16 Jul 12 - EUR/JPY - H4 - Bullish Bat Pattern - Type 1 Reversal

A great start for the week where a small nice reversal was caught on EUR/JPY.

H4 - Primary

Following the establishment of the Terminal Price Bar, the price action stabilized and showed an early sign of reversal.

In addition, there was a RSI validation in the form of a simple RSI divergence which completed early and this was ideal. Following the completion of a RSI divergence, the RSI assumed an uptrend while the price action was still consolidating, thus allowing me some time to find an entry to go long on this pair.

D1 - Distal

In the case of the distal timeframe, it was basically showing a countertrend setup as the pair has been trending down. The only respite here in this case was that the price was trading into a support which coincided with the Bullish Bat Pattern's PRZ.

Therefore, since I have identified this setup as a countertrend setup, my trade management strategy employed in this case would be one of a very aggressive approach. Once the price action fails to rally, my trade will be out based on my trade management rules.

H1 - Proximate

The proximate timeframe here offered a nice setup and I will able to entry within the PRZ at its lower limits which was still acceptable for me. The trade was triggered at 96.461 with a stop loss at 95.480.

The basis of execution here was based on the RSI BAMM Divergence setup which gave me a lot of confidence on this trade and its execution.

Trade Management

Since it was mentioned earlier that this was a countertrend trade, the moment the price action violated the reversal trendline, I will be out of the trade. It does not matter to me even if the price action rallies later of what as I am looking to capture only the highest probability profitable segment of the reversal which is sort of my "known territory", a segment which I am very confident and certain and this is good enough for me as I have learned that consistency is the key to success.

The trade was later closed at 96.737 when the price action violated the accelerated trendline, gaining a profit of 27.6 pips.

Reflection

With consistency now on my side, I am truly glad to see the capital appreciation in my trading account and I guess the perseverance paid off and I am truly grateful for it. To me, this is a very great milestone reached in my trading and in my life as I am finally seeing mastery in the Harmonic Trading Approach. And since trading is the greatest passion of my life, the mastery of trading has led to a great sense of fulfillment in me as this passion of mine has a one point in my life led to self doubt and every misery as I struggled to master it. After finding a great mentor like Scott Carney, it has changed the whole ball game and I was truly grateful for his guidance which changed the way I trade. Nonetheless, under his guidance and encouragement, it still required a lot of effort on my side and time was of the essence to gain the experience and understanding needed to improve along the way and I am proud to have pressed on till now.

For those who have been jaded or struggling, press on and focus and in time to come, your efforts will pay off. It took me 6 years to know what I know of the Approach now and trust me, the start was not an easy one. I started trading after I signed up for a course of which I traded badly for the next few years and suffered draw downs all the way. It was only when a good friend of mine introduced me to the Harmonic Trading in a very basic form found everywhere on the Internet which got me thrilled. After reading up more on the Approach, it became my desired outcome to one day learn from the creator of it and guess what, things happened so long as you know what you want and before I knew it, I was under his mentorship and it did take me 3 years of reading and research before I 'found' him. Even when I found him, I wasn't exactly financially capable at that point in time, but since I have learnt that in life, it's not a matter of can or cannot, it's a matter of how, I decided to take the plunge and forged a way to go under his mentorship. Since then, I have never looked back and I was glad that I have gone full out for my dreams.

I hope that this will serve as an encouragement for those who have started out trading and who are still struggling. Focus and in time to come, you will achieve what you have set out to achieve. Never give up!

Good trading everyone! :)

12 Jul 12 - USD/CAD - H1 - Bearish 5-0 Pattern - Type 1 Reversal

I was expecting this week to be a slow week initially but last night, the USD/CAD pair finally completed a Bearish 5-0 Pattern which allowed me to trigger a short on it.

H1- Primary

On the primary timeframe, the RSI was early in this case and it established a bearish RSI BAMM Confirmation before the pattern completed and started trending down after that.

The price action stalled following the completion of the Terminal Price Bar and that was an early indication of a possible reversal at hand. I have also included a zoomed out capture of the chart to show the ration alignment of the pattern.

H4 - Distal

As for the distal timeframe, the pattern completed in the direction of a downtrend and thus I was triggering in the direction of the predominant trend and that put me in a high probability setup.

M15 - Proximate

The trade was executed when after the pattern's completed and it was triggered at 1.02321 with a stop loss at 1.02720.

The basis of execution was for the fact that there was a nice Bearish RSI BAMM on the proximate timeframe which gave this trade a very strong setup signal.

Trade Management

The first batch of the trade was closed 1.01874 when price action reached IPO 1, gaining a profit of 44.7 pips.

The second batch of the trade was later closed at 1.02004 when the price action violated the accelerated trendline, gaining a profit of 31.7 pips.

