28/1: Insight – Trying to read setups onto charts

My monumental insight for the day:

If I am trying to figure out whether there’s a valid setup, and I start to look at the chart in detail – then most probably there is no valid setup. It’s almost as if I am trying to justify and read a setup into the chart.  I am sure I have mentioned this before, but it came to mind again today, as I am trying to carefully identify any change in behavior from switching from real-time paper trades to live trades.  When I have been doing my real-time paper trades, there was never any need to do that – more or less the setups just jumped up from the page.  I casually looked at the chart, and then immediately recognized that there was a trade to put on – this is what happened with the Cable trade yesterday, and with the Oil trade yesterday.

Here’s an example of what I think I should NOT do (and no, I didn’t trade here):

dax insight jan28

Also I guess the longer I look at a chart, the more I can read into it – for example the Cable chart at this moment (around 10.30am GMT).  Findings:

  • Price is trading at key level – around 1.52 handle
  • Looked for double top formation on 5M (bearish)
  • FOMC tonight – so any movement likely to be more muted than average
  • Then turned into ascending triangle formation on 5M  (bullish)
  • As the 1H trend is consolidating, trade can be taken in either direction

cable insight jan28 5M

For illustration purposes – here’s how I analyse the 1H charts for DAX, Cable and Oil.   I use the 1H chart to determine the trend for the instrument, since I am mostly using the 5M timeframe for execution (as “execution timeframe” – XTF) – someone explained to me that it’s good to use two multiples of 4 to figure out which timeframe to use for judging the trend.  So 5M x 4 = 15M, and then by 4 again -> I get to the 1H timeframe.

cable jan28

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