The Set It and Forget It “Swing Trade”

By Michael Storm (aka Robin Hood) – Follow On Twitter

Hello fellow traders.  Today I would like to go over a “swing trade” I placed this week. For me, as a scalper who likes to take advantage of short term pockets of price movements,  8 to 9 hours is a LONG TERM swing!  Take a look at the following chart of the GBP/JPY, it is a 1 hour candlestick chart and we can clearly see that within the 5 trading days shown…. We WERE in a tight consolidation range for a while, but then broke to the downside and now we have a downtrend in place:

Now, during Thursdays trading you can see it fell from 149.70 high to 147.30 Low traveling a whopping 240 pips! (yeah, you know I was all over those moves). Notice the bounce (the retracement) to the 148.40 area (up 110 pips). I personally do not bother to draw fibs, but I understand the concept and where the levels are from just looking at a chart. Here we can see it rose above a one third, to ALMOST a 50% retracement of the drop. It did a “double test” of the .40 level and PRICES WERE REJECTED 2 TIMES.

So, when it pulled up to 148.25 I shorted a lot, set my stop for .40 RISKING a 15 pip loss. And sometimes I take losses, we ALL have to deal with that, it is part of trading. I set it and forgot it and went to sleep with NO target in place to take profit. Why did I do that? Well, I made a very significant amount on the down move, and some decent pips to the upside as well… so I risked a very small portion of those profits in this trade. It would not have bothered me one bit to loose those pips. Knowing chart patterns I was fairly confident of this trade going down big in my direction. How far? Quite simply I DO NOT KNOW. If I was scalping it, I probably would have set targets a few pips off of the prior lows targeting 147.65 area and maybe 147.35 area too. NOT a bad trade by any means, but sometimes it is cutting ourselves short. I had a nice nights sleep, but due to drinking caffeinated tea, and staying up late (DON’T DO THAT!) I woke up groggy and checked my charts Not only did I see a 1 hour buy setup happening, I also saw this:

That’s right, time to get out! I hit that buy to cover button as fast as I could. Banking precisely 146 pips. Isn’t forex wonderful? Where else can you make money while you sleep. I could not do that in the stock market. Granted there was a bit of luck on this trade. I woke up and killed the trade at a perfect time. The trade could have just gone down a bit and consolidated and I could have had a lot less pips. Or, I could have been stopped out for a small loss. I don’t have a crystal ball. I don’t KNOW what is going to happen. Trading is based on calm, calculated decisions and RISK MANAGEMENT. We trade the ODDS. We trade the PROBABILITIES. We look for our win loss ratios to be as high as we can make them. We look for our risk reward to be as high as possible per trade. THAT is what its all about. My risk was 15 pips, my gain was almost 150 pips. That dear friends is a 15 to one ratio and I will take that ANY day!. By the way, the one hour chart, as well as the 4 hour and daily…. THESE are the MASTER charts. Always make sure you are in alignment with them. OK, thanks for reading and till the next time, Happy Trading!

Michael S.

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