Many Thanks to the Elite Range Bar Traders

What a wild month it's been!  In recent weeks I've been working with a large number of new traders thanks to a recent promotion with one of the friends of Samurai Forex Trading, and I just wanted to mention what a great experience it is working with so many talented people.  I've seen some very good results and got to know some excellent traders and I'm really looking forward to where things go from here.

Many of you have been sharing your own range bar developments with me as well and the creative element I've been seeing is fantastic.  As I've talked about many times on this blog, every trader has his own comfort zone and it's crucial that they settle within it if they want to achieve the best results over the long term.  Many of you have taken this to heart and are trading not only Elite Range Bars as I do, but also using it as an entry technique with some of your other methods due to the improved precision.  No matter how many years I do this job, there's always a new development to consider that expands my trading knowledge and I appreciate many of you giving me the opportunity to share ideas and feedback with you on your trading innovations.

Unfortunately, all this time spent working with traders in Forex and futures has been a massive undertaking and the blog here at Samurai Forex Trading has been forced to take a bit of a back seat.  I know many of you have given a lot of effort recently and I want to make sure I can do the same, so it's required me to prioritize things so that I have the time to work personally with all the traders who need it.  

Even if the updates are a little less frequent than they used to be, please don't hesitate to get in touch.  The markets are still moving and there's always more opportunity out there, so I will still be trading any chance I get!

Forex Trading Recap: 18 Mar 2013 +47 Pips Morning Only

I'm going to keep this recap short and sweet today as it's just such a busy day over here.  The nice thing is that even though life has been pretty hectic, the markets have been quite kind and are offering excellent opportunities every day.  Between EUR/USD and EUR/JPY there's always a few very good trades to be had.

Today was easy, if you were willing to follow the rules and push yourself into the trades.  As I've talked about many times, it can be difficult for some traders to trade trends simply because they always seem to be extended and possibly ready to turn.  The strongest moves can be even harder to deal with as it often means you need to enter right on the edge of the market if you want to get in at all.  By following my Elite Range Bar approach I was able to take advantage and get in on small momentum shifts that are often very difficult to ascertain on time-based charts.

Now that the Eurozone seems to be undergoing a fresh bout of uncertainty due to Cyprus, it could mean considerable opportunity for us as day traders.  In Forex, it doesn't matter to us if price goes up or down.  All that matters is that it moves!  We thrive on volatility.  You can never say for sure but I am hopeful that this will give us some fairly consistent volatility in the coming weeks so make sure you are ready to take advantage!

Forex Trading Recap: 12 Mar 2013 +43 Pips Morning Only

Forex is still my first trading love and days like this remind me why.  Catching those nice runs, smoothly moving to levels for ideal exits, and then reversing to catch the pips going the other way... it was all so clean.

If it was always that way during any session and any time of the day I would probably have never experimented in other markets, but I'm glad I have and continue to do so.  It's all about flexibility as a trader, really.  Knowing that you can trade at any time, any place, with consistent success in a wide variety of markets?  That's the Holy Grail if you're doing this for a living.  It's important not to discount continued research efforts and development for their own merits either.  Even if what you are working on is something completely different than you regular trading plan, it all serves to improve your market knowledge and overall ability as a trader.  Expanding your "trading toolbox" brings positive effects to all your trading, not just a particular niche.

A part of that ongoing development journey for me lately has meant I'm quite committed at times during the New York mornings so Forex has been limited cocassionally to the European morning only.  When you have a European morning like this where you can bank +43 pips though, a trader can have few complaints.

What was so great about today was the number of charts I received from many of you showing me similarly excellent results.   Markets have been moving well and many of you are taking advantage of the great volatility on a regular basis in EUR/USD and EUR/JPY which is fantastic.  Just don't get greedy, keep each day positive, and rely on your consistency to take you to your long-term goals.

Check out our March 12th, 2013 trading recap below:

Forex Trading Recap: 06 Mar 2013 +35 Pips

The last couple weeks have been a pretty wild ride in many ways.  The markets have been moving well (with EUR/JPY being especially active much of the time) and there has been plenty of opportunity out there for the Elite Range Bar trader.  I've also been extremely busy with some other trading projects as well but everything seems to coming together.

