gbp/usd update 7-24-08

click to enlarge


Let’s resume our gbp/usd tracking for a moment.

Today we can see that the 4hr gmt bar closed right above at 61% daily Fibonacci. So, we can assume that price will attempt to move up and challenge 50% daily fib at 9899. Why there? Because, That is the location of overhead price resistance as well as 50% fib resistance.

Both of these levels are untested after the breakdown through them. Most moves cannot be trusted to continue fully until the broken support or resistance level has been tested.

The 4hr trend is currently down so we would only be looking for opportunities to go short.

When price reaches our resistance area we don’t want to enter just because price touches that level. When price gets to resistance we want to drop down to our 1 hr chart and wait for the close of that 1hr bar to see if we have a setup. It is only then that we look for an entry trigger.

As I write this we are currently at 23% fib resistance where we can normally expect a pause and this is the first level we must close above before we can make it to the price resistance level of 9899.

You must not enter on the touch of resistance especially in this case because the 2 bars ago we closed with a long range down bar and it was a public.

You can best believe that operators are going to at least attempt to fade this bar up to near the high of that public and the high of that bar is a 61% fib resistance of the last down swing.

So, when we look at our 1hr we currently see the market is trying to form a bull pivot reversal. We won’t know until the end of this current hour.

We want to see this bar close higher than the high of the last bar (9849)
With higher volume than the previous 1hr bar or strong professional/operator participation.

If that should happen we will have a bullish 1hr setup. We would then look for our trigger which will be a pullback to 61% Fibonacci (9841) where we would enter long. This would be a counter trend entry so the risk on this one would be enhanced more than if we are entering with the trend.

If we get our trigger we would look to take profits at 9900 (50% daily fib resistance).

Our stop would go 6 to 11 pips below 61% fib and the low of the day ( 9815)or on 1hr weakness after entry even if stop is not hit. These are composite support for the moment.

So, no setup means not entry. No trigger means no entry. These are safety guidelines to keep your risk small.

Cheers, Jerry
jerry@foretradingmajic.com
tradingmajic1@gmail.com

BUILDING SMALL ACCOUNTS WITH MONEY MANAGEMENT

MONEY MANAGEMENT FOR MINI ACCOUNT DAYTRADERS

This article is a reprint of an article I wrote a while ago while keeping statistics on trade call I was making at the time. I am posting it here as there are many new members to THE LAWS OF CHARTS AND MEN who can benefit from some suggestions made here.

I have touched with you a little on trade management. There is something that goes hand in hand with trade management and that is money management.

When you look at the trade results I posted you may think that you can’t do a lot with that trading a mini account. Well, let’s see.

We will use our last 5 live trade calls and add contracts to each winning trade and subtract an equal number of contracts from losing trades.

In the end, you will see how a realistic profit of 1700 pips can be gained over a one month period, while risking only $16 dollars of your initial account balance, with an average winning trade of 23 pips.

This is the true power of LCM. The power to keep your risk/stops small while still providing a very high win rate.

1ct X +25 pips + 25 pips

2ct X+22 pips + 44 pips

3ct X+ 43 pips + 129 pips

4ct X+23 pips + 92 pips

5ct x+7 pips + 35 pips

TOTAL 325 PIPS


STOP INITIAL CAPITAL RISKED

1. 16 PIPS 16 PIPS
2. 20 PIPS 0 YOUR NEXT STOP IS WITH HOUSE MONEY
3. 23 PIPS 0 YOUR NEXT STOP IS WITH HOUSE MONEY
4. 36 PIPS 0 YOUR NEXT STOP IS WITH HOUSE MONEY
5. 38 PIPS 0 YOUR NEXT STOP IS WITH HOUSE MONEY

NOW YOU HAVE EARNED 325 PIPS WHILE RISKING ONLY 16 PIPS OF YOUR INITIAL INVESTMENT…OR DOUBLED A $300 MINI ACCOUNT.

THEN, ON YOUR NEXT CYCLE OF TRADES YOU CAN START WITH 2 CTS INSTEAD OF 1 AND ADD 2 ADDITIONAL CONTRACTS AFTER EACH WINNING TRADE AND IT WOULD LOOK LIKE THIS;

2ct X +25 pips + 50 pips

4ct X+22 pips + 88 pips

6ct X+ 43 pips + 258 pips

8ct X+23 pips + 184

10ct x+7 pips + 350 pips

TOTAL 930 PIPS + 325 PIPS ON FIRST CYCLE = 1255 PIPS

THIS IS NOT AS FAR FECTHED AS IT SOUNDS BECAUSE LCM CAN ACCOMPLISH 10 WINS IN A ROW OVER A 2 WEEK PERIOD INTRADAY.
SO NOW WE GO INTO A 3RD WEEK OR CYCLE OF 5 TRADES


NEXT CYCLE START WITH 3 AND ADD 3 TO EACH WINNING TRADE

3ct X +25 pips + 75 pips

6ct X+22 pips + 132 pips

9ct X+ 43 pips + 387 pips

12ct X+23 pips + 276

15ct x+7 pips + 105 pips

TOTAL 930 PIPS
+ 1255 PIPS ON FIRST 2 CYCLES = 2185 PIPS


Now To the 4th or End Of the Month Cycle
Start With 3 and Add 3 to Each Winning Trade

4ct X +25 pips + 100 pips

You get the Idea.

Cheers,Jerry

jerry@forextradingmajic.com

tradingmajic1@gmail.com