Play by play dollar trade

March 11, 2010 - 1:45am

Below is a play by play rundown of a typical dollar futures trade. You should be able to click on each screenshot to see the progression of the trade along with any notes written on the chart as the trade was taking place.

1.) Before I place a trade (no matter the trading vehicle) I already know where the support and resistance levels are. This is a short term trade (scalp) but you can essentially do the same thing for a longer term swing trade or investment.

This first chart shows that I bought the dollar on a huge pull back. I placed the trade on a support line I had mapped out days in advanced. I did not know if the price would ever reach this level, but I map these channels and levels anyway. Then I wait patiently and if the price hits a support line I buy or sell it looking for a bounce.

2) I was prepared to risk 100 dollars for a 200 dollar move (1:2 ratio). But I have traded the dollar enough times to realize that price will often over react and take out hard tight stops. So I entered the trade without a hard stop. (I use mental stops quite often with this type of trade. I would not recommend doing this if you are not an experienced trader.)

3) You can see in the chart below that I placed in my sell order. (the pink bubble on the chart) I also wrote on the chart where the price would possibly bounce or consolidate. If the price consolidated but could not pop above the horizontal line than I was prepared to sell as close to that price as possible.

4) The horizontal line acted as minor resistance at first.

5) After the price bounced down from minor resistance, it created a bull flag and pushed through resistance and was on its way to the top of the downward sloping channel that had formed during the day. In order to protect gains, I put in a hard stop limit just below the horizontal line of support.

6) The screenshot of the chart below was taken as soon as my sell order was filled. I sold my futures contract at the exact price I was looking for originally.