Reflection

Despite a quiet week, the patience paid off while I waited for nice a setup to present itself as I firmly believe that I will only trigger on high quality setups. Other than the nice setups, I will usually stay away as my focus is on capital appreciation and thus trading on the best setups is one of my most important criteria. If setups do not present themselves, I have learnt to stay away and not trade until they show up. I have reduced the need to trade and sort of built up a new habit of only demanding myself to trade on valid setups and I am truly glad that it has worked out quite well so far that my success rates are much higher than before.

Focus is important in trading and our success is based upon on what we are focusing on as Scott has once told me. Despite a simple advice, his words has turned my trading around and this is one of the greatest gift from my mentor.

Good trading everyone.

09 Jul 12 - NZD/JPY - H1 - Bullish 5-0 Pattern - Type 2 Reversal

This is another small trade which adds up the small profits. It exemplifies the importance of proper trade management rules employed in trading so as to capitalize on the natural reactive move on the completion of harmonic patterns. In addition, this also serves as a reminder that not all trades triggered will give us the home run scenario and upon a trade execution, we will have to react according to the trade management rules to preserve our capital and optimize our profits. There will also be days where the trade optimization will take us out prematurely and it is something which I have come to terms with cos so long as I stay profitable in my trades, it does not matter anymore as I will be stacking my profits along the way with a high consistency and I firmly believe this is more important that always looking for a home run for home runs will occur, but not always and thus the management of our expectations in trading is also crucial. Now that I get more grounded in my trading, I am slowly seeing a growth and this is something which was tough for me to even achieve during the early days of my trading and for me to reach this stage, I am truly grateful and glad that I have finally seen a great improvement in my trading.

Going on to the Bullish 5-0 Pattern on NZD/JPY, the trade was triggered after the pattern was validated. I have missed out on the Type 1 Reversal and only executed on the Type 2 Reversal though as I did not find a nice entry for the Type 1 Reversal.

H1 - Primary

Following the completion of the pattern at the Type 1 Reversal, the price action went to test the low of the Terminal Price Bar and exceeded it while maintaining within the limits of the pattern and thus in this case, I would consider this pattern to be still valid. I understand that in my previous posts some time back, if the price action tests the stop limit and exceed it and reverse, I did mention  that I will still trigger, but nowadays, after understanding the patterns better, if the price action does not reverse within the PRZ and only reverses after testing the stop loss limit of the pattern, I will stay away from in. However, in this case, since the price is still within the PRZ, this is still considered to be a valid pattern for me.

I was more confident on taking this reversal on the Type 2 Reversal as the RSI has also completed the extreme oversold test and formed a complex structure. It should be noted that since this is a complex structure seen on the RSI, I will be very aggressive when it comes to the trade management since I will be expecting the RSI to later resolve itself with an impulsive structure. This sort of sets up the expectation.

I have included a zoomed out version of the whole pattern to outline the ratio alignments. It is interesting to note here that on each test of the RSI oversold area, the RSI experiences a deeper test and thus, this is a hint that the reversal might not be one that will yield a very strong move even if I was to trigger the trade. With this expectation in mind, the natural course of action for me in this case was to manage it aggressively. I may sound repetitive here but I thought it would be good to point this out as there are many technical considerations here which highlights Harmonic Trading as a very powerful trading tool though when it is paired with the RSI and it was within these few months that it got clearer for me to sync the RSI and pattern completions to optimize my trades.

H4 - Distal

When it comes to the distal timeframe, there is basically nothing much in terms of the this timeframe except for the fact that we have the "wind at our back" as the pair has been trending up slowly.

M15 - Proximate

The trade for the Type 2 Reversal was triggered on the proximate time frame on a RSI BAMM Divergence at 63.229 with a stop loss 62.95.

Trade Management

As I have mentioned earlier on the primary timeframe section, since the RSI structure seen was a complex structure, I will square off the trade if the conditions are not conducive for the trade and in this case, the trade was later closed when the price action violated the accelerated trendline.

The trade was squared off at 63.339, gaining a small profit of 11.0 pips.

I have also attached a screen capture of the price action following the trendline violation to highlight the importance of respecting the trade management rules as usual.

Reflection

As the months progressed, it just dawned upon me that so long as I do not give up and persevere, my efforts will pay off eventually. I was filled with great happiness and gratitude when I started seeing how my trading has changed and improved. I have consistency now, despite the small profits. At the very least, I am glad to say that I am finally able to gauge and expect the reversal playouts from the RSI structure and in return manage my trades accordingly. This has really improved my success rates and it is a huge milestone gained for me in my trading. For all these, I am thankful to my mentor, Scott. The HT Approach, with its proper understanding and application,  has really transformed my trading. :)


Good trading everyone.

