Warrior Trading Blog

British Pound Trade Lesson | Steve’s Futures Pulse 132

Ah. Oh. Ooh. Oh hey trader happy Friday to you. Well maybe for you today I had a small red day thanks to the British pound. In today’s future pulse I’m gonna show you how and why I got lured into a long position and I knew it was time to call it quits when the market went the other way. Look over my shoulder here and now.

All right should be seeing my 10 minute British pound chart right up here on the screen. First thing I noticed here is I turned on my currency chart here is the British pound was on my radar and although this market could kind of peaked out early up here in that near 131.70 area. I saw the market was in a big breakdown mode here. ‘Kay so what really gravitated my attention here we did start to see some trend exhaustion warning bars down here and this is what we call TAS navigator which actually does a real nice job over a period of time of deducting when the markets likely to run out of steam.

In fact you can see an example of that back a little further on the chart here. Notice how we start getting those magenta color bars here and that’s right about when the market started basically run into its turning point on the upside ride. So that came into play here. This morning here about the time I was looking at the chart was right about here. So what I started to do was started to gear up for an opportunity which, again, probabilities that dictate that. This will often times have a positive outcome even though this was an exception.

We started to see a fall off in volume up above here. Okay so we’re looking for these volume voids or areas where the volume falls off. I’m gonna outline our TAS market map right here which basically takes volume, which you see in the very bottom of my screen down here. We take it, we flip it sideways there. And the reason we do this is we want to see where all the volume is occurring. The areas where there’s the most amount of volume here, here and here so we can look for a little volume gaps or tears of volume fall off because those are the areas where the market will typically move fast and vertically based in market profile.

So here’s how the straight came to life here. This is when this got on my radar this morning. This was about 9:00 in the morning and it was 9:35 right here that we started to see the market give us some closes and kind of test the waters above that supply area. That’s that red horizontal line you see up here so how we initiate the trade here we end up getting long right here on that bar and I’m gonna put a little hash mark. That was at 130.84. Okay things are looking pretty good actually. We still have this volume gap here. Couple long range bars right here which I like to call slip and slide bars.

Typically when the market moves through a historical long range bar like that you’ll tend to see the market follow through. The upside, but it wasn’t meant to be because you could see real quick here the very next bar market sells off and very quickly, guess what? We’re down below the demand area. So you say, “Where do I get out of that trade?” We had put our stop two ticks down below this level right here. Okay. So if you kind of were to cover up the screen right here, put it outside that technical lull and right here is where we end up getting stopped out and now is a price at 130.56.

Now that’s 28 ticks at $6.25 times 28 it’s gonna be $175 a contract is what we took right on the chin, ooh, here today. So there’s always a lesson to be learned and one of my favorite things to do even on a day where I pay some tuition to the market on a small loser like this is learn something. So one of the things that I learned on this trade even for myself after all these years I learned too is that the market still had a little ways to go to kind of put in its bottom. You can see that this kind of a short term day trade timeframe trend line actually was still holding relatively well despite that one outlier that you see right here.

So if I could kind of go back and do it again truth be told I’d be giving more credence to the lack of break of that trend line. In fact, again, you can see if I have my cursor I’m gonna do my best to draw a straighter line, connect the descending highs here. Again, I’m gonna do the best I can to do that. And you can see it’s a pretty darn good intraday trend line lower that did not get breached at our point of entry okay. So I’m just gonna have to do a little better next time. Took it for $175 a contract on that long position. Markets are a little wild this morning as many of you know came out with some good numbers this morning at 7:30 am.

So market had a lot of volatility right away, but at the time of this recording here we’re just after the lunch hour here in Chicago things are kind of tampering. We’ll see where things go the rest of the day here today. So I’ll meet you back in the markets on Monday morning. Those of you that will be joining me in the futures trading chat room for the rest of you hope you enjoyed the video. Look forward to having you continue you to follow along. Thanks much and we’ll meet you back in the market soon. Bye-bye.

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