a mistake, my analysis was accurate and the price retraced that and more even broking the rising strongest support line missing a trade that would have given quite a good profit. A classical Falling of The Roof western price pattern.

Lessons learned:

* Trust your analysis even if the price behaves unexpectedly for a few sessions.
* Add more risk to the trades. Most of the trades going bad end that way because of tight trailing SL.
* Even if it is psychologically taxing observe the charts more often and adjust your strategy to the changing situation. On the last short trade it seemed that a rally was going to take place by the break of the resistance line and the next consolidation in price but that was only a supposition. Watch the chart and if a change in trend occurs act accordingly. Learned it the tough way and missed a great opportunity.
 

FuLuShou

Private
Messages
8
EURJPY Previous analysis
Daily

19072014.EURJPY01.jpg
Hourly
19072014.EURJPY02.jpg
* Managed to catch a trade at the open of the London session with a ascending triangle price pattern that completed perfectly.
* Maybe I played it too safe and closed it too soon. There's a possibility of a Swing Target forming. I'll try to monitor the chart and take action if I see a bullish breakout. Too near to a falling resistance line to be wise to keep the trade open. Best close it in profits and open another if I see a clear bullish breakthrough.
* Dragui speak this evening at 18pm GMT can be decisive on how the price moves.

Hourly conclusion
19072014.EURJPY03.jpg
* Clearly and as the analysis indicated there was an important reversal since not only the price was near a falling resistance line but a horizontal strong (tested multiple times) resistance line that goes back until 2009.
* When I noticed the reversal was too late and didn't analyse where the price would go in a downtrend because I opened other trades that kept my attention and didn't want to overtrade.

AUDJPY 07/14/2014
Hourly

19072014.AUDJPY01.jpg
* Having learned from GBPJPY mistakes my previous analysis indicated a bear flag formation. The second downtrend wasn't formed yet.
* Waited till the 1st break of the rising support line and placed a short order with a tight SL that was triggered with -16 pips of loss.
* Trusted my analysis and opened a 2nd short trade waiting for the price pattern to form. Tired of tight SL this time didn't add one to the trade and just put a TP just at the end of the bear flag formation.
* The price hit it perfectly and reversed just only 14 pips below my prediction, a total of 77 pips in profits. In fact it hit it so perfectly that I'm starting to pay more attention to williama's thread and method.

Conclusion

* This trade has been a confirmation of the lessons learned in GBPJPY but still I have to find a solid risk/reward strategy and fine tune my SL since they're affecting my sucess ratio a lot.

P. S. This is a diary I started with the only objective that other traders would read it and perhaps they'll share their views on my trading decisions, what mistakes they've seen that I missed or things to improve in my strategy and in general any other advice they will like to share. If my diary is not achieving that objective I'll better keep this journal for myself on my pc and save the time it takes to post it here. So please if any of the 134 views it has by now want to share some view or insight I'll be greatly appreciated for the time it has taken you to share your thoughts.

Wish you a great weekend and good trades next week.
 

WaveRider

Master Sergeant
Messages
350
This is a diary I started with the only objective that other traders would read it and perhaps they'll share their views on my trading decisions, what mistakes they've seen that I missed or things to improve in my strategy and in general any other advice they will like to share.

A journal can feel a little lonely. The first few weeks of my journal I was hoping to get more traffic and back and forth. It's up to you but keeping your journal online keeps it honest. If you expose your thinking to the world, you will be a much harder critic than if it were private. You'll quickly realize you were trading outside your plan or over trading if it's online and it's easy to gloss over your own mistakes if it's purely private. This journal puts you ahead of 90% of all the "traders" out there. 134 views and they should all be starting their own trading journals. Instead they are hoping someone will tell them to buy or sell or for software to think for them. They see you have a method and you're working out in your mind how the market works and they bail because working at all is too much work for them. My thread has 14,000 views and maybe only 5-6 people have posted anything in there. They are welcome to. But I don't post for them. I post for me. It's how I keep my mind straight and myself honest about my faults.

Here is a little advise: getting a 2:1 ratio is great, when you can get it but where to put TP and SL is not a simple math function. The chart tells you a TP is a good idea and safe and also the an SL is safe and rational. Sometimes that results in a 3:1 or 4:1 ratio. Sometimes that's a 1:1 ratio. Working multiple positions and closing portions of the position, moving stops to BE means you will profit even if you are wrong. That alters the math in your favor and nearly all the successful traders do that. Try opening a position divisible by three, take 1/3 profit at 20-30 pips, move you stops to break even and leave the rest in for the remainder of the trade. I use an ea called "multi purpose trade manager" written by steve hopwood. I open a position and I can tell the EA to manage it for me. It moves stops and takes profit. If you decide to get it, read well on it. It is very powerful and has lots of features. It's written for MT4 but since you're with dukascopy, they may have something written in Java that does the same thing or similar.
 

RahmanSL

Major
Messages
2,852
"P. S. This is a diary I started with the only objective that other traders would read it and perhaps they'll share their views on my trading decisions, what mistakes they've seen that I missed or things to improve in my strategy and in general any other advice they will like to share. If my diary is not achieving that objective I'll better keep this journal for myself on my pc and save the time it takes to post it here. So please if any of the 134 views it has by now want to share some view or insight I'll be greatly appreciated for the time it has taken you to share your thoughts."

Our friend WaveRider is correct (most probably being high up on the tallest wave and have much better view up there:p) and his "little advise" is probably worth a few tons in gold ;)

...hehehe....does it really matter not many FPA members post their comments here in your thread??:p...this thread is basically for your own trades record and in taking the time to write and post them here (or elsewhere), you are in actual fact revising your trading system and, in thinking about what to write, you are in fact analyzing your trading system and tweaking it to perfection.

The most important thing is that you are confident with your trading system and is comfortable trading that system everyday.:cool:

Some, who read your thread, might be trading the same system and will eventually share their ideas with you.
 
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