Disclaimer for dummies… This trade has not played out yet. It is ongoing and in the live market but this is just a way to see what I see. It is kind of an “imagine if” scenario or an “outlier” possibility.
Ok here we go. I am currently long GBPAUD. My trade was up about 300 pips this morning but has pulled back a bit to 220 pips. I have already taken half of my position off the table and moved my stop to break even. Now, I am done.
The purpose of the blog today is to show what kind of possibilities exist in real life with real money.
Lets start by looking at my trade on a small 15 minute chart.
Ok so I have a trade on that is up 242 pips as shown in the picture. Let us look at what I saw to make me place the trade.
Well for starters, I was looking for a trend. Everyone talks about “The trend is your friend” but what really is a trend? Sometimes we can not even tell a trend is a trend until after the fact. Wanna know why? Because we are not looking at the long term charts. That’s why!
How many pips are possible from a long term perspective? Take a look at the monthly chart below…
Do you see the little green arrow on the lower right hand side of the chart? Thats my entry. What if we had a “black swan” event and price never stopped me out? What if price just rallied for 1,000 pips…3,000 pips…11,279 pips? It can and does happen.
If you go back through the charts, You can identify entry points where if you had gotten in, you would be up thousands of pips now.
Am I going to hold this trade until I get stopped out or until I make 11,000 pips? No. I will admit it right now that there is no chance of me holding that long. However, If it does keep rallying, then I know that there are 11,000 pips of POTENTIAL and as long as I stay with the trend, I have a better than average shot at making money.
Now Ryan, how many pips will you hold for? To answer that, Let’s take a look at the chart below. It is a daily chart.
Ok now this is a daily chart. It is in an uptrend. Do you spot where my entry is? Do you spot where price is trading right now? The odds of me getting stopped out are there but that sucker could keep going until the resistance level. That would net me about 880 pips in a few days. All I have to do is hang on.
If I do get stopped out, no biggie because I have already made money on the trade, took off half of my position and moved my stop to break even.
Ok next item on the agenda. How did I pick this entry? Lets take a look at the daily chart below…
Ok on this daily chart, you already know that the long term trend is up. You know it is a strong trend as well. If you look, can you spot support? If not, just look for the line that says support lol! Ok for the past several days, we were in a pull back of the long term trend and price got really close to support on several days. It is holding… That is support is holding currently so I was looking for and entry to the long side.
How did I find a great entry point? Look at the charts below and tell me what you see.
Did you spot it? The British Pound was was strong around 5am yesterday. It was strong across the board as one single currency, not as a pair. Who knows why it was strong? It could have been a major news announcement or it could have been that some dignitary just opened their mouth. The simple fact was it was gaining in value at that current moment in time.
If the GBP was strong, was the AUD (The Australian Dollar) weak? Not really. It was kind of mixed across the board but the GBP was so strong that it gave the GBPAUD enough of a boost to push it up 300 pips yesterday.
What if it had turned around and stopped me out? Thats ok. It would have been a small loss but usually when a currency is really strong one day, it will keep going at lest 40 to 100 pips before turning. Thats why you can take half or part of your trade off the table, set the stop at break even and walk away. This way you have made money and if it stops you out, not biggie.
There you have it folks. Whats your thoughts?