The market spiked up and took me out at B/E, we hadn’t hit the .382 profit target yet and maybe in hindsight I should have employed the 60 degree accelerated trend line in order to bank some pips. Afterwards as I am prone to do, I kept an eye on the chart to see what transpired, and sure enough after a period of consolidation the market went my way… but without me of course….. fair enough, it happens, BUT… there was something else that was really bugging me; I just felt that there was something staring me in the face, it was almost biting me on the…..  and I just wasn’t seeing it….. and then it came to me. Now I could be talking absolute you know what here, but here it is… as I see it…..

In this month’s monthly meeting Scott went through in detail some examples of Type 1 and Type 2 reversals and whilst I was looking at the AUD chart, all of a sudden it dawned on me that I might be looking at a Type 2 reversal. Now, I know that I have mentioned them in previous blogs and I have even traded them but in recent times they have got somewhat sidelined (just in case “HE” reads this….. yes I know!…… slapped wrists….. but at least I’m owning up!) So I checked the ratio alignments of the consolidation and sure enough there was a perfect Gartley, and I mean perfect. I also did some Harmonic scans and there was a small 15 min Butterfly that had formed in the latter stages of the consolidation.

So, how to trade it? Well the Primary time frame was the 15 min on both the Gartley and the Butterfly but as far as I could see when you went down a time frame to the Proximate timeframe there wasn’t an entry trigger/RSI to get you in, but if you went down to the 1 min it was doable. I guess that on a trade like this you could have just entered a limit order with a very tight stop above the X point of the Gartley.

So there you have it….. lesson learnt.

The way in which I managed it was to bring my stop into B/E once we hit the .236, took a piece off at .382, and then once we hit the B point I took some more off, all the while keeping my eye on the price action with the help of the 60 degree (accelerated) trend line and the 45 degree (primary) trend line.

You see I’ve been told by “He who shall be obeyed” ( based on a review of a trade that I had posted back on June 4^th were I got stopped out at B/E) that I really needed to be more aggressive in my trade management. He’s so right! It makes complete sense to keep banking points as often as the market makes them available to you. I think that I like most other traders on the planet live for the home run……… we are only human, but here’s the dilemma…. as Scott said in this month’s monthly meeting, the home runs account for about 20% of all Harmonic Trades, which means that you get your bread and butter profit from the other 80%; pretty much like any other business I guess. Therefore you’ve just got to be aggressive in your trade management and keep banking points… a bit like being in one of those game shows on TV.

Anyway back to the job in hand, this time I had split my trade into 3 parts so that on the 3^rd and final part I trailed my stop using new lows/retracement waves; meaning that once we made a new low, retraced and then hit the new low again I moved my stop just beyond the new lower high.

But as you can see here in the following chart, the market made a much larger retracement (well it was NFP day) before printing a new low…… now the question here is should I have used that larger retracement to trail my stop, or is that a trade for another day when I have split my trade into 4?

So what’s the problem? Well it’s Friday and I am just not comfortable taking on new positions on a Friday, OK, this one has the double whammy of being the July 4^th weekend but generally speaking I just can’t get my head around opening trades on a Friday (someone I greatly respect told me that he won’t entertain holding a position into the weekend unless he has at least 80 pips profit in the trade). To me it feels like looking into an abyss; a couple days of nothing or something crazy and only a stop loss to look forward to. Personally I like a full trading day to follow on from a new trade, don’t get me wrong I’ve no problem taking a loss it’s just how I take it… it’s still frustrating though….

I guess I just need to accept my decisions… and quit moaning!

I’ve posted the following chart of the EUR/JPY on a 4 hour time scale in order to give a better idea of the trend channel in which the Bat formed.

The next chart shows the “Beautiful Bat” structure itself which showed up on a 60 minute time frame. It reversed almost exactly off the XA-D leg at .886. There was a nice tight range of Fib ratios coming in together and I was more than happy to place my stop above the trend channel.

The way in which I managed this trade was to bring my stop into B/E once we had hit the .236 Fib level and then take my first bit of profit at the .382 Fib level, followed by the B point.

As you can see this one just flew and whilst I would love to say that I got the whole move I didn’t, because I only had 2 lots on…. had I had 3 lots on I would have let the 3^rd one ride, locking in profit on each wave/retracement…. with 4 lots… well that would have been party time… I would have taken the 3^rd one off at the C point and trailed the 4^th… I can dream.

Anyway me and the Bat… we’re feeling the love….

On a side note the Bat completed right at a support level where another structure namely a Bullish Butterfly formed on the 60 minute time frame. It reversed almost exactly off support at the 1.27 XA-D and so far it’s playing out nicely…… now how cool is that!

