Pips In The Pocket Method: Use it almost everyday!

[L.C.]

This trading method is one I developed a few years ago and I use almost everyday.

It works on every currency pair but I must warn you there are specific places and times to use it.

It starts with basic candle patterns which are listed below.
The indicators I use are the CCI and the MACD. I use the original settings for both of them. I also prefer to find this trade set up on the one hour chart.

Additional tips:
You will always do better trading with the trend that you can identify on the daily or four hour chart.
Stay away from using this when price is inside of overnight consolidation ranges.
To minimize the stop loss, use this method when there is a retracement from a break out of consolidation.
One of the things I’ve done to make his trading method more successful is waiting for a closed candle pattern to appear before I make a decision to enter a trade.
You will also have a greater level of success with this method if you look for this candle pattern to develop at a level that you would normally expect a bounce off of support or resistance. This includes a retracement in a trending market.

There are two places I use his trading technique.

The first is as I mentioned above, on a break outside of consolidation. I wait for a break outside of consolidation to take place without participating in that move. The reason I do that is because I do not want to be involved in a false move or head fake. If the move continues in the direction of the breakout, in many cases there is a retracement towards the support or resistance level of the breakout. Price then rejects that level and continues in the direction of the breakout and creates a candle pattern that is necessary for this trading method. Please see the candle patterns below.

In this instance when I have my closed completed candle pattern on the pullback I am looking for the CCI indicator to move in the same manner that price is. The CCI indicator following what price is doing gives me additional confirmation.

The second trading opportunity is when I see price touch major support or resistance that I can identify on the daily or four hour chart. Again I need to wait for that candle pattern to appear on the one hour chart before I consider entering a trade. I stress that I wait for a closed candle pattern. I do not assume that price will create a pattern I am looking for.

When trading this particular set up off of major support or resistance I prefer to see some divergence in the CCI indicator. This divergence in the CCI indicator gives me additional confirmation.

It is also very important to be aware of any economic data that might be released that could affect the direction of your trade. I prefer to have news out of the way but I have noticed that this trade works in most cases if I correctly identified the trade even before the news is released. The news is usually the fuel to move price to my targets.

Stop loss levels are located just below or above the candle pattern that creates the entry opportunity. This will usually provide anywhere from a 30 to 50 pip stop loss.

Targets: this is a bit subjective because we all have different expectations. However I look for what I call realistic profit targets. What I mean by this is that I consider market activity prior to my entry. If price is inside of consolidation I look for support or resistance and try to bank some money before one of those levels are hit. If however there is a solid breakout that can be identified on the larger time frames I would look for further targets. I do close my trades at two different levels which allows me to maximize profits in a trending market environment. For the most of the trades I take using this method, I look for a profit target equal to at least the amount of the stop loss level.

Please see attachment picture for the candle patterns.

I will continue to add additional posts to this thread. I will include chart pictures of examples that include both of these trading entries. I would also like to see how others incorporate this trading method with their own.
Good Luck!

If you have any questions, please feel free to post here or private message me.

L.C.
www.udaytrading.com

[L.C.]

This is a continued article which supports my original post for this thread.

I will be adding pictures of my charts when these trades develop. Not necessarily every day but as often as I can.
My charts will have some detailed explanations of where the stops and entries are along with targets. I will also try to indicate a time of day these took place and the pair.

If some of the text is not legible on my charts please feel free to e-mail me or private message me for more details or information about this trade set up.

This first chart was a trade I took on the 30 minute chart for the USD/JPY.
What is important is that I used the technique I’m describing in this thread. I looked for that morning star pattern to develop before I entered into a trade long on USD/JPY.

I realize that by definition, a morning star would appear at the end of a downtrend but for my entry I use small pullbacks to support levels and then look for the same morning star pattern to develop. It gives me the same opportunity and I set my stop loss levels just below that pattern.

You’ll see on my charts the entry, the targets and the stop loss level.
The entry for this trade was at 108.71.
The first target was 108.95
The second target was 109.10 and of course this could be continued and trailed if you actively manage the trade.
The stop was set at 108.49
using the entry and targets above, the total net profit from entry to final target was 36 pips.
The stop loss was 23 pips.

This trade of course continued on a lot farther and from the actual entry to where price topped out today was about 100 pips. This type of trade can and does put me in the path of a break out and trending day.

I picked the targets above because this trade actually develop before the oil Inventory data numbers were released.
I use the CCI for confirmation along with that candle pattern to give me that entry.

I will continue to post additional charts when these trades set up. It works just the same way in a bearish environment.

If you have any questions please post them here I would be happy to continue this thread and explain how this works.

As I mentioned in my first post I do this about everyday on every currency pair.
LC
www.udaytrading.com

[L.C.]

this is another trade I took today, Thursday, August 7, 2008.

As you can see this is a 30 minute chart of the euro/JPY.

