Trading off levels

Hi Guys,

First post in my section

Have just entered USD/CHF off the 4 hour chart based on a recent SR level and 61.8% fib from the recent low being sliced by an average looking pin bar. Entry was taken 2 bars later than the pin bar, however I have justified it as I would have entered on the break of the pin bar and price is still at this level.

Not sure if this one will work out therefore have not risked a great deal on the trade, stop is below the tail of the pin. Will shoot for a target of 1.1675 or above.

Hi FX,

Decent level around there. I had mine a bit lower at 1.1418 at the bottom of the big spike last week. Entered at 1.1428 and it got to +75 overnight but scratched a short while ago. Ah well!

Chris

jopester wrote:Hi FX,

Decent level around there. I had mine a bit lower at 1.1418 at the bottom of the big spike last week. Entered at 1.1428 and it got to +75 overnight but scratched a short while ago. Ah well!

Chris

My trade was back to break even until the US Unemployment claims were announced, hoping for no more bad news to allow recovery again.

As an aside there was a nice reaction 10 mins after the news on the 5min chart, the red arrow indicates the bar on which the news was announced:

Since been stopped out on the above trade (-80), the last low must have touched my stop within a 1-2 pips. I find this happening a lot, almost too much for it to be coincidence! I wonder if this is stop hunting and not being a pro I'm putting my stops where everyone else is? In this case it was at 1.1401.

Ok, not the most sensible place as it wasn't behind the big number but equally my reason for being in the trade was a trade that didn't break the low of the 4H pin bar which was at 1.1410.

Another of todays trades that didn't work out.

Entered on a half descent looking pin bar that didn't quite reach the 77.12 S/R level, however this was actually the mid point between a small S/R channel, also just above the 61.8% fib retrace from 03/06 high.

Also played this pair due to no direct news on the currencies during the day, however it could well have been affected indirectly by other news.

Far right red arrow was the entry candle. Net result was -40

Re-entered AUD/JPY long after a break and pull back, after a bit of juggling entries for loss of a few pips I've now got a long open from 77.14. Stop is now at break even after getting to +30 pips as the 4H chart shows a bearish pin bar.

fxtrades wrote:Since been stopped out on the above trade (-80), the last low must have touched my stop within a 1-2 pips. I find this happening a lot, almost too much for it to be coincidence! I wonder if this is stop hunting and not being a pro I'm putting my stops where everyone else is? In this case it was at 1.1401.

Ok, not the most sensible place as it wasn't behind the big number but equally my reason for being in the trade was a trade that didn't break the low of the 4H pin bar which was at 1.1410.

Hi FX Trdaes, I have some good books and an article which explain stop hunting and how to use it to your advantage. Drop me a pm and I will mail them to you. It is certainly a phenomenon that exists, more commonly when the market is thinner, Fridays are renowned for it. Let me know and I will send them over.

Know the feeling, seems like there is a conspiracy out there to get your stop! Still frustrates me like crazy when I'm hit and price turns within a pip or two and heads off 100 pips the other way.

The way I look at it is that for a short my stop is a buy order. There are obvious places to put stops like 5/10 pips above previous highs, pins, round numbers etc. Problem with it is what is an obvious place to put a stop to you or I is obvious for thousands of others too and as a result there are a stack of stops (buy orders) across the same 5 or 10 pips. Big traders can move price up to the stop areas by buying everything offered on the way up knowing there are loads of stops (buy orders) waiting there that they can offload their position to and take a profit. If you watch a chart at key levels you'll see it pick up momentum as the stops are hit and just as fast it will fall back when the buyers run out. It will often head off the other way then because the big players have lost the incentive to keep moving price up. They need to know there will be other buyers further up that they can sell their position to. Only way around it is putting your stop further away in less obvious places.

I quite like using bigger stops but exiting if the hourly candle closes the wrong side of an s/r level. It means greater risk if you are stopped out but does keep you in more trades and you only have to check price at the end of each hour.

Here's a good example of the stop dilemma. E/U has a strong level at 1.2150. There's bound to be a load of stops between there and maybe 1.2165. There's some articles on the internet talking about stops at this level so probably a lot of people are thinking the same. Here's one: http://www.forexlive.com/112477/all/eurusd-the-stop-story. Aside from anything else if you are short it is a pretty obvious place to put your stop.

I've got a two EU shorts open at the moment, one at 1.2100 and one at 1.2141 (based on the weekly levels trades I do). The first has a 100 pip stop so is well clear. The second is more tricky. As mentioned elsewhere when those trades get to +40 I tend to move the stop to breakeven or close by. This one has reached that target but moving the stop up would put it right in the problem area. For now I've left the stop at 1.2181 because I reckon there's a strong chance of a push up to 1.2150, maybe with the help of the US news out later. If it gets there all the stops between 1.2150 and 1.2160/65 will give it a burst of momentum but hopefully it won't rise high enough for my stop. Obviously a risky strategy because I could end with a 40 pip loss rather than scratch. The downside to trading very obvious levels like 1.2150 is that while the win ratio is high stop placement is critical because there are bound to be a ton of stops (buy orders) close together and the big boys would love to get them. Flip side is that if they can't get price up to 1.2150 it's probably heading back to 1.2000 this afternoon (news permitting!)

Great info, thanks again Chris. I'll need to check this out later when I have more time. My stop is above the 1.2150 - 1.2165 area also, so hoping it wont get caught.