When the First Trade Doesn’t Work, Should We Try and Try Again?

This trade originated with the setup described in the previous post:

https://straighttalktrading.wordpress.com/2018/08/14/the-opportunities-go-round-and-round/

As expected, our additional requirements made the entry slightly worse, but not by very much. In the end, it didn’t matter, as the trade stopped out, as will be seen below.

August 16th 2018 FKLI Hourly Second Trigger

The first long triggered (for us) at the top of the small spinning top doji. It lingered for a day, and then took out the stop in today’s opening session. Intriguingly, price then eked out a new pin bar, reaffirming its bullishness. The question is, do we try again?

We have specific rules in our strategy that allow us up to two trades per support zone. Any more than that would risk a war of attrition, should price enter a whipsawing period. Although not every Box that we publish will permit this second entry, this one does, and thus there will be a second try to go long on this Box should price break above the 1778 trigger line.

It is worth noting that in general the FKLI outlook is currently very mixed, and this cannot be considered one of the higher probability scenarios.

Good trading!

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com

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The Opportunities Go Round and Round

Price is taking its time getting to daily resistance zone we have been watching, so it is logical to assume that the current downward move is a pullback, where there is an opportunity to go long. At the very least, it should provide a relief rally, after the recent slide.

Here is the current hourly chart:

August 14th 2018 FKLI Hourly Setup.jpg

Price has just activated its Blue Box at 1761.81-1769.55. It is now a question of entering if price breaks much higher, providing a trigger into the long trade. From a pure price reading perspective, a break above the previous candle (the white pin bar) would suffice. A trader who chose to take this entry would receive no argument from me.

However, my own trading plan requires a confirming condition, which has not occurred yet. It will likely result in a poorer entry in this case, and at times like this there is a temptation to jump the gun. However, rules were created for a reason, and I will stick to mine.

Good trading!

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com

Times Change, and We Change with the Times

In this post, we discussed setting up a potential short trade on the FKLI’s daily chart:

https://straighttalktrading.wordpress.com/2018/07/31/complex-trading-decisions-a-birds-eye-view/

However, with the strong momentum that price has demonstrated in the past few days, the necessity has arisen for the box to be adjusted. Whilst it is relatively rare to have to change an expected turning zone for an instrument so drastically, this does occur when price action proves to be resilient. The result may be that a trade or two are missed, but it is preferable to having to take a few stops in succession.

The new Blue Box is in the 1820.16-1840.66 region, approximately. We shall be looking for small divergence and reversal candlesticks upon the activation of this region.

August 8th 2018 FKLI Daily - Adjusted Box.jpg

As always, I wish you good trading.

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com

Shorter Timeframe Can Yield Faster Results

The setup for this trade can be found here:

https://straighttalktrading.wordpress.com/2018/08/02/starting-a-new-trade-sequence-on-the-fkli-15-minute-chart/

After giving small wins and losses for awhile, the decision to move to the 15-minute chart on the FKLI paid off. Prices came into the support zone, and then bounced off, giving the potential for a 3:1 trade before providing any ominous or ambiguous price action.

August 7th 2018 FKLI 15-Minute Chart Result.jpg

It is now headed upwards to hopefully test and activate the daily resistance zone. The setup is described here:

https://straighttalktrading.wordpress.com/2018/07/31/complex-trading-decisions-a-birds-eye-view/

We will be watching the next trade develop with interest.

Good trading!

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com

Starting a New Trade Sequence on the FKLI 15-Minute Chart

August 2nd 2018 FKLI 15-Minute Setup

This will be a brief post as this is the 15-minute chart. Price has retraced quite dramatically today. There is no truly strong directional momentum on the larger timeframes, but there is a valid long trade setting up with the Blue Box at 1764.26-1767.61. Price is about to activate it, and a reversal pattern off this support zone would be an acceptable trade.

Good trading!

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com

Complex Trading Decisions – A Bird’s Eye View

The FKLI trade we have been stalking on this blog in the past few posts has evolved several times now. The story began here, with a potential pullback on the daily chart that we obtained a trigger for on the hourly chart.  The initial attempt proved unsuccessful, and we backed up to the next resistance zone to try again, as shown here.

The second trigger required some fiddling, but ultimately went more than 2:1 in distance, thus enabling us to recoup the loss from the first trade. So, this was the trade that was successful.

Decisions then became more complex, because the initial set of two trades then migrated to a higher timeframe. This occurs when the pullback has become sufficiently matured that we no longer consider a lower timeframe an optimal trigger. Entering there makes our trade vulnerable to choppiness. Thus, we migrated the trade to the four-hourly chart.

As of this morning, this third trade in the sequence has failed, as the chart below shows.

July 31st 2018 FKLI Four Hourly Result

By the estimation of most models, the momentum has shifted on this instrument, and it would be a valid decision to shift to being bullish. However, from a larger picture viewpoint, there is still some mild bearishness present, and I wish to use this opportunity to demonstrate how, even if one ends up trading countertrend (in hindsight, we would have been much better off trading to the long side), one can still walk away with little to no damage. Someone trading the three earlier signals would now be left with either a slight loss (less than 1%) or approximately breakeven, if they managed to manage the winning trade spectacularly well.

Taking a stop and reverse decision on this latest move is certainly valid, with the increased momentum to the upside. The weakness of that trade is that it would be quite late in this trend. Thus, I will point out that it exists, but will not participate in it.

The next decision is rather interesting. Assuming we maintain the short bias, we now shift to what is effectively the last line of defence for a bearish view – the daily chart. Picking out the resistance zone for this, systematic though our approach usually is, proved surprisingly tricky. That is because this particular formation of momentum makes one wonder whether price will even be able to reach up to touch the resistance in question, as shown below.

