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Price Action Swing Trading

Professional Swing Trading-Ideas, Education and Real Results

What Markets Do We Trade?

29/6/2017

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Picture
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​The methods described on this site are traded on a portfolio of 44 futures markets. Only the most liquid markets are considered, such that spreads are narrow and liquidity high. This is not always the case in thinly traded markets, such as  milk, which we don't trade.
Futures markets allow plenty of diversification within the portfolio. We can trade many non-correlated sectors, for example a position in coffee is unlikely to be affected by the movement of a stock index or gold. 
One area where the portfolio appears to be overweight is the currency sector.
​The FOREX market is the biggest most liquid market traded worldwide and there are many currencies crossed against the USD as well as currency pairs, such as EUR/JPY and so on. Therefore there remains a larger number of currencies available to chose from, whereas there are only a handful of grains (corn, soybeans) or softs, such as coffee and orange juice in other sectors of the portfolio.

We are mindful when trading USD based currencies of the risk of strong correlation and therefore not all potential setups are traded at the same time.
Diversification and non-correlation within the portfolio are provided by the large spectrum of markets included, along with the robust methods applied, help achieve consistent results overall.

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End of Month Report-June

29/6/2017

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As we approach the end of the June trading month, it seems timely to reflect on what has turned out to be a bumper month. We placed 14 trades during June and were rewarded with a positive month. In all, 7 trades were winners and 7 turned out to be losers, however we still made money.
Although we still have one trading day left, the month will likely return a 2.7R profit. In keeping with the monthly statistics, we tend to have winning trades twice the size of losing ones, so even though half the trades lost, we still made money.
When considering trading methods or systems, one of the most misleading numbers often quoted, is the number of winning trades. This number alone, doesn't tell the whole story. It is quite possible to have systems with very high winning percentages and still lose money, conversely low winning percentage systems can be highly profitable (trend following). What matters more than the number of winning trades, is the amount won or lost  per trade. With our swing trade style we consistently find the win rate hovers around 50%, but each winning trade is normally twice the size of the losing ones. 
This happens because we actively tighten stops when in a trade, such that winners are protected and losers cut short before they reach the original stop loss. It is unusual to hit -1R for a losing trade, whereas quite a few of the winning trades exceed the 1R initial target.
So when you consider a trading style, whatever it may be, or is claimed, always dig into the statistics and make sure you fully understand the results over a large sample of trades.
We will continue to apply the methods described on this site and by being disciplined traders, we can confidently allow the statistics to work in our favour.
Edit: The month is now closed, profit was 3.2R
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Coffee-An Ongoing Trade....

23/6/2017

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Picture
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We monitor many markets everyday and coffee has been a good short setup in the last few weeks. As with any good swing trade, we firstly noticed a multi-month downtrend since February (not shown), and during this time, pauses in the trend where price moved sideways for several days.
This pattern played out during the first two weeks of June, when coffee bounced along the support line, drawn in red. When price breaks a support line, then the odds favour a continuation of the down trend and surely enough this is what happened. The down arrow indicates the entry day, followed by the smaller red line, showing the profit target being hit on day three. So far coffee continues to fall and we will stay in the trade for as long as possible, until the move is over. 

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British Pound-Short Trade Setup

20/6/2017

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Picture
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The chart on the left shows daily trading in the currency pair GBPUSD, or British Pound.
The pound has been setting up for a short trade since the surprise election outcome on June 9th. The shock result caused a large down day, where the price fell sharply. Thereafter the pound tried to recover, but the next few days were weak and resulted in a pullback of five days. We had an order to sell the pound at 1.2725 and were filled yesterday. Today's price bar is shown in red, as the market is still open and at the time of writing, the pound is trading around the 1.2650 level, more than halfway to the initial target at 1.2575. 
We placed a stop loss level at 1.2885 when opening the trade, but this has now been quickly tightened to protect the position.
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Too Many Winners!

14/6/2017

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How do we handle a series of winning trades? This may not be a question that you have thought about, but it warrants some serious thinking, as a professional trader.
It is of course a nice "problem" to have, a set of winning trades. Suddenly you are checking the price of the Ferrari you always wanted, maybe a luxury trip somewhere? You can't lose, right? The money just keeps rolling in and very soon you can retire to a tropical island without a care in the world....
The reality, of course, is somewhat different! Professional traders always respect the law of statistics and understand that a cluster of winning trades can easily and probably will be followed by a losing period. We must remember each time we place a new trade, is that the outcome is largely random in the overall number of trades  placed during our trading career. Although it feels great at the time, it is important to understand that every trade stands alone. The outcome of one winning trade had no bearing or relevance to the next one and so on. That is why mastering emotional control as a trader is vital. We shouldn't get too excited by winning trades and conversely not be bothered by the inevitable losing ones either. Treat each trade as a separate event and allow the statistics of your method to play out over time. That way it becomes easier to maintain a balanced state of mind, whether you win or lose. 
When we experience a streak of either winning or losing trades, it comes down to luck, pure and simple, as trade distribution cannot be predicted. Stay balanced about each trade outcome and don't order that Ferrari just yet!
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Anatomy of a Swing Trade-Sugar

14/6/2017

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Picture
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​
Picture
Click on the chart above to enlarge.
The big picture chart of New York Sugar shows a market in steady decline. This type of price action is what swing traders love! We see multiple down legs, marked with the arrows. These are the points where we may consider a short trade. Periodically, as the trend lines indicate, the market pauses and then continues to fall.
Markets often have a tendency to keep moving further in one direction than anticipated, in other words we do not want to be buying sugar while the downtrend is intact!
The second chart shows in detail, how a swing trade progresses. This trade was entered on the 24th May and lasted just short of three weeks. At point A, we were alert for a possible breakdown of the three week consolidation, shown by the red trend line. Any break below this line gives a clue that the sellers were in control and prices may fall. An order in the market was filled at 15.72, then sugar dropped.
Note: we didn't "know" the price would go down, but the odds were in our favour and worked out for this trade. If sugar had unexpectedly risen, the stop loss lines, marked in green, would have taken us out of the trade. If we are proven wrong by the market, the correct action is to exit. We never try to be "heroes" and hang on hoping for a successful outcome!
At point B, sugar hits the target of 14.57 and half the trade is closed, with a profit.
The stop is progressively tightened, shown by the green lines, until the market takes out the remaining part of the trade at C, for a nice 1R profit.
​
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    John Morris is a professional financial trader, this site shows you the setups and results achieved, using the simple methods described. 

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    ​Recent Blog Posts:
    EURGBP Trade

    What Markets Do We Trade?
    End of Month Report-June

    Coffee-An Ongoing Trade
    British Pound-Short Setup
    Too Many Winners!
    Anatomy of a Swing Trade
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