Type Of Trader

As most traders would know, good trading is all about having a good trading psychology. For this, you need to understand yourself. There is a famous Indian song which says that if you know what you are, if you know what you can do and what you cannot do, if you know what your limitations are, you can always succeed in life. Whatever happens to you, you will never lose your self respect and you will always be successful.

So, try to understand yourself and choose a trading method that is fit for your psychology. There are basically traders who are scalpers and traders who are medium to long term. Scalpers get in and get out of markets very quickly. Their trades last for about an hour or lose and their profits vary from 7-8 pips to 100 or more pips (if they are lucky enough). They have a SL of mac 30-50 pips. Medium/long term traders trade with a view of 1 week to several weeks Their TP is hundreds of pips and so is their SL.

But what happens is, most traders cant stick to one trading psychology. They start out thinking that they are scalpers looking for 10-15 pips. They do take a few trades as scalpers but find that after they took profits, the trade went their way for several hundred pips. So, next time they are tempted and wait a little longer but then suddenly, the trade moves in the opposite direction and gets close to their scalping SL. They suddenly start thinking like a medium term trader. They think 'why dont we let this run and maybe it would turn back'. What happens ? even though they increase their SL, it still gets hit and they lose 150 pips or more. Imagine losing 150 pips aiming for a TP of 15 pips ??!!

Vice versa for medium term traders. They start off thinking to go for medium term for SL and TP of more than hundred pips but when the trade starts moving against them for 20 pips, they get scared and get out of the trade only for the trade to turn around and hit their TP....Or they get satisfied with just 20 pips profit and they start taking their profit too soon.

All the above is perfectly the wrong way of trading. Decide what kind of a trader you are and stick to it, whatever happens. If you are a scalper like me, have small TP and SL and take them as and when you see it. Dont bother about the trade after closing it. The more you bother about a closed trade, the more it affects you psychologically.

So understand who you are and trade. And always follow the KISS principle. Keep It Simple Stupid !!

Which indicators to use??

There are loads and loads of indicators out there and so all the new traders are overwhelmed with the amount of information at their disposal and also at the number of indicators. They do not know which ones work and which ones do not and which ones to use and which ones not to use.

Let me tell you something. All the usual, well known indicators work well. In fact, that is why they are well known. But at the same time, dont expect the indicators to tell you what the market is going to do. Indicators are like tools like hammer, scissors etc. It is upto you to learn to use it and find out how best to use it. Like any tool, indicators can be used to make a lot of money and also lose a lot of money. It all depends on the person who uses it. Moreover, as i keep saying, indicators are always reactive and not predictive. They always tell you what has happened and not what is going to happen.

For those who are new, the moving averages are the best and the most easy indicator to understand and use. The MA crosses are one of the most frequently used systems as well. Of course, the MA is always lagging and so it is upto the user to find the best and most optimum use for it. Try to understand what it is and how it works and then find how you can use it to improve your trading. Moving average for n periods is just the average of the price for the past n periods. If the current price is above that, then it means that the current price is above the average and vice versa. The lesser the value of n , the more reactive the average is to the price. The greater the value of n, the more smoothed the MA would be. There are many types of MA like simple, exponential, linear weighted etc. and they are the most used indicators for trading systems. Throw in various types of MA with different periods on the charts and watch for patterns between the MA and the price and you will learn a lot.

Likewise, RSI is a very good indicator as well and if properly used, it can tell you the fibs, pivots and S and R to a very precise extent. It would be amazing, but if u get the right combination of inputs to RSI, it would be amazing to note how it perfectly matches the daily fib levels. You dont need to even see the fibs, just get the correct combination of TF and RSI and you can see the fib levels automatically. I have seen it happen and it is really eerie to see the relation between the RSI and the fibs. They just seem to know each other so well.

Try and play around with various indicators with various settings and time frames and find out the one which works best for you. There is no such thing as the best indicator. It is all upto how you use it and how comfotable you are with it.

