BUY WINDOWS

Joined : 23 Dec 2007 Posts : 241 Location : Nigeria

Helloo Currency Traders,
Hope you'all enjoying the weekend. Lets review what happened yesterday on the GBPUSD.
Price is on a consolidation range right now on the GBPUSD, so we could put a BUY STOP @ 1.9500,target point @ 1.9531,with a 35 pip stop loss

Maybe I took too much black coffee, no sugar, no cream, like my guy roussell:)..Well, we got stopped out before price reversed and rocketed up from our initial target of 1.9531 to 1.9596, approximately 65 more pips than projected. Imagine what you could do with that pile of moolah when you dont argue with money in the bank.

So what happened?How come we got stopped out?This involved not properly observing the difference between a trend and a retracement, while wrongly applying the BUY/SELL WINDOW in the opposite direction..

BUY/SELL windows are one part of trading tools used to implement the ''BUY THE DIPS, SELL THE RALLIES'' rule, a la John Crane's book ''Advanced Swing Trading''

. A buy window is used in an uptrend, while a sell window is used in a downtrend. A 60% buy/sell window is used in trends and retracements in order to know where price might retrace.

'well, during live forex trading, most traders make a recurring mistake of mistaking trends from retracement. A trend occurs when price makes higher highs and higher lows(uptrend) or lower lows and lower highs(downtrend). while a retracement is a price movement in the opposite direction of the previous trend. Buy the dips, sell the rally refers to the retracements of an upward or downward trend..

a general observation of the markets shows that they do not trade in a straight line. There is always a struggle for control between the bears (sellers) and the bulls. In this struggle, each side enjoys victories and defeats.

For example, if a market makes a nice bottom formation after an extended downward move and then retraces up to a price where many chart readers believe the market will run into resistance, the bearish traders will move in and sell. The bearish traders believe that the trend is still down and this correction provides a good selling opportunity.'

So lets illustrate what we are trying to say here, by use of charts;

On the 13th of May, we had a HIGH of 1.9588, which then commenced a LOW of 1.9362.Since it was in a downtrend,we use the SELL WINDOW to ''SELL THE RALLIES''.

The total price range of the original move from A to B is 1.9588-1.9362=0.0226

Now multiple the range by 60% SELL WINDOW= 0.0226* 0.6=0.01356

Add this total to the low; 0.01356+1.9362=1.9498(SELL WINDOW).

This price(1.9498) was the begining of the SELL WINDOW in which we could take a selling position and go short. Observe as price knocked the 1.9498 SELL WINDOW which is now a resistance area.

Knowing in advance where a market is likely to reverse or at least run into support or resistance can help give any trader an EDGE only when ENTERING or EXITING a trade.

This time 15th of May, price formed a new low A(1.9403) and a high of B(1.9525). since it was in an uptrend,I should have used the BUY WINDOW to ''BUY THE DIPS''.
The total price range of the original move from this current A to B is 1.9525-1.9403=0.0122

Now multiply the range by 60% BUY WINDOW=0.0122*0.6=0.00732
Subtract this total from the high; 1.9525-0.00732=1.9452(BUY WINDOW)

This price(1.9452) was the begining of the BUY WINDOW in which I should have placed a BUY STOP and go long. Observe that price formed an INSIDE CANDLE BAR formation(like a railway track) at that area, found support then and went up.

So guys, that was where I made my error...Stuff happens,right? Like my friend nine would say'' 1 AM RESPONSIBLE!':cheesy:.. The most important thing is to go back, know where you made the error, study and learn from it, then move on.

Subject: Re: BUY WINDOWS Sat May 17, 2008 5:18 pm

hi stalion,am still trying to digest what you wrote here but can you please tell me how to cloe or exist your trade after entering window?

Joined : 23 Dec 2007 Posts : 241 Location : Nigeria

Hi fellow currency traders,

so lets see what happened in the morning.

1.9596-1.9440=0.0156

0.0156*0.6=0.00936

1.9596-0.00936=1.9502(BUY WINDOW)

so, at this point, we should be looking to buy on the retracement once price hits our BUY WINDOW to the upside.

