The Bouncing Zone Strategy — Part 2

Introduction

Your are about to read the part 2 of a 3 part article called "the bouncing zone strategy".

Have you tried to find zones on your charts? If so, you certainly noticed that not all of them work as planned. Well, I have a good news for you: it’s possible to filter out some of the zones that are most likely to fail.

Before talking about what makes a zone good or bad, we should first understand what are the characteristics of a zone. That’s what we’re going to talk about here. Each section below deals about one of the characteristics of a zone.

Name of the zone

You already know the first characteristic of a zone, it’s simply the name of the zone. Is either a supply zone, or a demand zone.

Okay, now let’s talk about things you don’t know yet :-)

Type of zone

We can divide the zones into 4 different types:

• Drop Base Rally (DBR)
• Rally Base Drop (RBD)
• Drop Base Drop (DBD)
• Rally Base Rally (RBR)

This sounds weird? Here's an image that should make things clear.

This is simply a way to describe the "direction" of the zone.

Strength of the move

When price leaves a zone, it’s important to know how to describe the strength of the move. For this we have 2 useful things to look at:

• How many consecutive candles of the same color there are
• How big the candles are

If you have lots of big candles of the same color, it’s a strong level. If you have only a couple of small candles of the same color, it’s a slow level. You can see below a slow move (left) and a strong one (right).

Time in the zone

This one is simple: once you draw the zone, count how many candles there are in the zone. If you see more than 5 candles, then it's a long zone. Is there are less than 5, then it's a short zone.

In the example below you can count 3 candles, so it's a fast zone.

Height of the zone

Look at the height of your zone, then look at the height of your price movement. If the zone is bigger than 1/4 of the price movement, then the zone is big. Otherwise, the zone is small.

In the example below, the left zone is big, the right zone is small.

Freshness of the zone

You need to follow 2 steps in order to know if a zone is fresh or not:

• Look on the left of the zone, and see if your price movement is due to a previous zone being hit.
• Look on the right of the zone, and see if the the price already hit the zone at least once.

It’s easier to explain with an example:

Is the zone 2 fresh?

• On the left, we do not see a prvious zone at 1
• On the right, price touched the zone at 3
• -> The zone was fresh before hitting 3, but now it is not fresh anymore

Is the zone 4 fresh?

• On the left, we do not see a previous zone
• On the right, price did not touch the zone yet
• -> The zone is fresh

Quick summary

As we just saw, there are 6 characteristics to think about when describing a zone:

• Name of the zone: supply, demand
• Type of zone: DBR, RBD, DBD, RBR
• Strength of the move: strong, medium, slow
• Time in the zone: short, long
• Height of the zone: small, big
• Freshness of the zone: yes, no

All of this is really important, you should keep it in mind while looking for zones

Some examples

Now it’s time to see some examples together. Below are 2 zones, try to describe them using what we learnt in the article.

Characteristics of the left zone:

• Name of the zone: supply
• Type of zone: DBD
• Strength of the move: strong
• Time in the zone: short
• Height of the zone: small
• Freshness of the zone: not fresh anymore

Characteristics of the right zone:

• Name of the zone: demand
• Type of zone: DBR
• Strength of the move: strong
• Time in the zone: short
• Height of the zone: small
• Freshness of the zone: not fresh (you can see another level on the left of the zone)

Now you should practice describing zones on your own charts.

Credit: 21pips

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Trading Recommendation Dec. 13

Technical Analysis
USDJPY Breached the Year's High May Aim for 104.35. Next: 107 to 114?

Today we are going to take a look at USDJPY for a break of this year high at 103.73 was seen early this morning.An ascending triangle can be seen from the trendline drawn from the highs of 2009 and 2013 lies at 104.25(long-term resistance) and a break higher may put pressure to move further up to the low of November 1,2007 low of 107.25 initially.While the measured move of the triangle may be seen as long term goal at 114.67.

To read the full trading recommendation, please click this link: http://metisetrade.com/index.php/research

Fundamental Analysis
Japan's 2nd Month Growth Forecasts Cut on Weak Capital Expenditure

Economists cut Japan’s economic growth forecast for the second straight month as a slowdown in capital expenditure and lackluster export demand weighs on the outlook for the current fiscal year. The economists stuck with their view that Japan’s growth will slow further next fiscal year due to a planned increase in the sales tax in April. The biggest downside risks to this scenario are a longer-than-expected downturn in consumer spending after an increase in the sales tax, the poll showed, as well as if overseas economies unexpectedly weaken.