Multi Timeframe Analysis leading to a 100 Pip Trade

This is the trade i took today using CBA. This again shows the power of CBA. In the morning, i had pointed out the control bar with its high around 4450 and low around 4375. I have attached the updated hourly chart with the bar marked as A and the high marked with a red line. Look at the price action. The flurry of activity began about an hour after London. The price broke through the red line, acting as resistance. I was long from 4330 and with the break of the low of the bar, i was waiting for a retrace.

The retrace did come but it was too quick and too powerful and so i just held off till the hourly bar closed. I decided that i will look at the close of the hourly bar and if the close is good and above the red line, i will add to my longs. But look at how the bar closed ? The bar closed below the red line and it was a huge nice pin bar. A sure sign of bearishness. At the close of the bar, i closed my longs and waited for a good time to short.

I switched to the 15M chart (attached) and in the area marked A, you can see a nice beautiful bar retracing exactly to the red line. There i took the short. And down we went. the DD was less than 4 pips and we kept going down down and down. There we have our 100 pip trade. I took the 100 pips with a DD of 4 pips !!

Does CBA require any more proof ? This is the power. You get huge trades and as the SL is less than 15 pips usually, your lot size is big and you can make good money.

PS - In case anyone is confused with the buy and sell lines on the chart, this platform is a demo platform running one of the EAs that i am developing. The buy and sell are from that EA...

Germany is showing resilience

The German Unemployment numbers were more than expected, yet there is a growth trend that continues.
Our Long in EUR/USD before the numbers is in 40-45 pips profit and thus it is a good time to put SL to BE. Since we are trading in Hourly Charts, it will be great to now walk away and track it every hour or two. I will trail stop loss till the trend bends.

Germany Moans of Greek debt and US politicians fight

And Euro/USD falls in these uncertain times. It is advisable to not take a big position till US debt Ceiling drama is resolved on August 2. Till then there will be uncertainty and USD will react to every news item.
Euro fell yesterday because German FM was complaining about the Greek debt buying. Still I think the up-trend in Euro is intact. I have gone long a small position in Euro. London open is still one hour away. Stoploss is under the pin-bar. I will trail the stop loss once it starts moving my way. The event risk for today in addition to US Debt ceiling news is German Unemployment numbers. You can wait till that data to put on a trade.

A New Addition

I am glad to welcome Sumeet to join me as one of the authors of this blog. As i pointed out yesterday, it has been my endevour to make this blog useful for as many traders as possible and to provide quality content to all traders. As a means to that end, pls join me in inviting Sumeet to this blog.

Sumeet Malik is a Forex trader and educator. With his interest in different countries and economies, Forex Surfing grew from a hobby to passion. His education includes a Bachelors in Economics from University of Delhi and an MBA from Pepperdine University, USA. He teaches NCFM certification and Trading courses at http://eduinfinity.com/. He also keeps a forex blog at  http://forexsurf.in/. You can follow Sumeet on twitter @fxsurfr.

Please continue to provide the same support to Sumeet as you have been providing to me so far. Together, we will all make this a wonderful blog for all traders.

Trading Systems

Everyday lot of traders ask me what trading system i use and they also ask my opinion about what trading systems they can use. The best advice that any experienced trader can give to another inexperienced one is to find things yourself. Not only in trading, in any sphere of life, only those things which we learnt by ourselves and which we spent time in understanding and imbibing would stay with us throughout our life. Those things which are got for free without much effort would either not stay with us at all or would leave us soon. We would understand the full value of anything only if we struggle and achieve it.

So try and learn trading and systems on your own. Go around the net, look into forums and forex sites, read read and read and gain as much knowledge about all the things as you can. The net has an equal number of scamsters and very helpful people as well. So be careful and spend your time finding out who the scamsters and who the nice guys are. Of course, you would lose money and time in the process but it would be well worth it. Learn the basics first, then how to see the charts, then learn the important indicators and then try to develop your own trading system. Of course, lots of system are freely available on the net. Learn as many as you can and if you feel comfortable with any of them , go ahead and use it. Or find out the good points of the system and try to incorporate them into your own.

