We’re WAY back up – back on our way to $1 million dollars in 18 months.
I told you I could dig us out of that hole, now didn’t I? Yes I did. J
After staggering to a rather terrifying low of about $22 in equity on Monday, I was able to make a monumental recovery on Tuesday and then further profits the rest of the week, resulting in a Friday-close balance over $150 – or more than three times the $50 we started out with. Whew! It was nice to finally get some breathing room by the end of the day’s trading on Tuesday, gaining some margin money to work with. Because I’ve got to tell you, it’s pretty darned difficult operating with only $20-$25. There’s just not enough margin money there to do much with. I was buying single micro lots at one point, because I didn’t have enough margin left to buy 5 at a time. It’s a lot easier to go from $100 to $1000 than it is to go from $10 to $100, trust me.
By the way, one trade that really helped me get out of the woods and back into the profit zone was selling USD/SGD, one of the trades that I mentioned in my article last week, “Three Currencies to Buy Right Now for Huge Profits”. You might want to take a look at that article.
The week was, in fact, what a fairly typical week using the Dance strategy often looks like – One really great day, two pretty good days, one day just above breakeven, and one relatively small down day. If we can manage that kind or performance week after week, we’ll definitely make our million dollars. Since the Dance strategy is a short time frame strategy, profits on any single trade are not generally large – often not more than 10 or 15 pips before getting stopped out. But there usually is an opportunity at least one day during the week to catch a long, sustained move in one direction without getting stopped out and pick up 50 pips or more on just one trade. And it’s those really nice winning days that more than cover a few small losing days which may occur now and then.
Thursday, I top-picked GBP/USD, EUR/USD – and after seeing an immediate profit of several pips in my GBP/USD trade – top-picked AUD/USD, too. But I wasn’t just blindly guessing or hoping to get lucky – I did have some almost rational reasons for putting on the trades. The GBP/USD – which I started with, and then saw an immediate profit on – had reached the daily pivot R1 resistance level at 1.6820 and then sold off sharply, falling quickly back below 1.6800. The trade was also a classic Dance trade, as GBP/USD had crossed to the downside of the 50 EMA on the 15-minute chart. EUR/USD was up against a fairly major resistance level around 1.3850, and AUD/USD was likewise at a strong resistance level of .9450. So there were good reasons for thinking those markets might well have topped out for the day. Plus, nothing goes straight up indefinitely – we were due for a day where there was at least some significant movement to the downside.
Very important was that I wasn’t risking a lot to test my analysis, just a few pips – I sold GBP/USD at 1.6792 with a stop at 1.6799 (I wasn’t even risking it going one pip above 1.6800), and I waited for the confirmation that I got when it promptly dropped 10-15 pips down before taking the additional positions in EUR/USD and AUD/USD. Often the tip-off that you’ve made a very good trade is when the market moves immediately in your favor and you have a nice 5 to 10 pip profit almost right from the start. Anyway, the strategy worked quite nicely. AUD/USD fell almost straight down from .9450 to .9400, and GBP/USD fell off nicely, too (EUR/USD couldn’t make up its mind, and I lost a few pips on that one).
THIS WEEK’S DANCE STRATEGY TIP – DON’T TRADE THE PORCUPINE!
Try to avoid the WICKED areas where price is just winding slightly above and below the moving averages, going nowhere fast, and the trading action is characterized by small candles with sizeable wicks on both sides, so that the market action starts to resemble a porcupine. This happened one day this week, illustrated in the EUR/USD chart below. If you look just a bit to the left of the middle of the chart, you can see the 5 and 10 EMA’s flatlined and price just winding slightly to either side of them, but with no follow through or even significant movement up or down – and candles with small bodies and either top side or down side wicks. Not the place to put on a trade. Better to wait for the market to make some kind of clear indication of direction – as it finally did with one large, solid candle up, followed by a continuing rise in price. I know a trader – a very good trader, in fact – who got caught in this particular porcupine: He went long at 1.3871, got stopped out at 1.3858; then went short at 1.3856, and got stopped out at 1.3871. That’s called getting “whipsawed” – the market catches you coming and going in both directions.
When the porcupine is around, it’s easy to get churned up like that, so just keep a lookout for that particular market condition. I got porcupined a bit myself on Wednesday when GBP/USD just kept going a few pips across the 50 EMA, enough to induce me to buy it or sell it, and then before showing me any decent profit, it would turn and run far enough back across the 50 EMA to stop me out. It finally made a decisive move, enough to allow me to escape the day with a small profit, but it meant extra hours of trading just trying to overcome several small losses that I had suffered from being churned up over and over again.
I’ve mentioned before, the tendency of GBP/USD to do “fake out” moves just prior to zooming off in the opposite direction. I just thought I’d show you a fairly classic example of this that occurred last Friday. Looking at the chart below, starting on the left hand side, you can see that GBP/USD made a low at 1.6718, right around a Fibonacci support level at 1.6723. It then struggled along for about 3 hours, failing several times to clear above the 1.6735 level. And then came a long, red, down candle, dropping all the way down to within just a pip or two of the low of the day, and even establishing a new low 15-minute candle close. If you stopped the chart right there, you’d think for sure that GBP/USD was going to plunge on down significantly below 1.6720. But what happened? – It immediately turned around and went right on up to nearly 1.6750.
Total fake out – If you were already long, you probably got stopped out; or if you made the mistake of going short at the end of that long down candle, you never even saw a 1-pip profit. The one tip-off that might have allowed one to enter the market on the buy side, running a tight stop just below the low of the day, was the fact that there was no downside follow-through on the next 15-minute candle following that big, scary-looking drop. (By the way, if this had been a totally classic GBP/USD fake out, it would probably have actually made a new low of the day by a couple of pips, thereby stopping out another whole boatload of buyers. This time it didn’t quite go that far.)
Going forward, just to let you know, the account may not explode at the exponential rate it did the first time out of the gate – I’m going to try (I said “try”, okay?) to operate a bit more conservatively. But don’t worry – I’m still planning to keep us on track for our million dollars in eighteen months. I mean, the way the price of gas and groceries is going up, we need that money, right?
So, we’ve been up, we’ve been down, now we’re back up again and doing very well (Who wouldn’t be happy with a monthly gain of more than 200%?). We’re having fun AND making money, right?
NEXT WEEK: I’ll walk you through exactly how I start my trading day and how I choose my first trade of the day – AND reveal how you can use the average daily and weekly ranges to maximize your profits.
COMMENT! Let me know what YOU think – after all, I already know what I think.
And please share this article around – make it the tweet of the week at Twitter, the post of the week on Facebook! The more people we have working on this together, the more likely we are to succeed – you know, “Two heads are better than one”. That’s what they tell me anyway.
It’s almost Easter! I hope the Easter Bunny brings you lots of nice presents.
Best wishes always, from the penthouse floor of the Heckscher building,
Jack Maverick is a writer and forex trader. Find him on Google+ at https://plus.google.com/u/0/103534926809963693894/?rel=author and check out his novel, the psychological thriller “A Cross of Hearts”, on Amazon at http://www.amazon.com/Cross-Hearts-J-B-Maverick-ebook/dp/B006GHJ0ZC/
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