The trading on Wednesday was a fairly straight-forward affair but it wasn't exactly easy.  Most of the trades required a fair bit of managing and few of the decisions that needed to be made were obvious.  Because of that I took a fairly conservative approach for the most part, banking pips if the price movement stalled for too long and was starting to show bottoming/topping behaviour.

The third trade of the day fully cemented that thinking when I saw over 15 pips come back to nothing.  That's just something you have to accept as a trader - if you want to look for more confirmation to exit or an extra leg in a move, sometimes you are going to give back some pips to the market.  The way I like to think of my trades is in sets of 20.  Ask yourself, if you took that setup 20 times and made the same decision, would it work out favourably?  More often than not I would expect at least another attempt higher that would give me a second chance to exit rather than a full reversal, and in some cases by holding I might see a lot of extra pips in a nice run.  Considering those possibilities it makes sense for me to hold these types of trades instead of just taking 5-10 pips on a strong pullback, even if it means I get nothing in this particular case.

Don't forget that Non-Farm Payroll is on Friday.  What that means is that we will likely see little movement during European morning (though this isn't always the case) before some significant volatility upon release.  If the reaction is particularly strong it's probably be best to switch over to 4 pip range bars to trade the aftermath.  Best of luck to all of you and be careful out there!

  

Forex Trading Basics with Range Bars

Forex Trading Basics To Be Aware Of

Almost every day I get emails from people asking about a very specific situation in the market.  They want to know how it should be handled if this exact pattern comes up again in the future.  While it's important to go back and analyze these opportunities, I often see that the trader is asking the wrong questions.

Usually they are looking at a small pattern in the market composed of only a handful of range bars but they aren't looking at the greater market picture and considering the context in which the potential opportunity occurs.  They are forgetting some of the forex trading basics.  The same thing happens with time-based traders and it's often to an even greater degree.  All you have to do is look at many of the "price action" traders out there who become incredibly focused on single bars on the M5 or M15 to make decisions.  This rarely ends up well in the long term.  Single bars can be excellent (like hammers and shooting stars) but only if the context for the trade is right.  If you are pulling the trigger based on a single bar without considering the overall structure and momentum of the market you are going to run into trouble.  While using range bars does help us with the short-term momentum part of the equation we still need to take a step back at times and consider the market as a whole.

The Market Structure

If the market is in a very clear and tight range, should we be taking trades near the edge of it?  Even if we can get a trade near the middle, is there a way we can minimize our risk?  These are the sort of questions traders should be asking themselves throughout the day.

Reading the overall context of the market throughout the day and making plans for possible future scenarios based on it will be a huge advantage in your trading strategy.  One of the greatest shifts in trading development that I often see is when traders stop focusing on ENTRIES and start focusing on SETUPS.

Read the market, plan out likely scenarios, then trade your plan when quality entries present themselves.  If you can do this you will learn how the market moves and what the likely outcomes will be far before they happen.  It's in this way that a trader begins to develop his "gut instinct" for trades.  Those who focus on only the last few minutes rarely develop that feeling.

Gauging Market Momentum

If the market has been trending very strongly in one direction most of the day, is it a good idea to fight that momentum?  While in retrospect the answer is almost always an obvious "no", in live trading this is often much more difficult.  While trading it always seems extremely easy to convince ourselves that we are putting in a top or a bottom.  The human ego loves to look incredibly clever by trying to catch the very edge of the market.  It forgets how often it can be wrong and always looks for the next time to look good.  Don't listen and don't fall into the trap!

We say to ourselves that "price looks so extended", "it couldn't possibly keep running in this direction", or something similar.  Usually when we think this way we quickly find out how wrong we were.  The market is the master and you don't have control of what it will do.  As much as we want to believe the market will turn on a dime this is very rarely the case.  Usually turns occur over the course of multiple attempts and an extended battle between bulls and bears.

Don't try to outsmart the market.  Consider the greater forces in effect and let the market tell you when it's most likely ready to turn.  It usually gives clear signs of the possibility if you don't become blinded by trying to force your bias on the market.  More importantly, if you guess wrong then be sure to minimize your risk as much as possible.  Fighting a trend is no time to keep your risk at the maximum.