Joined : 23 Dec 2007 Posts : 241 Location : Nigeria

1.9539-1.9463=0.0076
1.9528+0.0076=1.9604

You could see that the BUY WINDOW(1.9502) triggered our entry point and gave us the signal to go long. 76 pips,$76 minilots,$760 standard lots.

Joined : 13 Jun 2008 Posts : 6 Location : migeria

Hello,
I will like to know how you do choose your points in your diagrams. that is your points A and B. can i just choose it randomly

Joined : 23 Dec 2007 Posts : 241 Location : Nigeria

1.9668-1.9428=0.024
0.3 * 0.024=0.0072
1.9428+0.0072=1.9500(sell window)

[QUOTE=masif1;443998]Hi forexgreenland,

did you use the 60 percent retracement for the above as well?[/QUOTE]

Helloo masif,well I was tempted to use the 60% sell window or retracement as you called it but looking at price action going on that friday, looked to me that the 30% sell window would have been much more realistic, even addind 20 pips more to it. Maybe traders were overly cautious of the notorious Black Friday the 13th or whatever mumbo jumbo its called. Even at that, we noticed price depressed down below the low(B) at London news session, tearing off stops before going upwards to the 30% sell window of 1.9500.

Though it eventually hit the 1st target point of 1.9520 this Monday, it was just too close for comfort. Too bad we ran into the begining of a 1-2-3 bottom before price took off.So we should be looking for the 2nd target to be hit if you are already on that pair.

[QUOTE=onwukarisa;7174]I will like to know how you do choose your points in your diagrams. that is your point A and B. can i just choose it randomly[/QUOTE]

Well, onwukarisa,I must say that the random walk theory does not usually come into play in the markets neither are there randomness in price action. The points(A and B) that you see on the chart diagram is taken from the highest high to the lowest low of price movement.from there, you can apply your buy and sell windows.
Please understand the buy and sell are synonymous to the fibonacci retracement levels which tend to work amazingly if you know how to use it dynamically as price moves along. Due to the fact that different traders have different levels of skills and know how, that is why it is simplified as BUY and SELL windows

Joined : 23 Dec 2007 Posts : 241 Location : Nigeria

Hi folks, what happened yesterday Monday...well, price on the GBPUSD went past the 30% window of 1.9500 and rocketed up to the 60% window of 1.9644 which yielded at least 144 pips on the table. If our sell window projection is correct, we should see price retracing back to 1.9555 level. News on the UK CPI would make a significant impact on fueling that downward drive, or if greater than expectations,continuing its previous upward trend. European time would tell us what to expect.So we keep our fingers crossed, shall we..

1.9800-1.9409=0.0391
0.6*0.0391=0.02346
1.9409+0.02346=1.9644(60% sell window).

Joined : 23 Dec 2007 Posts : 241 Location : Nigeria

[QUOTE=forexgreenland;444796]Hi folks, what happened yesterday Monday...well, price on the GBPUSD went past the 30% window of 1.9500 and rocketed up to the 60% window of 1.9644 which yielded at least 144 pips on the table. If our sell window projection is correct, we should see price retracing back to 1.9555 level.

1.9800-1.9409=0.0391
0.6*0.0391=0.02346
1.9409+0.02346=1.9644(60% sell window).[/QUOTE]

89 pips,$89 minilot,$890 standard lots made for teusday.

[QUOTE=Stuart14;444933]Forexgreenland, 2 great calls in a row. Nice work.[/QUOTE]

Thanx,Stuart... though nothing is 100% perfect in trading..You win some ..you lose some...but as long as you GET the reasoning behind price movements, you make your money with your honest forex broker.
At forexgreenland..we make nothing but the hits...
Nothing but the hits...
Nothing but the m-u-t-h-a-f-r-e-a-k-i-n-g h-i-t-s ..:thumbsup:

Joined : 13 Jun 2008 Posts : 6 Location : migeria

Hello Stallion,
You said i shud use the buy/sell windows dynamically as price moves along.Does it mean that there are times when i shud recalculate the 30% and 60% buy/sell windows and use a new one?Also with this techniques, i will like to know which signal do you see b4 taking a buy/sell position (does the candle have to break any of the window or lines b4 buying or selling?