Let me start by stating that I'm looking for input from experienced traders. I have no wish to end up with dozens of posts telling me I need MACD, RSI, Stochs blah-de-blah, de-blah...
I am also aware of Jacko's way of trading (so no need to point me in that direction, either) as it isn't relevant to this discussion.
At this point, I would prefer reasoned discussion from traders who, primarily, trade 4-hr charts and upwards. As the question is opened up, it will be apparent that scalpers and others who limit their horizons to 10- or 20 pips may not be looking for the same answers as I am. This may be approaching the question from a blinkered point-of-view but I am basically looking for a longer-term perspective on this, even if the answers mean adopting a short-term perspective on the market.
I understand that this may sound arrogant but this is my thread and I'm entitled to make the rules. So, here's the question and the foundation of my dichotomy.
Firstly, I trade the trend (as I see it on the Daily chart) and only base my trades on Support and Resistance. Sometimes my trades are based on J16-style price action and at other times I place blind limit orders at key points (as I define them) on the chart. Having learned the folly of trading without some sort of disaster stop, I assess my position size on S/R and place my stops accordingly. My usual approach to risk is to allow a maximum of 5% overall
and I base my lot sizing on that. I am aware that this is higher than is normally recommended but, having been around the block a few times, I am fully in control of this side of my trading and accept the inherent risks involved.
I normally split the trades up and enter with minimum lots at each Support or Resistance level as price moves down or up; I guess we could call this 'averaging in'. I have been trading this way for some time now and am comfortable with it, but there is one aspect that has been eating away at me and this is the dichotomy that needs resolving.
Due to the way that I arrive at my levels I have quite definite and, historically, accurate Take Profit targets. As I also rarely take partial profits at these points I'm normally trading all-in and all-out. So the question that is searching for an answer is this:
I'm trading an uptrend and I have a clearly defined TP point on my chart, I must assume that at that point there will be sufficient Resistance to cause a reversal, albeit temporary. As price gets nearer, two or three things are likely to happen; (1) price runs straight to my TP and I'm out - if it breaks through and continues going I'll reassess later and treat that level as potential Support; (2) price starts to show signs of exhaustion in which case I'll tighten up my stop and (3) price hits my TP but shows signs of failing to maintain upward momentum.
The nub of my dichotomy is this: A stop is placed in the belief that the direction of the trade has, at that point, failed to be sustained and that market conditions have changed. In this case, what prevents me trading the retracement? There have been too many instances of me watching price travel 100s of pips back down to a potential Support level while I'm on the sidelines. Is it common sense or fear? Too strong a directional bias or an inability to react to the market?
So, do I need to address this as a weakness in my trading or sit back and keep doing what I'm doing now? To get some idea of my trading so far, have a look at the stats on Myfxbook. The EURUSD is live and the Alpari_Demo2 is what is says on the tin. Both accounts are traded in exactly the same manner, ie only going Long at Support in confirmed uptrends and vice-versa in confirmed downtrends. Hardly any contrarian trades can be seen in either of these two accounts.
I am also aware of Jacko's way of trading (so no need to point me in that direction, either) as it isn't relevant to this discussion.
At this point, I would prefer reasoned discussion from traders who, primarily, trade 4-hr charts and upwards. As the question is opened up, it will be apparent that scalpers and others who limit their horizons to 10- or 20 pips may not be looking for the same answers as I am. This may be approaching the question from a blinkered point-of-view but I am basically looking for a longer-term perspective on this, even if the answers mean adopting a short-term perspective on the market.
I understand that this may sound arrogant but this is my thread and I'm entitled to make the rules. So, here's the question and the foundation of my dichotomy.
Firstly, I trade the trend (as I see it on the Daily chart) and only base my trades on Support and Resistance. Sometimes my trades are based on J16-style price action and at other times I place blind limit orders at key points (as I define them) on the chart. Having learned the folly of trading without some sort of disaster stop, I assess my position size on S/R and place my stops accordingly. My usual approach to risk is to allow a maximum of 5% overall
and I base my lot sizing on that. I am aware that this is higher than is normally recommended but, having been around the block a few times, I am fully in control of this side of my trading and accept the inherent risks involved.
I normally split the trades up and enter with minimum lots at each Support or Resistance level as price moves down or up; I guess we could call this 'averaging in'. I have been trading this way for some time now and am comfortable with it, but there is one aspect that has been eating away at me and this is the dichotomy that needs resolving.
Due to the way that I arrive at my levels I have quite definite and, historically, accurate Take Profit targets. As I also rarely take partial profits at these points I'm normally trading all-in and all-out. So the question that is searching for an answer is this:
I'm trading an uptrend and I have a clearly defined TP point on my chart, I must assume that at that point there will be sufficient Resistance to cause a reversal, albeit temporary. As price gets nearer, two or three things are likely to happen; (1) price runs straight to my TP and I'm out - if it breaks through and continues going I'll reassess later and treat that level as potential Support; (2) price starts to show signs of exhaustion in which case I'll tighten up my stop and (3) price hits my TP but shows signs of failing to maintain upward momentum.
The nub of my dichotomy is this: A stop is placed in the belief that the direction of the trade has, at that point, failed to be sustained and that market conditions have changed. In this case, what prevents me trading the retracement? There have been too many instances of me watching price travel 100s of pips back down to a potential Support level while I'm on the sidelines. Is it common sense or fear? Too strong a directional bias or an inability to react to the market?
So, do I need to address this as a weakness in my trading or sit back and keep doing what I'm doing now? To get some idea of my trading so far, have a look at the stats on Myfxbook. The EURUSD is live and the Alpari_Demo2 is what is says on the tin. Both accounts are traded in exactly the same manner, ie only going Long at Support in confirmed uptrends and vice-versa in confirmed downtrends. Hardly any contrarian trades can be seen in either of these two accounts.