Even today, though i may have 2-3 trading systems of my own, i spend every weekend trying to look for a new trading system which is better than my current one. I look around the forums and also look at the charts myself to develop my own. No trading system would be 100% successful but you can keep looking for systems which get close to that figure. The closer you get, the more money you would make. The process of learning and improving never stops. So keep reading and keep learning. It will always be useful whichever stage of your life (trading and otherwise) you are in..

New Control Bar in the euro - 28th July

Its quite early in the morning for me but i just wanted to update the new control bar in the euro. As rightly pointed out by one of the readers of our blog, Pat, we have a new control bar in the euro. Easy to spot with its high range. I have marked it with an A. Its low comes in around 4376 and you can easily see how it has acted as a good resistance.

We could have shorted it during the late US session and be up by about 40 pips now with DD of less than 7 pips. Anyway, any move beyond this low, into 4385 would be good for a long (after watching PA of course) and that long should travel to the other end of the control bar which comes in around 4450. Keep a watch for it today.

CBA does it again on the Euro

CBA does it again !! Just open up the hourly chart which i showed in my previous chart. I am putting up the chart again. The control bar is marked as A (same as in the previous article) and i have marked off the high of the control bar with a red line. Look at the beautiful price action around it. Break, retrace exactly to the pip of where the red line is and now we have fallen 100 pips from there. DD ? Less than 5 pips.

Just on the euro today, just following the basics of CBA, you , like me, would have made 100s of pips. I can keep quoting more and more examples from various currencies. It all reiterates the same point. This is the power of CBA. None of it is marked after the fact. The control bars are there for all to see. Anybody can locate them. I have marked them over and over again in several articles of mine and you can see that they prove wonderful time and again.

Multi Timeframe Analysis for Euro Today

Apologies for not posting earlier but had been tracking some nice entries and hence was busy with that.

Today, we had 2 very good examples for CBA. Look at the attached 15M chart of the euro. i have marked off the 2 control bars that i see from today. Both of them have high ranges and are hence easy to locate. I have marked off the high and low of the 2 bars using red lines.The low of A acts as good support and you can see that once the low was broken, the price never came back above the high of A, which acts as resistance. If you had taken a short on break of the low at 4512 with the SL above the high, you would be up by about 50 pips now. Or, if you prefer a smaller SL, notice the price action after the break of the low of B. Price retraced exactly to the low of A at 4512 and this was a very good signal for short (break of support and retrace) and you would again be up by 50 pips by now. The DD for this trade would have been less than 2 pips..I took this trade, closed half at 20 pips and am still holding the rest at BE.You had another opportunity to short, with very low SL, at the low of B at 4498. Doesnt it look beautiful ? How exactly has price retraced exactly to support identified by CBA.

You would notice that price has been struggling to break through 4475. Reason? Look at the hourly chart and if you notice, the high of the control bar A, marked in the hourly chart, comes in around 4475. Hence this region is strong support and so the price was struggling to break thru till now.

Guest Writers Wanted !!

This blog is growing at quite a fast clip. This blog was started with a singular aim of helping other forex traders. You have placed trust in me and thats why 250-300 people visit this site on a daily basis. So, the only way that i can repay this faith is to ensure that i continue to serve up quality content related to forex here. I am also quite sure that down the line, traders might get a bit bored about what i say and do and would want to hear the opinion of others as well. Variety is the spice of Life!!

As a means for that, i am looking for guest writers. Forex traders, analysts anyone related to forex. i would like you to write about anything related to forex or tech analysis. As you can see, i dont make a penny out of this blog and hence please do not expect any payments (atleast for now..;-)). Those who want to teach their ideas, throw it open to an audience, meet fellow traders, share ideas with them and want to help others just as how others helped you, are most welcome to write in. If you feel that you are the kind of person, please contact me through email/twitter/comments etc.