July 31st 2018 FKLI Daily Chart - New Setup.jpg

This trade is now pushed considerably further away in time, as it will take quite awhile for the daily chart to reach the roughly estimated zone at 1797.52-1814.70. I say “roughly” because it is possible that the zone will require some adjustment as price approaches it. This may well not occur for another week or two, or price may turn prior to that. There would now be a valid reason to take a pullback on price on the lower timeframes to the topside. Thus, whilst I still consider the higher level resistance to be stronger, this evidence of bullishness is sufficient to justify lower timeframe upside trades, given strong enough pullbacks, which this market has been surprisingly reluctant to provide.

I will continue to track this trade, because this sequencing of trades shows that in this particular instance, our movements have not been in harmony with the market, and it is educational to see how a series of built-in safeguards can still limit damage.

Good trading!

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com

Multiple Timeframe Trading – Continuation of the Previous Trade

Sometimes, as we attempt to stalk a trade, it subtly migrates to another timeframe. This is happening to the trade that we were looking for on the FKLI last week. Although it has reached a minor resistance, the swing size makes it now appropriate for the trigger to be taken on the four-hourly chart.

For those who have not followed it, here is the previous post, where you can begin following the cookie trail to earlier posts:

https://straighttalktrading.wordpress.com/2018/07/24/results-of-the-trade/

In this case, the trade setup has already formed. We will only take one swipe at this setup – when price falls to 1762, one point below the low of the previous candle. The stop loss would be at 1774, above the high. If this occurs, we will likely be riding a small move down, so the trade will have to be defensive.

July 26th 2018 FKLI Four Hourly Chart

Good trading!

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com 

Results of the Trade

This is a quick post to demonstrate the result of the trade of the last few posts. The reader can begin following the thread here and work backwards:

https://straighttalktrading.wordpress.com/2018/07/19/the-trick-of-moveable-resistance-zones/

This started as an attempt to catch a pullback on a downward trend on the FKLI. The first attempt was stopped out, and we moved camps to a higher resistance level for a second try. This is the result:

July 24th 2018 FKLI Hourly Chart Result.jpg

We would have scaled out at about 1:1, in order to reduce risk on the trade, and then trailed the remainder. This trade did not move all the way in the direction we desired, but it was an acceptable one. It is most likely that momentum will move prices up one more resistance zone higher, where the final short would occur. Depending on the availability of time, I might cover that, but this series of posts shows how a set of decisions can evolve over the life time of a trade.

Thank you very much for following this series of posts, and good trading!

Kaye Lee

Head Trader Consultant
www.straighttalktrading.com

The “Trick” of Moveable Resistance Zones

For those just joining the saga, the discussion of the setup for this trade is available here:

https://straighttalktrading.wordpress.com/2018/07/17/backing-up-to-the-next-resistance-zone/

This is the most recent situation.July 19th 2018 FKLI Hourly Wave Count.jpg

There is at least one hourly close beyond the top of the Blue Box identified in the previous post. I have often written for third party sites in the past, such as www.DailyFX.com. In those situations, this particular condition would render the Blue Box null and void, as there is always a slight lag between composition and publication, rendering it tricky for me to adjust any trade setups.

However, in this case, as this is Straight Talk Trading’s own blog, I can point out that the wave count is still valid. I can also point out that a smaller set of waves, with a very large wave iii, has developed. This is one of the rare situations in which adjusting the Blue Box slightly to account for the smaller wave setup is valid, and thus I will take the opportunity to do so here, as shown below.

July 19th 2018 FKLI Hourly Adjusted Box

The adjusted Blue Box is 1763.12-1767.70. It is simply considered an extension of the original Box. This technique is only applied once, and in this case, will only permit one entry, whereas I am usually willing to try up to twice per Blue Box setup. In this case, price is so close to the high of the Box that a stop out would result in the Box being invalidated.

Should price continue upwards, it would probably be wise to step back and see what will happen next before making the next trading decision. It is extremely rare that price is able to break past two Boxes in a row without so much as a pause, but the extreme momentum upwards in the shorter timeframes of the past day is enough to give one pause. Nonetheless, rules are rules and trading plans are designed especially for these moments of uncertainty to guide our judgement. I shall continue to comment as the trade develops, should it trigger.

Good trading!

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com

 

Backing Up to the Next Resistance Zone

For more details on this trade setup and trigger, see here:

https://straighttalktrading.wordpress.com/2018/07/16/setting-up-a-candlestick-trade/

The long and short of it was that the trade did not work out. The stop loss was hit just prior to the closing, as shown below.

July 17th 2018 FKLI Hourly Stop Hit

Whilst definitely annoying, this was hardly disastrous, as this style of trading requires the willingness to take a couple of stops in exchange for better potential reward. (By comparison, a client of mine did not take a stop as he was trading the same setup on the daily chart, where it did not trigger. That is a higher probability trade in exchange for lower reward-for-risk.)

For now, the playing field has shifted higher, as this resistance zone is now considered breached. Aggressive traders would stop and reverse, and this would be a valid response, although I am not inclined to be aggressive here, and thus would prefer to wait for this move to lose steam at the next stop, which is shown below.

17th July 2018 FKLI Hourly New Setup.jpg

Instead of a zigzag-type complex retracement, we now expect a five-wave retracement on the hourly chart. It may take awhile to reach and activate this area, but we will be watching it with interest.

Good trading.

Kaye Lee
Head Trader Consultant
www.straighttalktrading.com