ProfitMaxTrading.com
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 Posted:
Wed Oct 12, 2005 9:56 pm Post subject:
Trading the Aussie Forex |
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The current daily cycle turn date of prior calculation is 10/11. Last night
I decided to jump in long prior to confirming this potential pivot bottom
for 10/11 via the Forex (where I do 95% of my trading since the beginning of
this year).
Last night I noted a drawdown but held position in expectation of this cycle
turn due.
Naturally noting a rally in Aussie upon my rise from slumber was nice to
see. So far so good. So what started in the red is now in the black. But it
is too early to count the chips. This market still needs to confirm the
cycle pivot. A higher high/low price bar will do the trick.
The next daily cycle pivot is 10/17. I'll adjust my stops accordingly in
expectation of this.
Often I find myself having to jump in just ahead of the turn. By doing this
I must give room to allow it to happen. This is the dangerous part because
it can move against you hard initially before making the turn (nasty initial
drawdown) or may simply not turn at all (1-2 out of every 10) or turn out to
be a strong move (acceleration) against me.
Each situation depends on the circumstances. In most cases if I'm going to
jump in ahead of an expected turn, I'll have a good idea as to how far it is
likely NOT to go. This is the price element.
For example, I determined (and provided this information to my
client/members) that Australian Dollar futures are oversold in the 7500-7460
short-term price range. The 10/11 low was 7485. Because 10/11 is also the
current cycle pivot date, it suggested a very strong probability that price
will rally (up). It also suggested that if it did not do so immediately
(such as being a day late), it would not push below 7460 by much. Anything
more and I'd bail out.
But the Futures prices that are quoted above are not the same as the Forex.
So a rough estimation is necessary.
When Futures made the 7485 low the Forex was 7507. That is a difference of
22. So if in Futures I suspect price not likely to drop below 7460, that
would be about 7482 in Forex (7460 + 22). Subtract a few pips for good
measure (do not try to be too precise - give a fudge factor), and a stop can
be placed just below 7480 in the Forex and you can turn the lights out and
go to bed.
In situations where you have a new daily low a day following when you are
expecting a pivot bottom due to a cycle turn date, it will either become a
pivot bottom or BUST. Knowing this, you can then place your stop-loss just
below that potential pivot bottom low in expectation that it should hold
(and eventually confirm as a pivot bottom). This is also great for getting
aggressive in adding contracts. No need to calculate price levels in these
situations.
So the situation dictates the approach. Discretionary trading approach.
Once the 10/12 price bar officially closes and we start trading the 10/13
bar (starts night session today), the low is a fixed price and a great
reference for initial stop-loss. In this case moved up from the
pre-calculated price shown above.
As the trade progresses, the stop is moved up accordingly. At some point we
come to another cycle pivot turn period and the stop-loss is adjusted
aggressively in expectation of a new pivot. At some point, the decision may
be made to simply exit/reverse "jump in" and repeat the above.
Just thinking out loud. :)
--
Cheers!
Rick J. Ratchford
ProfitMax Trading Inc.
http://www.profitmaxtrading.com
"The KEY to Precision Timing!"
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