To read the full trading recommendation, please click this link: http://metisetrade.com/index.php/research

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Trading Recommendation December 12

Fundamental Analysis
S&P Downgrades US Growth Forecast ; RBNZ Increases New Zealand Growth Forecast!

Standard & Poor's credit ratings agency has lowered its U.S. growth forecast warning of "significant downside risks" from federal spending cuts.

To read the full trading recommendation, please click this link: http://metisetrade.com/index.php/research

Technical Analysis
USDCHF Breached the Long Term Weekly Chart! Sell in Sight

Today we are going to take a look at USDCHF known as the Swissy. The pair is widely known to be a safety trade and is closely linked to the prices of EURUSD (although inversely related, meaning as EURUSD goes up, USDCHF goes down). As we can see from the weekly chart prices have broke down the lows of the consolidation phase that started way back in September 2011.

To read the full trading recommendation, please click this link: http://metisetrade.com/index.php/research

Dennis Gartman's 19 Rules Of Trading

2013 was great year for stocks and a crazy year for bonds.

But the amount of money you made depends on how you traded.

Dennis Gartman, editor and publisher of the Gartman Letter, has 19 rules of trading from 2013. But these hold true in general.

Here they are verbatim:

1. NEVER, EVER, EVER ADD TO A LOSING POSITION: EVER!: Adding to a losing position eventually leads to ruin, remembering Enron, Long Term Capital Management, Nick Leeson and myriad others.
2. TRADE LIKE A MERCENARY SOLDIER: As traders/investors we are to fight on the winning side of the trade, not on the side of the trade we may believe to be economically correct. We are pragmatists first, foremost and always.
3. MENTAL CAPITAL TRUMPS REAL CAPITAL: Capital comes in two forms... mental and real... and defending losing positions diminishes one’s finite and measurable real capital and one’s infinite and immeasurable mental capital accordingly and alway.
4. WE ARE NOT IN THE BUSINESS OF BUYING LOW AND SELLING HIGH: We are in the business of buying high and selling higher, or of selling low and buying lower. Strength begets strength; weakness more weakness.
5. IN BULL MARKETS ONE MUST TRY ALWAYS TO BE LONG OR NEUTRAL: The corollary, obviously, is that in bear markets one must try always to be short or neutral. There are exceptions, but they are very, very rare.
6. "MARKETS CAN REMAIN ILLOGICAL FAR LONGER THAN YOU OR I CAN REMAIN SOLVENT:" So said Lord Keynes many years ago and he was... and is... right, for illogic does often reign, despite what the academics would have us believe.
7. BUY THAT WHICH SHOWS THE GREATEST STRENGTH; SELL THAT WHICH SHOWS THE GREATEST WEAKNESS: Metaphorically, the wettest paper sacks break most easily and the strongest winds carry ships the farthest,fastest.
8. THINK LIKE A FUNDAMENTALIST; TRADE LIKE A TECHNICIAN: Be bullish... or bearish... only when the technicals and the fundamentals, as you understand them, run in tandem.
9. TRADING RUNS IN CYCLES; SOME GOOD, MOST BAD: In the “Good Times” even one’s errors are profitable; in the inevitable “Bad Times” even the most well researched trade shall goes awry. This is the nature of trading; accept it and move on.
10. KEEP YOUR SYSTEMS SIMPLE: Complication breeds confusion; simplicity breeds elegance and profitability.
11. UNDERSTANDING MASS PSYCHOLOGY IS ALMOST ALWAYS MORE IMPORTANT THAN UNDERSTANDING ECONOMICS: Or more simply put, "When they’re cryin’ you should be buyin’ and when they’re yellin’ you should be sellin’!"
12. REMEMBER, THERE IS NEVER JUST ONE COCKROACH: The lesson of bad news is that more shall follow... usually hard upon and always with worsening impact.
13. BE PATIENT WITH WINNING TRADES; BE ENORMOUSLY IMPATIENT WITH LOSERS: Need we really say more?
14. DO MORE OF THAT WHICH IS WORKING AND LESS OF THAT WHICH IS NOT: This works well in life as well as trading. If there is a “secret” to trading... and to life... this is it.
15. CLEAN UP AFTER YOURSELF: Need we really say more? Errors only get worse.
16. SOMEONE’S ALWAYS GOT A BIGGER JUNK YARD DOG: No matter how much “work” we do on a trade, someone knows more and is more prepared than are we... and has more capital!
17. PAY ATTENTION: The market sends signals more often than not missed and/or disregarded... so pay attention!
18. WHEN THE FACTS CHANGE, CHANGE! Lord Keynes... again... once said that “ When the facts change, I change; what do you do, Sir?” When the technicals or the fundamentals of a position change, change your position, or at least reduced your exposure and perhaps exit entirely.
19. ALL RULES ARE MEANT TO BE BROKEN: But they are to be broken only rarely and true genius comes with knowing when, where and why!