05 Jul 12 - XAU/USD (Gold) - H1 - Bearish Shark Pattern - Type 2 Reversal

This was a trade which was done last week. A nice trade done on Gold which is something I seldom trade. But, since a nice setup was observed on Gold, I decided to go short on it.

Despite a nice pattern completion at the Type 1 Reversal, there was not RSI validation when it completed and I was not at my computer when it completed and thus I have missed out on the Type 1 Reversal. On hindsight, if I was at my computer, I would have gone in on a fast trade since there was a RSI validation on the smaller timeframe and exit as per the trade management rules.

H1 - Primary

As seen in the attached chart, following the RSI's exit from the overbought region, the RSI was clearly showing weakness in Gold while the price action consolidated and that was an early indication of a possible reversal.

Therefore, the primary timeframe basically offered a clue of a possible weakness in the price action and that was good enough for me as a signal to look for a short on Gold.

H4 - Distal

Gold was seen testing a resistance near where the Bearish Shark Pattern completed. In addition, the RSI impulsive structure gave added confidence when it comes to shorting it.

M15 - Proximate

The trade was later triggered on a simple RSI confirmation. (Note: I have labelled it as RSI BAMM Confirmation and after looking at it again, it was basically a simple RSI confirmation but since I have taken the screen shot at the point of execution, I have decided to leave it as it is).

The short was executed at 1615.21 and the target profits are shown in the attached chart.

Trade Management

The trade was later closed at 1605.14, gaining a profit of 10 points when the price action violated the accelerated trendline.

In addition, as a usual reminder to remind myself to respect the trade management rules, the next attached chart shows the price action after the accelerated trendline violation.

This is how it goes and thus I have been constantly reminding myself that I will manage the trade as per the trade management rules and capture the highest probability, profitable move and I will not bother about any other further moves following the trendline violation as I am aiming for consistent profit. Yes, there will be days where the price retrace and then move down to hit the target profits and I have learned to live with it and be contented with my profits though.

Wishing all a great trading week ahead!

04 Jul 12 - EUR/JPY - H1 - Bullish 5-0 Pattern - Type 2 Reversal

This is a very short duration trade which I have taken on this pair as per the trade management rules though. The trade which I have triggered on was on a Type 2 Reversal. Nonetheless, I will be breaking down the whole pattern's Type 1 and 2 Reversals for learning purposes and something which supplements my trading journal when it comes to learning and mastering the approach.

Type 1 Reversal

H1 - Primary

In the first chart attached, the RSI Confirmation has pretty much confirmed the structural signal for the Type 2 Reversal rather than the Type 1 Reversal. In fact, there wasn't much of a confirmation for the Type 1 Reversal on the primary timeframe when the pattern completed, which is why it is important to refer to the multiple timeframes to coordinate a trade execution in the presence of valid trade signals.

Since the focus here right now is on the Type 1 Reversal, for the case of the primary timeframe, there was basically a pattern completion in the absence of a RSI validation.

H4 - Distal

As for the distal timeframe, there was basically nothing much either except for the observation that the price action has been languishing and trading has been choppy.

M15 - Proximate

Despite a lack of RSI validation on the primary timeframe, the proximate timeframe in this case offered a very nice confirmation for a trade execution though.

In the of the Type 1 Reversal Trade execution, I would have taken the trade on the close of the Bullish Engulfing Pattern when the RSI exited from the oversold region. But since I was away when the signal came in, I just thought it would be nice to document it as there was a nice playout in this case.

In the case of the Type 1 Reversal, I would have given this trade more time to work itself out as there was a RSI BAMM Confirmation. Despite a complex structure forming after the RSI BAMM Confirmation, I would have given the RSI BAMM more emphasis as the complex structure in this case did not violate the RSI BAMM structure and appeared more as a secondary retest in this case.

The trade would probably be taken out when the price action violated the accelerated trendline.

Type 2 Reversal

H1 - Primary

This is where the Type 2 Reversal gets interesting. The Type 2 Reversal was a nice signal to me as there was a smaller Bullish Shark Pattern which completed at the Type 2 Reversal which gave more strength to this whole setup for a buy.

In addition to the phenomenon of a pattern within pattern, there was a simple RSI Confirmation for the Type 2 Reversal at the completion of the Bullish Shark Pattern.

Since the Bullish Shark Pattern was a smaller setup in the Type 2 Reversal, I decided to shift the whole setup to a smaller timeframe on a M15 chart and executed the trade on a M5 chart instead of the M15 since I wanted a more leading entry. Therefore, in essence, the M15 has become my primary timeframe and the M5, my proximate timeframe.

M15 - Primary

In the attached chart, it shows the Bullish Shark Pattern's completion.

It should be noted that RSI has yet to exit from the oversold area on the primary timeframe when the Type 2 Reversal occurred.