 The following charts show an Alternative Bat pattern on the CAD/JPY which I traded earlier in the week. I have posted this trade because whilst I didn’t garner any points from it and I got out at break even, I still view it as a success and I was pleased with the exercise as a whole.

 I initially liked the pattern because it ticked all the right boxes on the check list which I have got into the habit of employing every time I consider the merits of a potential trade. It had a good structure and the correct ratio alignments and I was able to place a stop just under support which gave me a good risk reward. As you can see from the following charts (sorry they are a bit rubbish but I forgot to save them at the time) the Alternative Bat was forming in a pennant and as I have learnt when a pennant forms it tends to initially break out on one side but then often reverses back into the pattern before breaking out and revealing its true direction. The 1.13 XA – D of the Alternative Bat fell just outside the pennant which was the icing on the cake.

So I took the trade and I followed my Trade Management Rules which were to take the first profit at B and bring my stop into B/E roughly half way between my entry price and B( to be exact B/E was 10 points higher but as Scott always says don’t let a winning trade become a loser… and with broker variations etc I can’t afford to be that pedantic!) . In the past I have always watched my trades like a hawk and every retracement against me, especially when I was in profit could bring me out in a cold sweat which was not helped by the fact that I was simultaneously watching the P & L move up and down. Big mistake! It made trading a thoroughly unpleasant experience because I always felt as if I had failed somehow either by leaving money on the table or giving too much back. I have tried all manner of methods to manage my trades but they just didn’t gel with me. For me as far as my trading life is concerned it needs to be “as black and white as possible with no grey areas” because otherwise I’m going to be meddling and I am lethal with the mouse in these situations!

Anyway, I followed my trading plan, and as I mentioned previously I got out at break even, and even though there were some decent points to be made which because of my method didn’t end up in my account, I still felt good about the whole process because the emotion had been removed from the situation.

I have recently heard Scott talk about there being no such thing as leaving money on the table; there’s only profits and losses…. I’ll go along into with that…..no problem….

I am realizing more and more that trading should actually be quite boring and repetitive. I cannot afford to pin my hopes on and get overly excited about individual trades / setups, which when they don’t materialize leave me feeling a little deflated and a little desperate. I then tend to rush off in order to find something / anything to trade which results in me making silly mistakes (need I say more). 

I am learning that really my job as a trader is to look for and line up as many potential Harmonic setups as possible and then sit back and wait and see what transpires. “Patience and self-discipline”, that’s my new mantra! Meanwhile whilst I am sitting there in my new Zen like state maybe I should reinforce it with a new hobby…. maybe I’ll take up knitting….. NOT! 

The following charts of the AUD/JPY highlight a bearish Gartley and the downward channel in which it had formed. I didn’t take this trade even though it ticked all the boxes in terms of its symmetry, near perfect ratio alignments (.786 XA leg, 1.618BC extension and an AB=CD) all coming together in a very nice tight configuration at the PRZ, which just happened to neatly coincide with the upper end of the downward channel. The reason that I didn’t take it was simply because I didn’t like the risk reward element. It has since reached the first profit target at B and it remains to be seen whether it continues down or reverses back up towards the upper end of the channel. If it does the latter I’d be happy to take this trade as a Bat pattern, because even though the B point is not at the ideal 50% or .382, it did fall just short of the .618 and the other required ratio alignments for the Bat, the .886XA leg, and the 2.0BC extension would make up for it by coming together in a very nice tight range just above the upper channel, the AB=CD or as is usually required in a Bat the 1.27AB=CD would come in above the other 2 ratios therefore I’d be inclined to enter above .886 with my stop above X, thus enabling me to take a low risk trade with a good risk reward.

 Let’s see if this Bat finds its way home! In the meantime I’ll be looking for other opportunities!

1. The B point is at 50% which means it could potentially evolve into a Bat or a Crab but with the clear range showing good support and resistance, the Bat is the one that fits best to my mind because it comes in just under resistance at 80.87ish (XA-D of the Bat is .886 and the Crab is 1.618). The potential 1.618 AB=CD and the BC projection at 2.00 would come in around the same area, creating a very nice Harmonic PRZ.

2. The Risk verses Reward is good and I would be comfortable placing my stop above resistance.

3. Finally I like the structure of the potential pattern.

 Let’s see if it pans out….

For a while now I have been struggling with one aspect of Harmonic Trading, and unfortunately it’s the single most important aspect of the system; namely trading the PRZ (not good eh!!). The problem for me lies in finding “the reversal candle” that is going to give me my entry signal. In  my limited experience I have found that I always seem to be in the wrong place at the right time. I find also that the whole experience of checking the different time frames looking for the “magic” candle, and the RSI to back it up is both overwhelming and frustrating, added to which it has not helped with my self-confidence and ultimately I keep missing great grades!

