Henrik Thorstensson sharing trading knowledge

tradingcurrencies

tradingcurrencies

Hi

It is nice to be here at the forum. I am a 25 year old Swedish day trader, I only trade the currency market. I recently started a non-commercial blog (available in both English and Swedish) about currency trading with focus on scalping. The adress is: https://www.tradingcurrencies.se/. I will try to publish an article almost every day. I write about my trading and trading in general, I will discuss concrete strategies, losing trades and winning trades.

Examples of articles are: "A good and concrete exit method for scalping" and "How to find potential reversal points in the price of a currency pair".

If you want me to write on a topic that you are interested in, please let me know here or email me at: henrik.thorstensson@tradingcurrencies.se.

Best regards Henrik Thorstensson
 
Hello

I would like to share a blog post here:

This post will be about a basic trading setup: trading reversals at price levels. When price reaches a level three things can happen: reversal, consolidation or break through and continuation. With this setup we try to “catch” price reversals in the market.

All trading setups must exist in the right context, otherwise the edge isn’t strong enough. To open a chart, search for a potential reversal and trade it without looking at other factors (context) in the market is rarely successful. It is best to trade reversals at strong zones (demand -, support -, resistance – and supply zones). It is easier to predict a reversals at any of these types of zones than between zones. It is also important to pay attention to trend, momentum and the range to the next zone of opposite type. If we for example want to open a short position we want a downtrend and a big enough range to the next support zone/demand zone.

This setup can be traded in all timeframes, the market works in the same way in all timeframes. Supply and demand fully determines the price in all timeframes. But a setup can work better in a specific timeframe.

Good confirmations to work with when trading the reversals setup are candlestick patterns and market structure. Market structure is about where tops and bottoms are in the market. A combination of confirmations that I use frequently is: Pinbar/Engulfing plus higher low/higher high. This is a strong combination in my opinion.

When we trade the reversal setup we 1) look for a strong zone 2) wait until price reaches the zone 3) study how price reacts to the zone. Is there an imbalance between supply and demand – which is the strongest force? 4) Look for confirmations that indicate a reversal 5) Open a position and speculate in a reversal

Here below in the picture we see a key level, let’s study the third touch at the zone (marked with a yellow elipse). When price reaches the zone “exhaustion” is created (a lot of wicks in the same place) and also a Pinbar. But a bullish engulfing is created after the Pinbar, this does not indicate a bearish reversal. I would like to see a stronger price reaction to the zone (a quick price drop), in this case price stays at the zone for a while and this indicates that supply and demand are in balance. If we are going to speculate in reversal we want supply and demand to be in imbalance of course.

5m-uj-768x356.jpg


Disclaimer: Currency trading entails a high level of financial risk. A currency pair can both rise and fall in value. In currency trading it is possible to lose the entire initial investment. Nothing published on this website is financial advice or investment advice. I assume no responsibility for any investment decisions made by persons who read this blog.

Best regards
Henrik Thorstensson
 
Hello!

Now I will discuss an important part of any trading strategy: the exit method. I want to highlight this topic since it doesn’t matter how good your entry is if your exit is bad.

When you open a position you take an “entry”. When you close a position you take an “exit”. The exit method I use in my scalping is based on the tick chart. When I am in a “long” position (buy position) and the structure in the tick chart shifts from bullish to bearish, I close my position. If I am in a short position I close it when the structure shifts from bearish to bullish. This means that I close my long position if a lower low is formed in the tick chart and I close my short position if a higher high is formed.

Here below is an example of a shift in structure in the tick chart (zoom in with your browser to see the picture better):

ticken.jpg


In other words my exit method is based on structure in the lowest timeframe. Structure is very important when scalping and it is also a part of my entry method. I get very good exits with this method and I am happy to share it with you.

It is not always good to close a position that is in profit. A position should only be closed when the “edge” is lost. I have a lot of experience with this exit method and the edge is more often than not lost when the structure shifts in the tick chart.

In my opinion this exit method is considerably better than a trailing stop since a trailing stop isn’t based on price action. A trailing stop is based on a set number of pips. A trailing stop is decent at best, if you use a trailing stop the number of pips should be based on the current volatility.

Since this exit method is based on a very low time frame and closes your position as soon as negative structure has been formed it is not suitable for swing trading. When you swing trade you usually have less precise entries and price can move against you before moving in the right direction, therefore this exit method doesn’t fit swing trading.

In this paragraph I will create some controversy. I really think it is stupid to use a “take profit-order” (“TP”) when scalping. This order closes your position at a certain price. Why do you want to close your position when it has reached X pips of profit? Why not look at price action and stay in the position as long as it has a good edge? Price could pick up a lot of momentum in the right direction when it is close to your TP, this is impossible to know in advance – so why set a TP in advance?

That’s all for this post.

Disclaimer: Currency trading entails a high level of financial risk. A currency pair can both rise and fall in value. In currency trading it is possible to lose the entire initial investment. Nothing published on this website is financial advice or investment advice. I assume no responsibility for any investment decisions made by persons who read this blog.

Best regards
Henrik Thorstensson
 
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