Tuesday, February 23, 2010

GBP/CHF - A Trade in Action (and not going well)

In the chart below you will see a trade I have currently in place. This trade is an example of the scary nature of trading pivots the way I do them. When things go right, you can make thousands of pips. When they go bad though, you can lose your account. Here is how this trade breaks down. The weekly pivot is 1.6729. I stacked 10 orders below the pivot, each 10 pips apart. The first at 1.6719, then 1.6709, 1.6699, etc. until I had 10 buy stop orders ready to go.

On Monday, the price spiked up and opened all of my positions but one. The price then fell somewhat putting my account negative for a while. Then early this morning (Tuesday), the price spiked up again and missed the weekly pivot by 1 pip. Yes, 1 pip, then fell like a stone and nearly margined my account before coming back somewhat. Now, this trade may yet work out. If you've looked at the way price moves in relation to the pivot point you'll know that it very often comes in contact with the pivot more than once. So I'm riding this out. But this is an example of why this trading method is not for everyone. It can be volatile and frightening. If you fear losing your account, don't trade this way. We'll see how the trade works. I'll report when it closes.
Happy Trading!

Tuesday, February 2, 2010

Trading Example - GBP/JPY Weekly Pivot Trade

The chart below shows the GBP/JPY hourly. I've noted the weekly pivot point at 144.80. I traded this pair by stacking positions at the open of the week on Sunday night. The pair opened at 143.28 and I started stacking my positions at 144.70 with a limit order to sell at the pivot, 144.80. I added an order to buy at 144.60. 144.50, 144.40, etc., all the way down to 143.80. I like to keep 50 pips or so between the price and my most recent order to give the price a chance to move before opening my positions. I opened up 10 orders at 10 pip intervals each for two units (for example, I trade in 5 mini lot units so each order set above was for 1 standard lot). Over the next few hours half of those positions opened up, then the price fell back to just about the 143.00 level. I used that drop to add 3 additional one unit positions down to 143.50 (I'll discuss stops and why I do not use them with this trading style in a separate post - for now, suffice it to say that margin call is my stop loss in this account).


Starting at about 0600 EST on February 1 the price for this pair started moving up and continued up until the weekly pivot was hit during the 1900 EST hourly bar. On this trade I made 1,460 total pips (counting 130 pips for the last order, 120 for the second to last order, 110 for the third to last, then 200 for the first two unit order [100 pips x 2 for the 2 units traded]). Not bad for a trade that opened and closed in less than one day.

I will deal with the issue of stops and account size in a later post. This has been a very profitable trading method for me. I use it almost every week and have seen great gains. But a word of caution: I spent several months back testing this method before I put a dime of my own money behind it. I suggest that you do the same. It is a volatile trading methodology and will have big moves in both directions. If you trade using too much margin you will suffer losses. Become comfortable with it before you use it and it will, I hope, be as good to you as it has been to me.

Happy Trading!