I am not for one second knocking the method because it’s genius and it definitely works but I guess like all things in life one size does not fit all and at the current time with my level of experience and success it is not working for me. Fortunately I have come across a bunch of other traders and their teacher who is applying the general principles of Harmonics as discovered and outlined by Scott. He has adapted them in a way that I find suits my personality and one that I am feeling comfortable with in order to be able to execute my trades in a consistent and less stressful manner.

 There are three key principles to this method of trading the patterns and they still remain true to Scott’s pattern recognition and ratio alignment. One looks for the patterns to line up with support and resistance so that you can place a sensible stop in an area that you can be comfortable which means that you don’t need to try to “trade the PRZ”. The risk reward is another crucial element, one that I know Scott rigorously applies, but I have been so busy running around like a headless chicken that it has slipped down my list of priorities. Finally you need to check the structure of the pattern which needs to have at least 30 bars (this relates to the Central Limit Theorem regarding statistical analysis and normal distribution curves…. don’t ask me, ask Scott… no clue). Obviously this is just a very brief synopsis of it and there is a lot more to it, and whilst I feel that I can more easily replicate this method of trading the PRZ because it is more mechanical in its approach, it isn’t a short-cut and it still requires constant study and self-discipline.

  I hope to share my experiences of it through my trades, but for now suffice to say I am enjoying myself again…Hallelujah!! So thank you HRH Scott Carney (His Royal Harmonics) and thank you to “The Duke” who showed up at just the right time…

 There was certainly an abundance of those and I have to admit that they are very nice to trade. Added to which, I cannot begin to count the number of times that I have heard the phrase “the trend is your friend” or words similar to that effect, and it has to be said that for me at least, there is a psychological difference between trading in the direction of the trend and trading reversals (which is why I am sticking to the re-tests on reversal patterns!).

 For the purpose of today’s blog I am going to discuss 2 trades on the JPY; both produced nice points but I screwed the first one up and I will tell you why, and what I learnt from it!

 The following chart shows a 15 minute Bullish Butterfly:

When I entered the market on completion of the above pattern I was very conscious of the fact that a valid Butterfly pattern should react pretty much immediately after testing the numbers in the PRZ; and this one wasn’t doing that. I started to get fidgety and as a result I started to look for more evidence as to why this trade wasn’t valid .I pulled up the Fib Time Ratios which indicated that in addition my pattern was completing at the 1.618, well over the ideal 1. So what did I do? I jumped out with a small loss, only to watch the market hang around for short while before rocketing up, well it would do wouldn’t it!

 So now it’s time for reflection and to go over the chart to see what I might have missed or overlooked. Guess what, I’d overlooked the RSI yet again and it had given an oversold reading in the PRZ which would have helped to add weight to the validity of the pattern. I also came to the conclusion (I hasten to add this is only my interpretation)  that maybe one can be less rigid on the specific characteristics of the Butterfly and use of the Fib time ratio when trading what is basically a consolidation within the direction of the overall trend as opposed to a trend reversal trade.  From now on, when trading Harmonic continuation patterns I am going to stick to focusing on the numbers in the PRZ, (in order of their specific pattern related importance) allow for a little overspill, look for the stabilisation and last but definitely not least I will not forget the RSI!.

 I had an opportunity to put this into practice on the following Bullish Bat pattern shown here on both the 15 and 60 min time frames:

Let’s see what gems the market has to offer next week…..

What my “non pattern” did highlight however, was my laziness. If I mark something up myself I should then follow through by manually working out all  the potential ratio alignments  before doing an HA scan. This way I will get a greater understanding of each pattern, its individual requirements and a better feel on how to trade them.

I’d also posted a chart of a 60min Bullish Bat pattern on the CAD, and as shown by the following charts it experienced 2 tests of the PRZ before rolling over and violating the pattern. I followed my rules and took the trade. I employed a very tight trend-line to capture a few points, something that I always try to do in order to limit my exposure, keep my losses as tight as possible and help me relax!

The GBP did not disappoint yet again this week. I traded the retest of a 60min Bullish Bat pattern.

Whilst I was busy with the GBP, the NZD produced a lovely example of a continuation pattern as shown by the 60min Bullish Bat in the following charts.

I spent the week trying to take advantage of the numerous trading opportunities available to me through the HT system, with the result being that due to my current level of experience I spent the week running around like a headless chicken with my attention far too scattered. So I stopped took a deep breath, realised that I was in danger of becoming a jack of all trades and master of none and did a complete U-turn. I am now back focusing my attention on trading just the re-tests. I appreciate that as a result of doing this I will miss out on lots of trading opportunities but I am willing to live with that…….for now……