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Monday, June 9, 2014

Using ‘On-Stop’ Orders to Maximize Trading Profits



Examples of effective use of ‘on-stop’ trade entry orders

Using stop entries to enter the market in-line with fresh market momentum is an excellent way to take advantage of this entry type. The idea here is, after a surge of momentum opposite to a recent trend, a stop entry on a price action signal can help “confirm” that the fresh momentum will continue at least for a while after filling your entry order.
In the chart image below, we see a EURUSD pin bar sell signal that formed shortly after a down move in the market that followed a strong up trend. The most logical entry order on this pin bar sell signal was a sell stop, because this gives us some more “confirmation” (not 100%) that more bearish momentum might be in store. In this case, the pin bar signal actually kicked off a very large move lower and formed very early in the new downtrend.
Using on-stop entry orders can help get you into new trends early. By taking you into the market in-line with the near-term momentum, you get a little extra “confirmation” that the move you are entering on is more than just a temporary counter-trend retrace:
pin bar stop entry The on-stop entry is the only entry type to use for an inside bar trading strategy. An inside setup is a ‘breakout’ play by definition, so you need to enter in-line with momentum by waiting for price to break either above or below the mother bar high or low.
In the chart image below, we can see an inside bar setup in the AUDUSD . Note that using the sell-stop entry allowed us to have a little extra “confirmation” that the downtrend might continue by bringing us into the trade as bearish momentum pushed price down into our stop entry which would be placed just (typically 1 pip below) below the mother bar low of the inside bar setup:
inside bar stop entry The recent sell-off in the spot Gold market has been widely discussed on our site and if you knew how to use sell-stop entry orders properly you did not have to waste time waiting for the big moves to trigger. You could have simply placed a sell stop entry order below the lows of two recent price action sell signals on the daily spot Gold chart and then literally walked away, and you would still (at the time of this writing) be up a very large profit. This truly shows the power of using on-stop entry orders in trending markets.
In the chart image below, we can see two recent price action sell signals in the Gold market that you could have entered on sell-stop orders. The first one was a fakey sell signal that formed back on May 3rd, note how the market consolidated and ‘chopped’ sideways for four days after the signal formed. If you had placed a sell stop just below the fakey’s mother bar low, you would not have gotten filled until price finally broke lower, triggering the fakey sell entry on May 10th. Had you entered “at market” or on a limit retrace entry before price broke the mother bar low, you would have had to endure 4 days of price chopping sideways, including one big up day against your position. Many traders struggle with the emotions that get stirred up when they enter a trade early like this and have to wait for it to come off, and they end up closing trades out prematurely for no real reason as a result, then the trade comes off without then on board; this can mostly be avoided by using on-stop entry orders as we see below:
gold sell stop Note: On the three examples above, whilst they are all sell-stop entries, buy-stop entries work just as well and everything above applies for buy-stop entries too.

How to place an ‘on-stop’ entry order…

What good is knowing the advantages of on-stop entry orders if you don’t know HOW to place them?
Let’s do a quick walk-through of how to place pending on-stop entry orders on the Meta Trader 4 trading platform:
Step 1. There are three easy ways to open the order entry screen in MT4. The first one is to simply right click on the chart of the market you want to trade and then slide your mouse over “trading” and then “new order”, click on it and then you should see this box appear:
MT4 order window An even easier way to make the order window appear is to simply push the ‘F9’ button on your computer when you have the MT4 platform open, doing so will also open up the above order entry window.
The third way to get the order entry window open is to go to “Tools” at the top of the platform and then select “new order”. These are the three main ways to open up the order entry window in MT4.
Step 2. The next step is to select “Pending Order” from the order “Type” drop down menu. Then, you will select Buy Stop or Sell Stop, depending of course on which direction you are trading (Buy Stop for buy entry, Sell Stop for sell entry).
how to enter a pending stop entry Step 3. Next, you need to select the price you want to enter the market at and the expiry date of the entry order; the expiry date means if the market hasn’t filled your order by that date, the order will automatically be cancelled. You also need to decide the volume you will trade (lot size) and put in your stop loss level and profit target, for more on this, checkout this article on how to place stop losses and targets.
order entry window After you place your stop entry order you can see it in the “Terminal” window at the bottom of the MT4 platform. Be sure to either set an “expiry” as explained above, or cancel your pending stop entry order if it doesn’t get filled by the day you want. Forgetting about a pending order with no expiry can cause you to enter the market when you aren’t expecting to or don’t want to, this obviously can result in an unplanned loss.

