The Art of Trading

The recent focus in the market is non other than US interest rate hike! Since the start of their first rate hike, we have seen market "spike" (which we haven't seen in a long long time).

** The above is extracted from CNBC website**

The chart below shows you what happened during the announcement, and how market players reacted to the news by creating the spike upwards before dropping further. How does our traders benefit from this news event?

First, as we can see from the chart, an UP-Fib was present before the data, and price has traded up to 261.8% -- a resistance level which traders need to take note of.

Trade the Current Market Condition, Flow with it

Similar to what we have gone through in our weekly tutorial sessions on data release strategy, this week, the "market flow" before the news release is telling traders that the probability that price would spike up is higher. Therefore, traders should prepare the FIB to capture this move should it do so. In this case, we have a down-FIB to capture the price spike. Target profit levels would depend on how well a trader can analyse the current market flow.

A professional trader's income and livelihood is generated solely from their ability to take profits consistently out of the market. Professional trading is mentally and emotionally challenging, but it offers substantial rewards to the few who can master the craft of trading. Becoming a better trader takes discipline, skill development, and statistically profitable trading strategies. In fact, position sizing will account for the quickest and most magnified returns that a trade can generate.

From the Plan to the Action

This Fib's has given traders a good Risk/Reward ratio, park the sell orders at FIB sell cluster before news, and let the price take you in during the news release if it spikes. If the price spikes up and continue to move higher, the risk is 116 tics or $1,450 on 1 lot. If it spikes up and proceeds to drop further down according to our trade plan(which it did), the first exit plan rewards our traders with 373 tics or $4,662.50 on 1 lot.

If a trader can afford 10 lots, with 80/20 rules, he/she will be rewarded with $37,300 on this day; if a trader is as skilful as our Sniper trader, on 100 lots, he/she is rewarded with $373,000 on the first exit level. As we can see from the performance sheet below, entry time: 2:30am, first exit time: 3:21am, close to an hour for the first exit, and final exit is at 6:08am.

It's all about Size

Final Note

You should always take advantage of the large position size within the boundaries of your own personal risk profile, while ensuring that you can capitalise and make a profit on favourable events. This means taking on risk that you can withstand, but going for the maximum each time that the market is offering you a high probability opportunity.

An experienced trader should stalk the high probability trades, be patient and disciplined while waiting for them to set up and then go for the maximum size within the constraints of his or her own personal risk profile.