(C) MAMTA BADKAR

Trading Recommendation Dec. 11

Technical Analysis

USDJPY Possibly Forming a Double Top Which Signals Lower Prices Ahead

Looking at the USDJPY chart, we can see that prices have failed to breach the recent previous high of 103.40 and prices have fallen. This is a possible double top move in progress and could mean bearish tendencies for prices in the near term. Entry price would be at 103.05. Stop loss price would be at 103.55 when the former high is breached. Take profits when prices hover down at 101.95. 

To read the full trading recommendation, please click this link: http://metisetrade.com/index.php/research

Fundamental Analysis

US Budget Deal Compromise Ends Risk of Another Government Shutdown in 2014

Congressional negotiators from both Republicans and Democrats unveiled a long-awaited budget framework to fund the government past mid-January and stabilize the government's finances into the near future. The announcement follows a day full of fine-tuning the details of the agreement, which covers the next two fiscal years and set a top-line budget number for each year. The framework would set spending levels above the $967 billion cap established by the sequester; the budget for 2014 would be set at $1.012 trillion, and the budget for 2015 would be $1.014 trillion.

To read the full trading recommendation, please click this link: http://metisetrade.com/index.php/research

The 4 Stages of Loss in Forex

One of the first things that you should learn in forex trading is accepting defeat. Although it is a normal part of the overall trading process, losing is something that many traders–both newbies and pros–have difficult with.

Think about it. Losing in a game where nothing is at stake is tough enough, what more when there is actual money that you have worked for very hard is involved?

The main reason behind the difficulty in coping with losses lies with the lack of understanding rather than actual psychological problems. People who are experiencing loses misunderstand the negative emotions that are attached with them, which can cause anguish and despair. This eventually makes them quit trading forex altogether. People who cannot deal with the psychology of losing end up exiting the forex trading business quickly.

In this article, I’d like to address that lack of knowledge with losses. In the next several paragraphs, I’m going to talk about the 4 stages of loss in forex, namely, denial, rationalizing, depression, and acceptance.

Do the terms sound familiar? They should, because they’re similar to the 4 stages of grief. Do note, however, that they are applied differently in forex. My desire is that by getting to know the 4 stages, you are better suited to handle the losses that come with trading.

Stage 1: Denial

The first stage of loss enables you to deal with the losing trade. In this phase, you deny to yourself and to others that your trading idea was wrong, and that the loss wasn’t your fault. Reasons like “I was stop hunted” and “I didn’t really care for that trade” are normally used. There’s nothing wrong feeling this way, especially if you’re new. It’s a way to ease the blow to your ego, survive the loss, and move on.

Stage 2: Rationalization

After the denial stage, you move on to rationalizing your trade setup. This is the point in time where you point out everything that’s right about your trade idea and do not even think about what you did wrong. You cite the appropriateness of your trading plan, profit target, stop loss, and entry point but totally disregard that you actually did lose the trade and made a mistake somewhere.

Stage 3: Depression

At this point, you have already looked at all the possible external reasons for your loss. You then turn inward and consider the idea that the loss was completely caused by your own doing.

Although it's reasonable to take responsibility for your loss, blaming yourself too much can be damaging to your forex career if you consistently doubt yourself. You might ask yourself questions like "Is forex trading really for me?" and "Why go on at all?" You could even wind up withdrawing yourself from the business altogether if you can't find enough reasons to keep pushing forward.

Those who have experienced this kind of self-doubt can attest that the longer the losing streak is, the more the intense the feeling of depression. In some cases, you could even see yourself thinking of pursuing other business ventures out there and giving up on forex trading.