Keeping Your Discipline

Sometimes when you are watching the market for hours at a time it becomes easy to lose your focus.  Novice and veteran traders alike struggle with this and maintaining focus is all about the discipline of the trader.  Like anything else it's a skill that can be developed with time and practice but being aware of it as a newer trader will help improve the learning curve.  As traders we often feel a certain pressure to be active in the market.  After all, if we're not trading, are we really traders at all?  This pressure can be the most difficult thing for a novice trader to overcome.  Once you begin to realize that real trading is all about patience you usually begin to turn the corner to the consistency you desire.

We need to understand that our skill as a trader is defined by our ability to choose high quality trading opportunities that will provide us with an excellent expectancy.  Doing this is all about patience and it is an often neglected part of the trading toolbox.  If you know the types of setups you want to take through a solid plan and some study, then finding your patience at the trading screen becomes easier.  When your patience pays off with a good trade (it doesn't have to be a winner to be a good trade) it reinforces your discipline and increases your ability to be patient in the future.

The real trap is when you lose that patience and start to take bad trades you know you shouldn't take.  Normally you know right away when you've made these decisions.  You feel uneasy being in the trade or even start to panic.  If a bad trade loses, it very often leads to another impatient decision and further losses.  This is a cycle that any novice trader must be aware of to have hopes of developing out of it.

This gives the trader some important questions to ask:

How do you make sure your focus remains on the big picture during the day and doesn't become too narrow?

What tools do you use to guage the momentum in the market and either trade with it or use it to minimize your trading risk?

In what ways can you develop your patience as a trader outside of just screen time?  Are there other activities you can do to develop this skill and make yourself a more effective trader?

Forex Trading Recap: 19 Feb 2013 +44 Pips

Wow, what a busy couple weeks its been!  I've been working with a lot of you and it's been great to see some of the results you guys (and girls) are getting.  Some of you have also come up with some very interesting developments to use with our Elite Range Bar System which is great to see.

I know the recaps have been a bit less frequent lately but I assure you the time is being well spent.  I have been pouring a lot of hours into a new trading project and while I can't say much yet I will say it's something I'm quite excited about.  My hope is that it addresses the needs of some of your who are looking for a bit more intensive program and like to trade other markets as well.  I will be letting out some details as soon as I can.

In the meantime the forex market has been excellent lately.  Lots of good moves, volatility (a trader's best friend), and not as many dead periods.  As I mentioned above I know a lot of Elite Range Bar members are doing well and I hope those who are just surfing by Samurai Forex Trading are pulling out good pips too!

The video below is a recap of my trading for the 19th of February.  It was a good day with some solid opportunities.  I definitely made a mistake at the end of the day as you'll see that could have turned a good day into an excellent one but as a trader we have to realize that sometimes mistakes happen and move on.  As long as the majority of our trading decisions were positive ones and we end up with green pips at the end of the day then that's what really counts.  Best to leave thinking about the mistakes and pips missed for a in depth weekend review where you can actually plan to do something about it!

Forex Trading Recap: 29 Jan 2013 +85 Pips

Some days everything just lines up and making pips couldn't be easier. Today was definitely one of those days.  Other than a minor blip at mid-Frankfurt where an aggressive reversal trade didn't pan out, everything was clean and easily tradeable.  If only every day were like that!

A key aspect to good trading is making sure that you maximize profits as much as possible when price is moving well.  We had a couple excellent moves today and no doubt many novice traders would have panicked early and then were kicking themselves as they saw another 10 or 20 pips available on the board.  You need to have a tested trade management plan you feel comfortable with that allows you to stay in these moves and hold with confidence.

Today I followed my trade management strategy perfectly on every trade and it really paid off.  It got me out of the trades fairly near the edge when price refused to follow through but even better it practically forced me to hold on to the runners for excellent pips.  Hopefully the rest of the week keeps the quality market action going!