In closing

Finally, I trust that you’ve learned some of the advantages of using ‘on-stop’ entry orders and some new concepts about the MT4 trading platform in today’s lesson. All of the ‘order-strategies’ discussed above are possible on our preferred forex broker’s trading platform. This powerful yet simple technology is something that you should take advantage of and hopefully after reading today’s lesson you have a better idea of how to do that.
If it’s not already clear, you can save time, learn to trade with discipline and take advantage of trading in-line with the current market momentum all just by knowing how to use ‘on-stop’ entry orders. For more information on how to trade my price action strategies, including using ‘on-stop’ entry orders and other order types,

Success in Forex = Learning + Practicing + Update Knowledge

Sunday, June 8, 2014

Using ‘On-Stop’ Orders to Maximize Trading Profits


 There’s an abundant amount of trading opportunities each month in the market, but we don’t always have the time or desire to sit around staring at our charts waiting for the market to hit our pre-determined entry level. Also, I should mention that sitting around waiting for the market to trigger an entry is an unnecessary waste of time and can tempt us into entering a trade prematurely or to enter a trade that we otherwise might not. Fortunately, with the knowledge of how to use ‘on-stop’ entry orders, we can eliminate the need to sit in front of our computers waiting for the market to trigger a trade entry.
I get a lot of emails from traders asking me about different trade entry order types and how to use their Meta Trader 4 (MT4) trading platform. Thus, in today’s lesson I thought I would answer both of these questions by discussing how to use ‘on-stop’ entries properly and some of the advantages they provide.


Advantages of ‘on-stop’ entries

Let’s discuss some of the ways that ‘on-stop’ entry orders can improve your trading and the major advantages they provide:
• Momentum confirmation – When you enter the market on a stop entry, the market moves into your order on momentum that is in-line with the direction you want to trade. This has the added advantage that price is already moving in the direction that you are trading at the time of entry and often results in your trade moving into profit quickly. If you were to use the other two popular entry orders; a market or limit entry, you do not necessarily have this advantage.
For example, if you are entering on a ‘buy stop’, it means you are buying the market and in order for your buy stop to get filled the market has to be moving higher and move up into your buy stop entry, and that means it has bullish momentum behind it. Conversely, if you enter on a ‘sell stop’ entry, the market will need to be moving lower, down into your sell order. It doesn’t “guarantee” that the trade will continue in your favor, but at least at the time of entry the market is moving in your favor.
• You don’t have to be at your computer – Many of you have read my set and forget trading lesson, but what I don’t get into in that lesson is that the stop entry order allows you to set up your trade and ‘forget’ about it (stop entries allow you to ‘set and forget’). Also, unlike a limit entry, with a stop entry order you have the added peace of mind of knowing that if your trade does get filled after you set and forget it, you will get filled with ‘momentum confirmation’ as we discussed above.
Many of us (myself included), don’t have all day to sit around waiting for the market to move to our desired entry level. If you use an on-stop entry, you do not need to sit there watching and waiting; once you spot a price action trade setup you can simply enter your stop entry order, stop loss and target, and then walk away for a while.
• Eliminate trade ‘obsession’ – If you are trading an inside bar setup for example, you do not need to sit there waiting for the market to break past the mother bar high or low to enter. Instead, you can simply place a buy stop or sell stop just above the high or low of the inside bar and then go do something else. Traders who obsess over trades and are glued to their screens tend to lose money, you need to be interested and passionate about trading but not “in love” with it, I discussed this in last week’s article in which I talked about the differences between amateur and professional traders.
• Reinforce discipline – If you set an on-stop entry order and then walk away and let the trade play out, you are trading with discipline. There is something to be said for “letting the market come to you” as opposed to just jumping in with ‘at-market’ orders all the time. A stop entry allows you to set the exact level you want to enter at; if the market breaks past a certain level you will get filled, if it doesn’t, then you won’t. Many traders get into trades too early, before they really start moving, and this causes all kinds of psychological problems for them like second-guessing their entry, over-analyzing and closing out trades prematurely; if you enter with a stop order as the market moves into your desired entry level, it can help you avoid these mistakes.
Also, by setting your order and then going and doing something else, letting the market ‘do the work’, you are getting into the habit of not ‘forcing’ trades and of trading in a relaxed manner, instead of over-trading and (or) getting in prematurely. Once you start to see success trading in this manner it will begin to reinforce the discipline you had to put forth to set your order up and walk away.

