Price Action Swing Trading - The PAST Strategy

[Nigel Price]

Great Discussion!

I wasn't expecting to read such great comments when I logged in here this morning! Great discussion!

I'll be spending some time in here today and will try to give my input to the topics that have been raised.

Hope everyone had a good weekend and good luck for the coming trading week.

Nigel

 

[Olu]

EurUsd

gbpusd rocketed to the upside but the euro didn't. Would we double top here?

 

[Nigel Price]

Review: 28th July - 2nd August

Last week was a bit of pain for me to be honest - it reminded me that when you get a week with a few high level news releases together it's probably a good idea to take the week off!

In terms of price action all you really get are tight ranges leading up to the news release, then you get a week's worth of movement in a few minutes and then it goes back to a tight range again. It might be good for scalpers but for swing/position traders, it makes for tough going!

Hopefully we can get back to some normality this week, but we should also bear in mind that we are still in August, so the big boys who drive the big trends are still probably in the Hamptons or St Tropez. However, come September, we can hopefully look forward to some multi-week/month trends getting going.

Anyway for me, my plan going into last week was to short crude and USDJPY.

Crude

Crude fell early on in the week but I didn't really see any good trendlines to short from so I wasn't in any trade. It then finished off the week screaming to the upside, so no trade at all there for me. No profit, but no loss either

USD/JPY

I have short two positions in USD/JPY right now, one opened at 100.35 which is 186 pips in profit. This was opened on 24th July. I got another opened last week after the NFP, but got a pretty terrible price, at 99.23. Nevertheless, it is still open, at 72 pips profit right now [chart below].

I have "spent" 105 pips in losses to get these positions in play - a combination of small losses and breakevens. Floating profit at the moment is 258 pips, hopefully with more to come.

EUR/USD

We identified a nice looking daily candle in Eur/Usd during last week and decided to take a speculative look at the downside here too, although we were fully cognisant of the risks posed by the ECB on Thursday and the NFP on Friday. I did take a short on the trendline break that we had identified but price moved against us quickly - my total loss was -17 pips.

For the coming week, as was recommeded in my report yesterday, I will be focusing on shorting EUR/USD.

For traders who are reading this and might be wondering about trendlines, where to draw them, getting them correct, etc, please always remember, the magic is not in the trendlines or in any other technical analysis.

We all look at a chart and see different things - there is nothing unusual about that. In addition, price isn't static - it moves, and trendlines will sometimes move to reflect that.

The magic is in always cutting your losers quickly on short timeframes, and then having a longer term outlook for your winners, keeping them open for as long as possible. We might have very few winners, but because the are big, one winner can pay for many many losers.

Good luck for the coming week!

 

[Nigel Price]

Excellent Post

Good day all,
My thoughts on myknees' dilemma about which pairs to trade. If we follow PAST strategy implicitly we should be prepared to take several 20 pip hits in order to catch the ride to our intended profit target. With that in mind I decided to avoid the Minor pairs with spreads of more than 3 pips. Admittedly, by doing this, I'm probably missing out out on many potential trades but the upside is one's trading balance is not too severely punished before one eventually succeeds in catching a winning trade.
Presently I'm +106 pips on NZDJPY after 6 attempts (120 pips) to catch the bus. And +29 pips on CADJPY after 4 failed attempts (80 pips).
However, I'm -100 pips (5 failed attempts) on USDJPY and still not in the trade yet.

This is an excellent post. From my calculations, Basil's current account when he typed this was a floating profit of +135 against a realised loss of -300. This during a couple of very difficult trading weeks where we saw little trend movement.

Basil, if you keep control of your losses, you will notice that on a week when price does move for you, your deficit of -165 pips will be wiped out so fast it will make your eyes water.

Until that week comes along, money management is everything. When it comes, let those winners run!

Keep it up!

 

[deu]

Thx for this great setup.

One question though. EURUSD is obviously going sideways for more than a week. Given that the most obvious trendline has already been broken last week, wouldn't it make sense to only trade bottom and top borders of the sideway channel we are in? Any random trendline that might pop up during the next few days will surely be worth less than the lines at 1,3350, 1,3300 and 1,3250.

