andrew-mitchemFellow Kiwi trader, Andrew Mitchem, has been trading for the past 12 years after making the transition from dairy farmer to Forex trader when he became a stay at home Dad for his 3 year old son. He attended a trading course in New Zealand and immediately fell in love with it. He now trades daily and teaches people his trading methods at TheForexTradingCoach.com.

In the show Andrew reveals:

  • His “home-grown” strategy to trade longer term timeframes
  • 3 things most traders do wrong
  • When to ignore Candlestick patterns
  • His definition of round numbers in Forex

Interview

36: How Andrew Mitchem Trades Forex Using Round Numbers, Candlestick Patterns & Trends
00:00:00 00:00:00

Interview Links

Recommend Book

Broker & Platform

Metatrader 4 on AxiTrader, Pepperstone and Gomarkets

Key Lessons

General

  • Don’t just jump into a trade just because it’s a Pin bar or Engulfing pattern, e.g. if a bullish pattern closed at 1.2995 you wouldn’t take a buy trade because it’s just below the round number 1.30000 which is a psychological barrier
  • By trading higher timeframes (1 hour and above) it makes it easier to fit trading into your life because you only have to check the charts once per hour at most
  • 6 and 12 hour charts show some great setups
  • Understand that there will be bad days and weeks in trading and if you have a good system things will eventually come right
  • A lot of people give up too easily, have a short term view of success, e.g. to double their account in a month, and revenge trade
  • Don’t count pips, look at percentage growth on your account
  • Understanding Pivot Points and Fibonacci Extensions was a learning from the big banks and financial institutions
  • If you have a sound technical strategy it should work regardless of the currency pair, time of day, chart timeframe and market condition
  • “See the trade, place the trade, leave the trade”
  • Winning percentages differ depending on the timeframe. Higher timeframes have a lower win rate but higher risk to reward, e.g. a weekly chart might have a 50% win rate but your wins make up much more than your losses. On lower timeframe charts like the 1 hour it’s more important to have a higher win rate, e.g. 6/10 win rate but the gain per trade is lower than the higher timeframes
  • Understand what type of candlestick pattern you like and where it occurs on the chart

Andrew’s Trading

  • A technical trader who likes candlestick shapes and patterns
  • He remains aware of fundamentals but doesn’t trade them
  • At the beginning of the month he’ll look at the monthly charts and do the same for the weekly charts at the beginning of the week – he’ll then look to take positions on those timeframes if they show
  • As a slightly longer timeframe trader he’ll look at the daily charts every day and go down to the 12, 6, 4 and sometimes 1 hour charts
  • If he’s trading a daily chart, trades may last 1-2 days
  • A four hour chart may have trades between 1 and 4 or 5 bars
  • The length of time he stays in a trade is generally based on the number of bars, regardless of the timeframe he’s trading
  • Reward to risk is generally over 2:1, but it depends on the timeframe – longer timeframe charts offer higher reward to risk, sometimes 4 or even 5 to 1
  • He trades no more than half a percent of his account on one trade
  • He likes to make anything from 1-2% on average per week
  • He trades on the main 26 currency pairs – the main 8 and the related crosses
  • He likes to look at the typical candlestick patterns, e.g. Engulfing and Pin bars, alongside what part of the chart it forms in
  • He’s a big fan of round numbers, i.e. any prices that end in a 00 or 50
  • He likes to look at the candle that’s just closed, so he only needs to check the charts after each timeframe, i.e. each hour or each 4 hour block
  • He works off the 5pm close of day New York charts and will check the charts just before the close of the day and base his trades after the day has closed
  • He’ll look for currencies showing strength and those showing weakness, then look at which pairs are likely to be moving up and which are likely to be moving down
  • There are about 5 times in the day that he will look at charts, sometimes one timeframe and sometimes more depending on the time of the day
  • He learnt through trial and error to figure out what would work for him
  • He avoided the forums as they tended to be the “blind leading the blind”
  • He’s been trading the same strategy for 8-9 years
  • He looks for reversals or continuations
  • He takes between 1-3 trade per day on the daily chart  and another 1-2 more trades on the lower timeframes during that day

Andrew’s Strategy

mitchem-continuation

  • Continuation Trade
    • Wait for an uptrend followed by a pull back and a bullish signal to enter a buy trade
    • Looks for a reason why a currency has bounced at a level, e.g. a level that’s been hit before, a round number or a news announcement
    • Have a stop loss that’s protected by another strong support or resistance level or a round number
    • Have a profit target – a level that the price is likely to get to before it stalls again
    • If you’re not at your profit target and see an opposite candlestick pattern then consider exiting some or all of the trade or move your stop loss up to protect the remaining part of that trade
  • Reversal Trade
    • Look to sell after a big up trend
    • This is confirmed with candlestick patterns, e.g. a Pin Bar followed by a Bearish Engulfing pattern
    • Lots of room to move to a profit target
    • The strength or weakness for that day or week is in the same direction

You can reach Andrew at TheForexTradingCoach.com or directly via email on andrew@theforextradingcoach.com.

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