M5 - Proximate

The trade in this case was triggered at 99.968, within the PRZ when the RSI exited from the oversold region. The stop loss in this case was set 99.350.

In addition to the RSI's exit, the whole technical picture in play at the point of entry was a RSI BAMM Confirmation.

Trade Management

The whole trade was later squared off when the price action failed to maintain a reversal of 45 degrees and violated the the primary reversal trendline which was my cue to cut the trade off. The trade was closed at 100.075, gaining a small profit 10.7 pips.

The trade was closed as per the Trade Management Rules and it did not bother me even if the price action went higher later as I was only looking to take on the high probability and profitable segment of the move and this is important for a consistent profit as I consider myself a very conservative trader and greed has stayed at bay as I have come to believe as it was proven time and time again that there will be plenty of opportunities so long as I am patient and disciplined.

A note though, there was an early hint in the possible lackluster reversal when both the price action and the RSI broke below the trendlines.

I have attached another chart on the price action after the trendline violation.

Following the primary trendline violation, the price action actually consolidated only to make another rally and crash after that. In my opinion, it was not worth hanging on to this trade when it languished for a period of time. I would rather capture the natural reaction and get out when the conditions depict the exit. I have also learnt not to bother after I am out of a trade so long as I stick to my trade management rules.

Good trading everyone.

01 Jul 12 - Possible Patterns to look out for week starting 02 Jul 12

Despite an uncertainty looming in the markets, I would consider this week a nice trading week. I was reading a book on Warren Buffett recently and there was a nice segment of the book which I would like to share with everyone.

"If successful people have one thing in common, it's a set of investment principles that don't change much after they've been developed. Just like business and personal goals, they are achievable and always written. Your goals might be to invest in the new economy, the old economy, technology, Internet companies, initial public offerings, you name it. Well defined investment principles cover them.

In spite of the fact that some people suggest that today's investing environment is different or may require a different approach or a new philosophy, that's not really true. Principles are principles because they don't change. They may evolve, but they don't change. If they changed, they wouldn't be principles. Ben Franklin may have said it best: "If principle is good for anything, it is worth living up to." "

I believe the Harmonic Trading Approach has evolved to a very powerful since Scott founded it and his trading principles have stood the test of time and proved itself. Just as I have started trading initially, I have gone from one system to another only to feel jaded. It was only through the discovery of the approach that it lifted my spirits and got my passion burning again. It was no doubt that the journey was one that was not considered a walk in the park and even in my early days of trading with the approach, success was not even near as mastering it required time and experience. After much perseverance, things slowly started to get better and I have been truly grateful that I am still happily trading with the approach and as each day progresses, I know that I am moving towards its mastery and my desired outcome in life, which was to succeed in my forex trading. Once you find a great system and know that it fits your style and character, focus and press on till the end with due diligence and the fruits will come. In my case, I have chosen to sow my seeds in good grounds and that would only be the HARMONIC TRADING APPROACH.

Well, as I was going through the charts to prepare for the week to start, i have decided to post a few potential candidates for the week starting 02 Jul 12. Then again, with the projections in place, we will still have to be patient and wait for the patterns to complete and from there decide on whether a trade execution should be considered.

1. AUD/USD - H1 - Possible Bearish Crab Pattern

As mentioned in my earlier post, this is one of the pairs which I am looking at as it has previously invalidated a Bearish Gartley pattern and could possibly morphed into Bearish Crab Pattern

2. USD/JPY - H1 - Possible Bearish Shark Pattern

This is an interesting case which prompted me to type out this post as I find this truly educational and something worth sharing. If I had not shorted this pair previously on a Bearish Crab Pattern, I would have plainly identified this as a possible Bearish Shark Pattern.

However, since the chart from the previous Bearish Crab pattern was still on my chart, the projection of the possible Bearish Shark pattern revealed that the Bearish Shark's PRZ coincided with the Bearish Crab pattern's PRZ and this could give rise to a Type 2 Reversal of the Bearish Crab Pattern. To me, this is a very strong structural signal as the 2 PRZs are pointing to a very strong harmonic resistance in this case.

3. AUD/JPY - H1 - Possible Bearish Crab

Among the 3 likely candidates, I would consider this the least ideal of the 3. Reason being, the B point is in between a 0.50 and 0.618 fibonacci retracement level at 0.553. However, since a Bearish Crab pattern's B point can be between 0.382 to 0.618, I have decided to put it under observation since there was a nice tight PRZ upper limit where I saw the 1.618 XA and 3.14 BC projections lying quite close to each other. However, if I am expecting a Bearish Bat or Bearisg Gartley to materialize, I will most probably be ignoring this setup as these 2 patterns will require a more exact B point alignment.

This is what I have for now. Wishing all a great trading week ahead!