An entry at 1,3300 with initial stoploss at 1,3360 seems to me much easier to trade than a couple of intraday trendlines.

 

[Nigel Price]

Thx for this great setup.

One question though. EURUSD is obviously going sideways for more than a week. Given that the most obvious trendline has already been broken last week, wouldn't it make sense to only trade bottom and top borders of the sideway channel we are in? Any random trendline that might pop up during the next few days will surely be worth less than the lines at 1,3350, 1,3300 and 1,3250.

An entry at 1,3300 with initial stoploss at 1,3360 seems to me much easier to trade than a couple of intraday trendlines.

Hi Deu welcome to the thread. Thanks for the question.

In terms of EUR/USD, I will be watching to see if price exhausts itself somewhere beneath the trendline too, what we call "retests" - so if you look at the chart below I could be shorting anywhere up to the recent highs really.

If price establishes itself above the trendline I'll stand aside.

There would be nothing wrong with playing the ranges that you have identified either of course. The reason why I like trendlines (and this applies to breaks rather than retests) is that when a trendline breaks, it often does so with some speed. You will often see price accelerate away from the trendline once it breaks. This means I can often get a stop to breakeven very quickly, which in turn means that I have my capital exposed to the least amount of risk necessary. My trade moves quickly into profit and I am at break-even, fast. There is nothing nicer than having a trade that spends hardly any time in the red.

But this is simply a personal preference that I find works very well for me. As I have said many times before, where you draw lines and how you enter is of minor importance. What is important is that the risk is kept under control on short timeframes and winners are allowed to stretch their legs on long timeframes. Candlesticks and trendlines are simply the tools we use to implement this philosophy, nothing more than that.

Hope this goes some way towards answering your question

 

[Olu]

CadJpy

Let's see what will happen

Olu

 

[Nigel Price]

Let's see what will happen

Olu

Looks like it is working out quite nicely so far Olu!

 

[deu]

Watching this trendline. It's cleaner on D1, but H4 shows it's holding quite well for now.

 

[basilc]

Pass me the Kleenex please Mr Price!

Basil, if you keep control of your losses, you will notice that on a week when price does move for you, your deficit of -165 pips will be wiped out so fast it will make your eyes water.

Just a brief update.

NZDJPY - moving along nicely to +118 pips today, set SL to break even.
CADJPY - raced along to +132 today, set SL to break even.
USDJPY - finally managed to catch the bus today and am now +24 pips.

Eye watering stuff indeed. Your admonition for PAST traders to demonstrate 'patience and persistence' is certainly beginning to pay off for this OAP.

 

[Olu]

Basil, if you keep control of your losses, you will notice that on a week when price does move for you, your deficit of -165 pips will be wiped out so fast it will make your eyes water.

Just a brief update.

NZDJPY - moving along nicely to +118 pips today, set SL to break even.
CADJPY - raced along to +132 today, set SL to break even.
USDJPY - finally managed to catch the bus today and am now +24 pips.

Eye watering stuff indeed. Your admonition for PAST traders to demonstrate 'patience and persistence' is certainly beginning to pay off for this OAP.

Well done BasilC on those trades. I am in the cadjpy short. I have taken off half and the rest is at b/e as well. Your post before this one was excellent. This one is too

Olu

 

[Nigel Price]

Hope everyone is holding on to their long JPY trades, they should be looking quite healthy this morning.

+600 pips for me on USDJPY

 

[Nigel Price]

Just had a look at your list and agree with most of them - Phew!

Nigel - What do you do with so many options - Trade them all - Pick the best ones (how) - Thoughts appreciated

Hi myknees, sorry for missing your question. Thanks for it, by the way, it's a good one

For me, I really like to make my trading week as easy and relaxed as possible, that's actually more important to me than getting a signal that works out! So I like to concentrate on one or maybe two signals. Over the course of the week I find that I get to know the chart quite well on the lower timeframes, so I know quickly when a signal is working out or not. If it isn't working, often I will just take the rest of the week away from the charts.

Now that's not to say I'm immune from taking a sneaky flick around the daily charts during the week to see if there are any nice candles there, but overall I mostly concentrate on 1 or 2 weekly charts.

