Trading range and getting stopped out in the 4 Hour chart

The past 4 weeks have been a bad period for the FxTopSystem trading the 4 Hour chart. Trading the 4 Hour(H4) chart also caused the highs to move higher and the lows lower in the FxTopSystem. This caused the draw down on the system to increase compared to just trading the Daily chart. We'll go into this in more detail after looking at the development of the markets.

The markets

To research the markets and save time, but still get a good general idea, I use 2 charts. The S&P500 and the USDJPY.

The S&P500 was in a trading range throughout the period and this made swing and day trading difficult on the H4 chart, at least this was the case when trading with the Expert Advisors (EAs) on FxTopSystem. The H4 chart does not provide a clear picture of where the market could go.

While the daily chart provides better information compared to the H4 chart, there is also the weekly chart. It shows a short-term low when checking the stochastics. The price should close above the Tenkan-Sen this week to give more support to this view. Nevertheless, this will be a short recovery within the downtrend. Only when we get higher tops and bottoms, confirmed by convergence in the MACD, a reversal is possible. It's way too early to draw any conclusions based on the current Weekly chart.

For the USDJPY, the daily chart is shown below. The MACD is showing divergence and the price could fall towards the cloud where there is also support around 131.10. For this we must first see lower tops and lower bottoms.

Based on the S&P500 and USDJPY chart, it's hard to tell where the market will go. A brief pullback in stocks in the coming weeks is possible with a decline in the USDJPY. However, for the longer term, the chances of a bearish trend in equities are still greatest with USD/JPY rising.

The pairs traded

This time we won't go into details for each pair traded as they all had bad results. To prevent this in the future, some measures are being taken. One of the measures is to broaden the Stop loss to give the positions more room. At the moment trading on the H4 has been cancelled and the trading system is being optimized to avoid this poor performance in the future.

If we look at the chart below on the performance of H4 trading, we can see that the highest percentage on June 21 was 8.9%. The low percentage was 6.5% on 15 July for the time being. A decrease of 15.4%.

Although it is a pity that there has been such a large decline. It is something that comes with trading. It would be a shame if nothing is learned from it. This mainly includes combining trading with the H4 chart and the daily chart. There are various points of interest such as the total number of positions, the distribution over the currency pairs as a whole, etc. etc.

Another thing to keep in mind is the stop loss (SL) in the H4 chart. Using a SL of 1 ATR similar to the daily chart is too tight for the H4 chart. This will hit the SL too quickly. Several articles can be found in which complete strategies can be read about how Institutional traders can make use of this, see for example the following article: Why Do Stop Raids Happen? To be on the safe side, the SL has therefore been made wider.

Trading on the H4 chart is expected to start again sometime in mid-August. First it will have to be optimized and that takes some time. By then I'll be back with another article where we'll go into more detail. Until then, I wish you a happy trading in the coming period.

DISCLAIMER

This article is my personal opinion, not recommendations, FX trading is risky and not suitable for everyone. The content is for educational purposes only and is aimed solely for the use by ‘experienced’ traders in the FX market as the contents are intended to be understood by professional users who are fully aware of the inherent risks in forex trading. The content is for 'FX Trading Journal' purposes only. Nothing should be construed as a recommendation to purchase any financial instruments. The choice and risk are always yours.