Stage 4: Acceptance

In this stage, you begin to realize that it's unhealthy to blame yourself for everything that went wrong. Even though you've accepted that the loss was partly your fault, you are also mindful of the fact that the forex market is a wild untamed beast and that there are plenty of market factors beyond your control.

Let me clarify though that acceptance isn't simply about feeling okay about the loss. In truth, acceptance is more like aligning yourself with reality and realizing that the loss cannot be undone.

When you reach this stage, you accept that you have made some mistakes on your part but that there are also things you are unable to control. Some even say that acceptance is a mix of rationalization and depression, as you combine the two before you are able to move on.

At the end of the day, it's important to remind yourself that you can never truly reverse what has been lost but that you can make up for it. One obvious way to do this is to have a winning trade and recover financially, but you can work on rebounding mentally as well.

You can come up with improvements for your trading strategy, exercise better risk management, or just figure out how to handle your losses better. Instead of simply denying the loss, you have to move on, adapt, and grow.

The Bouncing Zone Strategy — Part 1

Introduction

Your are about to read the part 1 of a 3 part article called "the bouncing zone strategy".

You should know that I haven't invented this strategy. I've learned it on the internet and with friends, and then tweaked it to feet my needs. Some people call this strategy "supply and demand levels", but I think "bouncing zones" better describe what it's about.

The setup

This is a strategy based on Price Action, so the setup is quite simple: just the price in candle sticks. No indicator at all. I trade mostly on the main pairs (EUR/USD, GBP/USD, etc.), and on a 1h timeframe (TF). But this technique should work on any pair and any TF.

The basic idea

Sometimes we see price moving very rapidly in one direction. What does it mean? Let's use an example to make things simple:

• Some people are selling a huge amount of $currency, and these "some people" are usually big banks
• That makes the price drop quickly from 1.3 to 1.2
• It means that a lot of people who wanted to sell $currency at around 1.3 couldn't do so, since price moved so fast
• So next time the price goes back around 1.3, a lot of sell orders are going to be triggered, and price is going to move down again
• Of course it works the opposite if price increased from 1.2 to 1.3

Once you realise that, you just have to use this information at your advantage. Here's a EUR/USD chart that shows this.

Legend:

• 1) Price dropped quickly from here, we call this a zone
• 2) Then when the price reaches back the same zone, the price bounce

Now you should understand why we call this strategy "bouncing zones". The zones from where price move quickly in one direction are called:

• Demand zone, when people want to buy and price will increase
• Supply zone, when people want to sell and price will go down (like in the example chart above)

So you just have to identify these supply and demand zones, place orders when the price goes back into these zones, and wait for the price to bounce. Obviously not all zones are going to work as planned. But from my experience, enough are going to work in our favor to make this system work, and make money.

How to identify bouncing zones

Identifying zones is quite easy. All it takes is two steps:

• 1) On a chart, identify all strong price movement
• 2) Find the base of the price movement, where the price moves slowly in sideways. This is what we call a zone.

In the example below we see 3 strong price movement. There is a supply zone that already worked, and a new demand zone.

You can see that it's quite easy to do!

How to precisely draw zones

This part is hard to explain precisely, cause there may be some rules to follow, but your also need some kind of instinct, that you can only learn by doing. Drawing zones is an "art". Anyway, the basic idea is this:

• Look at the base of a strong price movement to find some candles moving sideways
• Make the zone cover all of these candles (body and shadows)
• Then refine your zone:
  • If it's a supply zone, you do not care about the lower shadows of the candles
  • If it's a demand zone, you do not care about the upper shadows of the candles

Here are a few examples of zone drawing:

Legend:

• In blue + orange: the whole zone that covers all the candles
• In orange: the shadows we're not interested in, as explained above
• In blue: the refined zone to use for the trade

Entry, stop loss and take profit

Once you identify a zone that you want to trade, you have to set up the trade. Here's how I do it with a little example.

Legend:

• Blue rectangle: the supply zone
• Blue line: the entry of the trade, at the beginning of the zone
• Red line: the stop loss (SL), usually 2-3 pipes above the end of the zone
• Green line: the take profit (TP), that is simply placed in a way to have a 1:2 or 1:3 risk:reward ratio (in this example it's a 1:3)

So once you know how to draw zones, setting up trades is really simple with these rules.

Examples of bouncing zones

Below are 4 examples of bouncing zones from CHF/JPY charts. Two are demand zones (top), and two are supply zones (bottom).