Anyway, i would continue to write in this blog and i expect your continued support to this blog.

Newbie Syndrome

As expected and as posted in todays article, the crosses have begun their upmove and i feel that it would go on for a few days. Today, i would like to discuss about what i call the newbie syndrome. Most of us, when we start out, have small TPs in our minds and we all enter forex after some thorough study and all studies tell us that we need to have strict SLs. So when we start out trading, we have good TPs and SLs and we trade diligently.
With this kind of trading, we slowly accumulate our profits and suddenly we find that we have doubled our account and we feel happy and proud. But as the size of the account grows and as we make more and more successful trades, we forget our good habits and slowly fall into bad ones.

We forget that we need to have SLs, we forget that we need to set good TPs. So what do we do? We find that some of our SLs get hit and then the pair travels in the direction of our trade. So, slowly, we stop using SLs. We keep losing trades and we keep hanging on to them hoping that somewhere somehow some magic would happen and we would get back to parity on our trades. We also become greedy and start having impossible TPs. We forget the strategy that we used to make so much of profits and start trading with no strategy at all. This slowly leads to degradation of our account and one fine day, we find that our account has been wiped out totally.
The best way to make money is to be patient with our profits and impatient with our losses, but we always do it the other way around. We are impatient with our profits and we close our successful trades with very small profits. We are very patient with our losing trades and we keep waiting and waiting hoping that it would come back but the trade never comes back and it either closes out our account or someday we get a flash, understand that the trade would not come back and finally close the trade with a huge loss.

The above is the newbie syndrome and i guess many of us would have gone through it. So find out what strategies made you make a profit and stick to it. Dont change it. Times would change and your trades would keep going up and down but stick to strategy. Keep studying the market, its changes and keep analysing and keep developing new and better strategies in sync with the changing market. Analyse your new system thoroughly and make sure that it would be a profitable one in the long run before you decide to leave out your previous trading system and switch to a new one.

Took a Massive Trade on the Euro

Attached is the hourly chart of the euro. For the past 2 days, i have been insisting that the high of the control bar (marked A) which comes in around 1.4325 would be a good place to long. Just look at the price action around this high (marked with a red line) and also look at where it is now.

All that you had to do was watch the price action and place a buy at 4325 or 4330 and with a little patience , you would have made more than 150 pips by now, as i did. If you watch carefully, the drawdown would not have been more than 15 pips at any stage on this trade and you would have made 150 pips. Thats a RR ratio of 10:1. A massive trade. If you are good at spotting control bars, you would see that the latest control bar's high comes in around 4470 and i would be watching the PA around that for a short.

Expert Analysers

Many of us, when we start out trading try to look for short cuts tosuccess in trading. And one of the easiest ways to make money seems liketo go for EAs (short for expert analysers). So what are EAs? EAs are programs which are written to trade automatically. They are mainly used in MT4 platforms but now many other platforms have started supporting programs for auto trading.

So how does this work? You can program your trading platform to buy or sell under certain conditions. The conditions can be anything. It can be as simple as 'buy if price goes below 1.1000' to something as complicated as 'buy if 10 ema crosses 13 ema and MACD value is 1' or whatever. The indicators used in your platform can be called as functions by the program and parameters can be passed to it, indicator values can be returned for the parameters passed and then a buy or sell can be executed. It can also be programmed to give a audio or visual alarm when the trading signal appears.
The EA is the height of automated and mechanised trading. Nothing can beat it. No human intervention is required and everything happens mechanically. This has both its positives as well as negatives. The biggest positive is the emotional turbulence and hence the confusion of a human mind in trade is avoided. Since there is no human intervention,errors like seizing up when a signal is there cos you are too scared,taking profit early, refusing to execute a stop loss cos you somehow feel that the position will come back and other human errors born out of emotion can be avoided. The negative of this is the same as the positive. Just as being mechanised totally is good in a way, likewise,too much automated trading is not good. Whenever a signal is generated,there needs to be an analysis of the background of the signal, the market conditions, market sentiment etc before you enter a trade. Blind following of the signals will eventually lead to a huge loss.