In terms of how to pick them, I have to say I don't think I am any better than anyone else when it comes to identifying signals that work and avoiding those that don't. Most of my weekly signals don't work out. But when they don't I lose very little. And when they do work out - I make sure I am profiting as much as I can

If I was pushed to identify one thing I look for, it would be a candle that I think I can get in on before the big move happens. I like to think that I am in at the very beginning of the move, because that's where the profits are greatest.

Hope that answers it for you.

 

[deu]

Another question I'm not sure how to handle money management with this system. A simple rule like never risk 2% of your capital on a single trade works quite well when the risk during a trade never exceeds the initial risk. For example, we have an initial stop loss of 50 pips and then use a trailing stop of 50 pips.

Now trading PAST, I try to get into weekly trends while only risking 50 pips, but I fully expect to need several attempts, and when I actually manage to get into my trade, I will need a much larger stop loss to handle the swings on the weekly timeframe.

Any recommendation how to handle that?

 

[Olu]

CadJpy

'Trend line breaks' in action

 

[Nigel Price]

and when I actually manage to get into my trade, I will need a much larger stop loss to handle the swings on the weekly timeframe.

Not quite sure what you mean here deu - we control risk (i.e. set stops) on the lower timeframes and target reward on longer timeframes. Once a trade moves into profit, we bring the stop to breakeven. If it gets stopped out, we try again if there is another trend line break or retest. Have you read the ebook? There are a few examples in there that should help you out

 

[basilc]

"Now trading PAST, I try to get into weekly trends while only risking 50 pips, but I fully expect to need several attempts, and when I actually manage to get into my trade, I will need a much larger stop loss to handle the swings on the weekly timeframe."


Good afternoon deu,

Might I suggest you re-read Chapter 8 in the PAST manual where the Stop Loss quandary is very well handled.

Simply put, PAST traders should risk no more than 20 pips to Enter a trade. It might take several attempts to finally get onto a winner but in doing so one will have lost a relatively small amount.

At the moment I am sitting on ±158 pips on 3 different pairs at a cost of ±200 pips which is very good news indeed because all 3 trades are now well on their way to my projected targets and my stop losses are at break even.

It hurts to be stopped out even with small amounts but as Nigel says once you catch a winning trade all the pain disappears.

Good luck with your trading and keep persevering.

 

[deu]

I've read the ebook, that's how I've found this forum . I don't think my particular question was answered there, but I could be wrong - will certainly reread the ebook...

Now back to my question: Let's say I risk 2% of my account per trade, setting my stoploss to 20 pips (so 20 pips = 2% equity). Now the trade goes 200 pips into my direction, I move my stoploss to breakeven - but at that point I'm still risking those 200 pips worth 20%(!) of my equity on a single trade. Which doesn't sound particularly solid to me. And that's not even a big swing on a weekly timeframe...

So how can I manage my risk better? I could start with the idea that my actual risk when I'm in a trade is more like 200 pips for example. So 2% risk should be set to 200 pips - meaning that I would only risk 0,2% of my equity on each trade with a stoploss of 20 pips.

A different idea would be to trail my stop more aggressively than suggested in the ebook.

I will certainly try some backtests, but would also like to hear how you guys handle this.

 

[basilc]

Stop Loss Management.

"Now the trade goes 200 pips into my direction, I move my stoploss to breakeven - but at that point I'm still risking those 200 pips worth 20%(!) of my equity on a single trade." [/QUOTE]

Hi deu,

Are we not talking at cross purposes here?

Once your Stop Loss has been moved to break even surely you are risking nothing! Whether the trade then goes to +20 or +2000 surely your risk is nil. For, should the trade now reverse and take out your Stop Loss you've lost nothing at all. If however, you are referring to how much you could have banked by exiting the trade at say +20 or +2000, that is an entirely different matter.

For what it's worth deu, I use fib extensions to locate profit targets and trailing stops to lock in profit.

Hope this helps some.

 

[deu]

My risk is the amount of equity I can still lose in a trade at any given time. Doesn't matter if I lose 200 pips in a single trade when it reverses, or if I lose 10 trades in a row at 20 pips each. Both cost the same amount of money