You should try to find zones on your own charts, and see the price bouncing into them

Credit: 21pips

NOVEMBER 29 Happy Trading Hours Demo Competition Winners

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You WIN:
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3. MetisEtrade Souvenir - Tshirt
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Trading Recommendation Forex Nov. 29

Fundamental Analysis

Nikkei Surges to 6-year Closing High 

Today we are going to take a look at the Japanese stock market. Yes we do provide research mostly for Foreign Exchange pairs; but in this case the Japanese stock market is always a good indicator of Yen movement. Since Japan is an export-oriented country; Yen weakness gives Japanese companies higher profits thus positive equity prices. 

To read the full trading recommendation, please click this link: http://metisetrade.com/index.php/research

Technical Analysis

AUDCHF Nearing Support;Buy at a Bounce! 

Today we are going to take a look at AUDCHF. As we can see from the chart the price has been ranging for the past 6 months between 0.8745 and 0.8210. However, at the present we are closing in the bottom of that range. 

To read the full trading recommendation, please click this link: http://metisetrade.com/index.php/research

MetisEtrade's Forex Cup !

If De La Salle University had Mark Ebenezer Bernardo,

Who would Ateneo De Manila University's Top Forex Trader be?

We'll find out soon!

-------------------------------------------------
There will be an orientation on how to trade in the foreign exchange market and how to use the trading platform (MetaTrader 5) on December 2 430-6pm at Faura 116.

This event is open to ALL ATENEANS willing to learn and ready for an exciting experience. Participation is for FREE.

Sign up at http://tinyurl.com/ForexCup
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CONGRATULATIONS!!! FREEDAY FRIDAY WINNER !

CONGRATULATIONS!!!

FREEDAY FRIDAY WINNER – MR. WILLIAM SEO
November 22, 2013 

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Happy Trading Hours: 1 Hour Sprint Demo Challenge by MetisEtrade

Happy Trading Hours will let you experience the excitement of trading foreign exchange, without the risk of losing money

Happy Trading Hours is a weekly trading demo competition held every Friday 8:30pm where participants get a chance to win exciting prizes as well as learn from top foreign exchange practitioners in the country.

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LIVE TRADING

Happy Trading Hours starts with a seminar on basic forex and a quick commentary on current events and its possible effect on the different currencies. 

Serious traders are serious.

Participants may ask our in-house traders for advice during the competition itself. WE HAVE SNOWFLAKES. 

Place in the top 3 in the weekly competition and be eligible to compete in our monthly finals. WIN MOARRRR PRIZES!

TRADE ONLINE

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(C) When In Manila

Trading Recommendation For Nov. 22

Fundamentals Analysis
Soft Philly Fed Survey Raises Manufacturing Doubts in the US.

The lowest reading of the Philadelphia Fed’s manufacturing survey since May has some economists fretting about a slowdown in the key manufacturing sector thus giving mixed signals about the true state of the US economy.

To read the full trading recommendation, please click this link:http://metisetrade.com/index.php/research

Technical Analysis

GBPAUD Breaks Out of Range to the Upside; Buy on Dips!

Today we are going to take a look at GBPAUD. Since July, the pair has been ranging from 1.66 area to around the 1.74 area and have been bouncing up and down since then. However, yesterday the pair broke the range to the upside and is solidly above the 1.74 area. However, given prices have accelerated substantially yesterday we prefer to wait for a pullback before buying.

To read the full trading recommendation, please click this link:http://metisetrade.com/index.php/research

Trading Recommendation For Nov. 21

Technical Analysis

AUDUSD Llikely Forming a Head and Shoulder Pattern; Sell on Confirmed Breakdown!

Today we are going to take a look at AUDUSD, also known as the Aussie. Technically as we can see in the daily chart, a head and shoulder pattern has formed. Head and Shoulder patterns are bearish patterns where prices tried to make high's 3 times but failed to make new high's on the 3rd attempt.

To read the full trading recommendation, please click this link:http://metisetrade.com/index.php/research

Fundamental Analysis

Fed Minutes Show Tapering is Likely Under Way 

The Federal Reserve looks set to move sooner rather than later to taper back its bond buying, once more surprising markets that have been repeatedly confused about when the Fed will begin to step back from its extraordinary easing policy.

To read the full trading recommendation, please click this link:http://metisetrade.com/index.php/research