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):
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
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.