Trading with Range Bars - What They Are and Why You Should Be Using Them

Today I wanted to cover some trading basics and discuss just what range bars are and what sort of advantages they can offer to your trading approach.  Range bars are a relatively new development in the world of trading and as a result a lot of people don't know much about them and haven't actively used them in their own trading.  This is a shame, as properly utilized range bar charts can be an extremely effective way of breaking down the market's price action and offer a number of advantages over conventional time-based charting.

The Invention of Range Bars

To start, let me give you a brief history on range bars.  In 1995 a Brazilian broker and trader named Vicente M. Nicolellis Jr. decided he needed a better approach to handle the volatility of his local markets in Sao Paulo where he operated his trading desk.  His solution was to eliminate the time element from the equation and instead just concentrate on the price action.  To do this he developed an extremely promising approach called constant range bars, which had a number of characteristics:

• Each bar is the same height because the range is constant
• The close of the bar is always at the high or low of the bar
• The open of a bar is always one pip (or tick) above or below the preceding bar
• The time period covered by each bar is variable as time is irrelevant to range bar creation

Using this method a trader could choose the range they found most useful for their methods (we use mostly 3-5 pip range bars at Samurai Forex Trading) and apply new approaches that were otherwise unavailable using their previous charts.  This new range bar development provided Mr. Nicolellis many advantages over time-based charting.

The Advantages of Range Bar Trading

For one, using range bars helps smooth out the price action and eliminates a lot of the market noise.  Since only price matters to range bar creation and not time, periods of chopping action are minimized and false signals are reduced.  We can see in the chart below how effective this can be, where extra bars print in the strong trending move up (allowing us additional entry opportunities) while less bars print while price is moving slowly and is quite choppy (thus keeping us out of false moves).

Using range bars also more clearly highlights potential areas of support and resistance.  You can often see this in the video recaps I post when price is moving quickly.  Support and resistance areas that may have previously been hidden within M5 and M15 bars become clearly visible by using small range bars.  We can use these areas as extra evidence for our trades and also as highly effective potential exit points in our trade management strategies.

But probably the most important advantage of range bar charts is that they allow us to minimize or in some casesbeven eliminate the lag time of indicators.  Using indicators may only be a small part of a comprehensive overall trading approach, but they can still be highly effective if used in a way that minimizes the noise and false signals.  By focusing on price alone and removing the time element, many indicators become much more accurate and powerful.  For example, in The Elite Range Bar System we use moving averages to help us time our trades by taking entries in line with short and medium-term momentum.  By removing time we are able to focus on the movement of price itself which allows us to be more precise.  Where a trader might normally have to wait for a M5 or M15 bar to close, we can enter within that bar by trading strictly off the movement and momentum of price.  This makes for an extremely effective trading approach!


Here we have an example of how range bars can be very useful in fast trends by using moving averages to gauge short-term momentum.  Where the M5 doesn't offer much opportunity for joining the bullish run, the RB3 (3 pip range bar) chart shows the smaller price action pullbacks the M5 bars hide and allows us to take some high-quality entries in line with the overall move.  The same sort of price action can occur on price extremes as well, where quick rejections on time-based charts don't give us an entry but the clarity of range bar price action does.




Range bars can also be highly effective with oscillators such as MACD or Stochastics.  Although I no longer use these directly in The Elite Range Bar System, for over a year I did trade range bar strategies with some of these indicators and I found them to be far more effective than with time-based charts for trading ranges and counter-trend.

By eliminating time and focusing on price alone, these oscillators built themselves in a completely different way that greatly improved their accuracy.  Things like overbought and oversold levels were based on price alone and were better than ever.  Try them out on some range bar charts for yourself and you will see what I mean!

Conclusion

If you have been trading time-based charts for any length of time you will likely find it well worth the effort to do some research and testing with range bars.  Not only will they offer you a completely new perspective on trading and price action, they are also highly effective in an actual live trading environment!  If you want to see more of range bars in action I would greatly encourage you to watch some of our video recaps here on the blog so you can see how we use them to effectively pull pips out of the market.  If you're looking for a more comprehensive approach that includes setups and trade management strategies you can take a look at the page for our Elite Range Bar System course which contains a complete trading methodology.