Enter any discussion forum and you find that there is a huge demand for EAs. Why? Cos people are lazy. They just want to sit back and relax while all the money is made automatically by the EA. But they fail to realise that nothing in this world comes easily, without doing any work.Nothing wrong in using an EA but atleast an effort should be made to understand what is happening in the EA, how it works, when it works,when does it not work. etc. No EA will work under all conditions and at all times. So a thorough study of the EA needs to be made to understand what happens in the background so that the EA can be correctly controlled at important points of time so that its power can be utilised to the maximised extent.
My request to all new traders is to spend some time in forex. Spend sometime understanding how forex works, how the market works, how the indicators work, how the trading systems work, how EAs work etc. Spend lot of time studying. Nothing in this world is got freely without hardwork. There are no freebies in this world. If it looks like one, then it surely aint. So work hard, sweat it out, learn it the hard way. That is what will make you consistently successful.

Update on EURGBP Trade

Attached is the 15M chart of EURGBP. It is an updated chart and there you can see the region C which i had marked off yesterday. You can see that after C, the price broke into the control bar region and travelled to 8796 which is exactly the close of the control bar B (seen in my chart from the other article). This was also the TP2 which i had specified in my previous article.

Price then move back up, broke thru the high of the control bars, which acted as resistance, then retraced back and then you can see some consolidation in region D. This is a clear sign that further upmove can be expected. Thats what followed and we see that EURGBP has moved very high further up. You could have made 60-70 pips over 14 hrs just through these 2 setups. With very low DD as well.

Thanks to All of You!! Its your Success !!

I wish to thank all of you for the great success of this blog so far. There has been no marketing for this blog and i havent even cross-linked with any other blog. Its your continued support and comments that have been making it all worthwhile. I say this cos today, we hit the 5000 page views for this blog. From humble beginnings, i am proud to say that this blog now receives close to 300 visits a day which is massive for a small blog of a single trader with absolutely no marketing.

I hope to continue to provide content that caters to all your tastes and if you have any suggestions on how we can make this blog better, please let me know.

Constructing a trade using CBA

Attached are 2 charts of EURGBP. Lets see how we can construct a great trade using control bar analysis. First, have a look at the hourly EURGBP chart. I have marked off 2 bars which serve as the control bars. These are very easy to identify as they are the biggest bars in the current chart. So i simply mark them off as A and B and i have also marked off the high and low of each bar using red lines.

Now switch to the lower timeframe i.e. 15M. This is show in the next chart. You can see the price action clearly. Concentrate on the price action between the 2

red lines in the region marked C. You can see a great battle going on . On one side, you can see price trying to push into the region of the control bars but 8820 acting as support and on the other hand, you can see price trying to push out of the control bars but 8828 acts as good resistance. So, for the trade, you wait for price to move into 8828 and then you realise that 8828 could act as a resistance. You wait and watch to see if 8828 is indeed acting as resistance.

Remember that you should not jump into a short immediately when price drops below 8828. You need to wait and see whether 8828 is indeed acting as resistance. Wait for  retrace to 8828 and see if it breaks back above 8828 or stays below. Here you can clearly see that it stays below 8828. So, you take a short below 8828. Have the SL just above 8828 (6-7 pip SL) and you have a great trade. TP1 is the point which gives you 1:1 risk reward ratio and TP2 is the close or the low of the control bar (this gives a 4;1 or 5:1 trade).