This is the same trade and technique I have been explaining in this thread. I wait for a breakout of consolidation or support or resistance and then I wait for a pullback. The pullback usually moves to an old support or resistance level but it does not always have to hit that level on the number. I then look for either the morning star pattern or evening star pattern depending on which direction I’m trading in.

My stop is placed just above or below the star pattern.

This trade developed a lot later in the day than I anticipated. Today was a quite unusual day with the BOE releasing their interest rate decision and the ECB as well.

it was Trichet comments that really turned price around on the euro/USD.
This helped set up my trade on the euro/JPY and I entered the trade which paid within the hour to the first target and the second target over a couple of hours later.
As I mentioned this is usually later than my normal trading hours but when the pattern is there usually works no matter what time of day. Just be careful of overnight consolidation ranges.

Tomorrow I will discuss the importance of identifying the overnight consolidation range and what is a typical range for each pair. If you are not careful and incorrectly identified the overnight consolidation range you can get caught in a false move or head fake.

These trades have very small stop loss levels and in almost every case will net equal to the size of the stop or more.

If you have any questions or comments please post them here I would like to continue this thread with those who are interested. As I mentioned a use this trade almost every day on every currency pair I trade.
Thanks for reading,
LC
www.udaytrading.com

[L.C.]

How overnight consolidation affects my trades

I would like to share with you some thoughts I have on consolidation for the method I am describing in this thread.

I mentioned in my last post that I look for overnight consolidation ranges. What I am referring to is the time when the London markets and New York markets are closed. It really depends on where you live but to some, this is the overnight trading session and there is in some cases fewer traders available for the euro/USD, GBP/USD.

What I do is identify a new day which is a basic industry standard of 5 p.m. New York time. I identify this period of time with a vertical line on my 30 minute chart at 5 p.m. New York time. From that point on I am looking for the overnight consolidation range leading up to the London open.

If that range of consolidation is too small I consider it a risky range and I will wait for price to move even beyond that tight level. I have an example of just such a situation below in a chart picture of the GBP/USD.

For example, GBP/USD I have noticed that a comfortable overnight consolidation range can vary between 50 to 70 pips. Of course, this isn’t exact every single time but this is the general range I am looking for. Anything smaller than that range, I am cautious and looking for the possibility of a false move.

In the chart example I have posted below, the previous range I was identifying for overnight consolidation turned out to only be approximately 40 pips. This caused me to be very suspicious of any candles that closed outside of that range and I did not trade it up any higher. This kept me out of the market before the release of the BOE interest rate decision. As you will notice, immediately after prices started to come back down and eventually I saw another candle that closed below the low level of support. The move up in price after the BOE interest rate announcement caused me to adjust my consolidation range and allowed me to correctly identify the proper direction.

I use this overnight consolidation range in conjunction with the method I have been describing in this thread. I wait for a breakout of that consolidation range and I am patient to wait for a pullback and then look for the morning star or evening star pattern before entering.

Again waiting for this pullback opportunity allows me to confirm the direction after the break out of consolidation, and it also allows me to identify a smaller stop loss level which would be just below or above the morning star or evening star pattern. Examples of this are in my previous posts and chart examples, posted above.

This week I will continue to post pictures of my charts with new trades using the same technique.

If you have any questions please feel free to e-mail me or instant message me on this site.

Good luck with your trading this week.
LC
http://www.udaytrading.com/freevideos/freevideos.htm

[L.C.]

How you can make 50 pips a day

August 14, Thursday,
I traded the GBP/USD. The same trading technique I have been describing on this post was used.
The entry was approximately 20 and the final target was 80 with a 27 pip stop loss.
This method can be used almost every day on almost every currency pair.
The key is to wait for the candle pattern to close before taking the entry. In most cases the stop loss can be placed at the high or the low of the entry candle.
In this example I used a 30 minute chart for the entry. I also use a 1 hour chart to find entries as well.
To view the charts for this example, please click the link below

http://udaytrading.com/signup/signup.htm

[L.C.]

I have remade the page to view the corresponding charts for this article.
It should be easier to see and understand my explanation of his trading method in the video

I received many emails for more clarity on this trading technique, so I have posted a 14 minute video which will give you a better understanding along with tips and technical settings for the Indicators I use, and how and when to use this method.

please click the link below to view the video and the charts.

Thanks for reading and watching
LC

http://udaytrading.com/charts/charts.htm

[L.C.]

This is the same trade technique I use on the 30 minute and 1 hour chart. It can be applied to the daily chart as well

In this example, it allowed for an entry on the strong down move with the GBP/USD. Almost all of the news released during this time was negative to support the move lower. I take pieces of a large move like this on my 30 min and 1 hour charts.

I prefer to be flat at the end of every day.
It works great on the 4 hour too

If you cant see the chart, please click the link below, I have posted the charts on a web page.

Thanks for reading,
L.C.
http://udaytrading.com/charts\charts.htm