Success in Forex = Learning + Practicing + Update Knowledge

Tuesday, June 3, 2014

Forex Trading Strategies The Market Never Forgets 2


Hopefully by now you’re starting to see how the market ‘never forgets’ about key chart levels and event areas. Once you get more experience and familiarity with these levels, your eyes will begin to instantly be drawn to them on a daily price chart, and you’ll start to feel more confident in your ability to analyze and trade with just raw price action and levels.
This next example was a pretty easy one to identify . In November of 2013 we had two pin bars in the NZDUSD carve out an event area up near 0.8410. As price retraced back to this area in mid-January of 2014, we would have already had this key resistance / event area drawn in on our charts and our attention would have been focused on it as price drew closer. Not only would a blind sell entry have worked as price hit that 0.8410 event area, but we also got a nice pin bar sell signal for further confirmation that a move lower was probable.
We can see the market fell all the way down to the key support near 0.8080 after breaking down below that event area pin bar from January 14th. Note, how well price respected that key support and that the market ‘didn’t forget’ about that level either. I’m telling you guys, this stuff is POWERFUL!…


marketneverforgets3-1  

Let’s take a look at some more examples so the idea crystallizes in your mind…
The daily charts below both show the spot Gold market, one of my favorites to trade. You will notice in the first chart below, a key level / event area formed through about $1277.00. Note the small pin bar on August 7th of 2013, the pin bar and subsequent powerful bullish move from it told us that this $1277.00 level was an event area to keep our eyes on if price re-tested it in the future.
We can see price did re-test it on October 2nd of 2013, and a blind buy entry would have worked well here with a tight stop loss just below $1277.00. However, had you missed that entry or been waiting for a price action signal to ‘confirm’ your entry, a clear fakey buy signal formed on October 15th, just a couple weeks later. This fakey signal at the event area led to a nice push higher.



marketneverforgets4 


 Now, here’s where things get even more interesting…
The chart below is also of Gold, and we are looking at the exact same event area from the chart above, just more recently. This $1277.00 level has been an important level and event area all the way back from that pin bar on August 7th we discussed in the chart above.
Now we are looking at about the most recent 3.5 months of daily chart data in Gold, and we can see this $1277.00 event area is still in-play and working quite well.
Note that since the start of this year price has tested this event area 4 times and each time the level held, at least initially. Most recently we had a fakey buy signal from this event area which formed April 24th . Just today , the market tested this event area at $1277.00 yet again and it held yet again…we will wait to see how this fakey signal from April 24th plays out, but the power and effectiveness of event areas and key chart levels cannot be disputed as you can see by today’s lesson!


marketneverforgets5-1  


I hope you’ve enjoyed this brief lesson on key levels and event areas. It’s clear upon observing and analyzing the raw price charts of a market that the market truly ‘never forgets’ where major moves started. By learning to spot these key levels and event areas, we can mark them on our charts and when the market starts approaching them on a retrace in the future, we have a high risk/reward scenario setting up to pay close attention to.
I suggest you first learn to trade these second-chance entries at key levels and event areas with a price action signal as a ‘confirmation’ / entry trigger, then as you gain experience you can try the ‘blind’ second-chance entry we discussed here today. For more information and training on key levels,


Success in Forex = Learning + Practicing + Update Knowledge

Monday, June 2, 2014

Forex Trading Strategies The Market Never Forgets

 I’m going to share with you a very powerful trading ‘tip’ that will significantly improve your understanding of price dynamics as well as how to read a ‘naked’ price chart.
The ‘tip’ is somewhat simple on the surface, but a bit more involved when we dive down a bit, and that’s the part I’m going to help you with today. What I’m talking about is the tendency of a market to never ‘forget’ where a major move started.
How many times have you seen a market retrace back to a level or area where a recent major move started from, only to respect that level almost exactly before making another strong directional move? It happens often enough to be something that you need to understand and know how to make proper use of, because these scenarios can often yield very high-probability / high reward to risk trades.