Formulating a Trading Strategy using CBA

So how do u formulate a trading strategy based on the control bar analysis ?as mentioned before, the control bars appear in all timeframes ranging from 5M to the weekly. So first of all, decide which time frame you are comfortable trading in. Some are comfortable trading in 15M while some are comfortable trading the daily...choose which timeframe you want to trade in. I suggest that for day traders, you choose 15M and for those who work on other jobs, you can choose the daily timeframe.Once u have chosen a timeframe, stick to it and trade that timeframe. Dont keep changing the TF depending on how the trade goes....stick to it...

once u have chosen the TF, mark the control bars. These are bars with the highest ranges/volatility (between the high and the low) and mark the high and low of these control bars. For 15M, take the bars from the past 2 mnths.  For daily, take bars from past 6 mnths. You should get about 6-8 control bars. Mark the high and low of each. You should get good support and resistance areas.....will discuss step 2 later...

We Finally Have a Name !!

Thanks to one of my friends, we finally have a good name for the kind of study that we afre trying to do. After sifting through control price points, control bars, high range bars, we have finally nailed the name for this group of study. Henceforth, this field of study of the bars will be know as Control Bar Analysis (CBA).

This will analyse the volatility of the price action within each bar and using that, we will find areas of support and resistance and using these, we will design a form of trading around this. I already do this form of trading but since it has been personal so far, it didnt require to have a structure. Now that it has been thrown open to the public, it will have a structure and as you can see, we are slowly evolving the basics before we dwelve deeper and deeper into this topic. Patience pays.

Update on the euro control bar

Attached is the hourly chart of the euro. Around noon on Friday, i had pointed out the control bar for the euro and had also posted an article of where i would be looking for longs on the euro. This is an update on the chart. As in the previous article, i have marked the top of the control bar, and you can clearly see how the price came to the exact same support region and then bounced more than 40 pips.

I had called for a long around 4325-4330 and if you had taken that, it would have been a cool 40 pips for a DD of less than 10 pips. Thats the power of the control bar.

Market & the frictionless Ball

All of you would have seen the supports and resistances which i provide to all on a daily basis. These S and R are points in which the price is expected to stall and also there is a greater probability of the price falling from the resistance than it breaking. Thats what make the S and R useful and powerful.

But the big mistake that many traders make is to follow the S and R blindly. When the price nears a support or a resistance, we need to analyse the market situation as well as the market sentiment before we decide whether we are going to enter into the trade or not.

The market is like the frictionless ball which keeps rolling in one direction unless and until acted upon by a force. Everyday, atleast 3 forces act on the ball (market). These are the begin of the Asian session, European session and the American session. Apart from these three forces, there could be other forces like news, press conferences, rate hikes etc. but everyday will have atleast 3 forces. Lets say that in the begin of the Asian session, the ball is rolling in favor of the longs. The Asian traders would either choose to slow down the ball or force it to travel in the same direction faster or force it to reverse. Whichever is the direction, the ball keeps rolling in that direction till the begin of the European session (unless there is some news in between. If there is news, then that would be another force which will make the ball gain momentum or change direction). Likewise, the European traders would also make the ball move in a specific direction (either same or reverse). This trend continues during the American session as well and would be interrupted only by news etc.

So when entering a trade based on S and R, it is important to know what time it is and which direction the ball is rolling. The best example would be yesterday when in the begin of the Asian session, the ball began to roll in the direction of the longs. This continued in the Euro session as well. So midway, through the Euro session it would be foolish to enter into a short just cos we have met a resistance. The ball is rolling in favor of longs from the Asian session and continues thru the Euro session and since there has been nothing to change that direction, it is expected to roll in that direction only till the next force (like the news or begin of American session) comes in. So in such cases, it is better to wait for the next force to come in to get the correct direction (whether the force continues the move in the same direction or reverses it) before entering in the market. For example, yesterday, it would not have been a great idea to enter into shorts at any time just cos a resistance was near.

So always keep in mind the frictionless ball and trade accordingly.