I time my market entries from a very fast chart – in the case we will discuss today it is a 40 tick per bar chart of the USDCAD pair. The chart in Figure 1, shown below is the window on my workspace that contains the price bars. I plot two indicators over the price bars so it may look a little messy at first glance – but with a little practice you can learn to see the forest rather than the trees, so to speak. First let me make it very clear that I don’t make a decision to trade on this chart – it is too fast and the oscillations seldom are sufficient to justify a trade. But when I spot trade on either of my two other intra-day charts, I always try to use this faster chart to pick the best entry price – and the best exit point as well. I pretty much only trade FOREX these days. And when you trade FOREX it is well to keep in mind that a very significant portion of the trading activity in these markets is done by robotic trading systems – let’s call them Bots for short. So what is the big deal about Bots? As far as I am concerned the only thing significant about Bots is that they trade automatically and often. The trading frequency will differ with the individual Bots, but for any given time frame, I firmly believe that most Bots trade a system based on moving averages. That is why I always use the Bollinger Bands on my trading charts. On the chart in Figure 1, the Bollinger Bands are the three white dashed lines. The yellow and cyan lines over the price bars are my RMI indicator. USDCAD-40tpb-1-5-2016.jpg Figure 1: USDCAD-40 ticks per bar First look at the chart and have your eyes ignore the yellow and blue lines completely. When you do you will note that the price bars tend to stay either above or below the middle Bollinger band – then when they move above or below that middle band they tend to stay there for several bars – sometimes a great number. That is the work of the Bots trading a time frame very near to my chart setting of 40 ticks per bar. When price is beaten back in the opposite direction and as in nears or penetrates the upper or lower Bollinger Bands the Bots start closing positions and often switching the direction in which they trade. That is interesting information, but what the hell good is it.? Good question. I entered a short trade about twelve twenty today and I am watching the market carefully to determine when best to exit my trade with maximum profit. I missed an exit at about one-twenty because I was away from my computer for a couple of minutes and the market dove below the bottom band briefly. Unfortunately by the time I returned to my computer it had bounced up significantly so I had to think about my next move. I was torn between the possibility of losing a nice profit – and getting out before the trade had a chance to run its course. I exited at about 15:31 for a reasonable good profit. I was able to get out after the price dove very close to the bottom band and then reversed. With the Bollinger Bands alone I would have waited until it penetrated the middle band to exit, but my RMI told me that this move was likely to penetrate the middle band – saving me another 30 or so pips on the trade. That was enough to more than cover the spread. Thos extra pips add can up quickly and go a long way in covering my occasional loss. If you want to know more about the RMI, take a free trial of it at the TradeStation App Store: tradestation.tradingappstore.com/search/all/rating?search=RMI.

 

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