Let’s hit the charts for an explanation of this powerful trading technique

Before we proceed, it’s important to note that what I’m about to discuss with you is not a ‘perfect science’, but it’s an occurrence in the market that is critical to understand, and a tool to have at your disposal when you’re analyzing charts.
The first point you need to understand is: A market will often ‘remember’ and respect where a major move started. That is to say, if a market retraces back to the level or area a major move started from, many times (not every time) it will again bounce or fall away from that same level / area. As a price action trader, this is a HUGE clue for us and we can use it to develop several high-probability entry techniques:
In the example chart below, we can see a few important things taking place.
1) A key resistance level was established near 9735.00 – 9700.00 in the DAX30 market (German Stock Index). This key resistance level and the big move lower from it established an ‘event area’.
2) The first major test of this key level / event area a little over a month later, resulted in a bearish pin bar sell signal that led to another large decline.
 For our purposes here today, you should know that an event area is a level or a small area / zone on the chart where a big price move started from. A price action signal by itself can start an event area, it doesn’t have to be at an existing support or resistance level. However, if a big move starts from a price action signal in conjunction with a key level of support or resistance, this is an even stronger event area.
3) The next important thing to note on the chart below was that as the market tested the event area when the pin bar sell signal formed, it reversed yet again, because the market didn’t ‘forget’ about that event area…


marketneverforgets
In the above chart, not only could have we traded the pin bar sell signal from the key resistance level / event area, but on the subsequent test of that event area, we could have taken what I call a ‘blind entry’ at the event area. The entry would have basically been a limit sell entry somewhere in the range of where the pin bar formed, with a stop loss set just above the resistance near 9714.00 / pin bar high. This is called an ‘anticipatory’ blind entry at an event area on a retrace, or sometimes I will call it a ‘second-chance’ entry.
Note: A price action signal at a key level or event area is a bit ‘safer’ of an entry technique than a ‘blind entry’ because it gives us some ‘confirmation’ for an entry, but as price action traders it’s important to be able to read a chart and understand the dynamics of event areas, because we won’t always get the price action signal when we want one. Thus, as you gain experience you can try to enter ‘blindly’ at one of these tests of an event area, I also sometimes call event areas ‘hot points’ in the market as they are important ‘hot’ areas where a significant price action event occurred recently.

Let’s look at some more examples:

In the chart example below, we can see a good example of how to use an event area both with and without a price action signal as the entry trigger.
Note the first pin bar on the left of the chart, this initially formed the event area because of the strong down move that followed. So, we knew this level / area near the pin bar would be important on subsequent tests in the future. Sure enough, price has respected this event area on each subsequent re-test.
The pin bar buy signal from February 27th would have been a very obvious trade since it was rejecting and false-breaking down through the event area and price had bullish momentum behind it at that point. Note the nice up move that followed.
Next, when the market retraced all the way back down to the event area on April 4th, we could have successfully entered long on a ‘blind’ limit buy entry near the event area, note the powerful up-move that followed over the next four days.


marketneverforgets2

Now, let’s look at another example of how a recent event area clued us into a potential ‘blind’ or price action signal entry.
Note, the key level near 1.6670 area on the GBPUSD and the big move lower that started from that level on January 24th, this big move told us that this was a level the market might not ‘forget’ (event area). A long-tailed pin bar sell signal formed here on March 13th, this price action signal and the move lower from it further solidified this level as an event area. Note, how the market then fell away from that level as price sold lower from the pin. We then had another re-test of the event area that led to a modest move lower before the market surged up above the event area. Now, as the market retraced back down to the event area, you would have already known this level was important and an event area (now you know for future reference).
You could have entered a blind buy limit near 1.6700 – 1.6670 area, or you could have waited to see if a buy signal would form. In this case, a very nice long-tailed pin bar buy signal did indeed form and price is still moving higher from it as of this writing. 


marketneverforgets3

Success in Forex = Learning + Practicing + Update Knowledge