Trading / Investing

The Anatomy of an Easy, Low-Risk Trade

3 Min Read

You're going to kick yourself for missing this one.But I promise you, I'm doing this to help open your eyes for future trading days. I'm not showing you this just to tease you (OK, maybe slightly - but in a friendly way!)We're going to take a look at EUR/USD.Today was an unexciting day for EUR/USD really - there weren't too many wild swings.However, it was extremely formulaic in the way it moved. Which made it relatively low risk for a lot of small trades.Using our full range of tools, you could have picked up hundreds of pips in a matter of hours - no joke!!But I don't want to talk about those.Let's talk about the easiest trade of the day - a trade you should have picked up, just by using the lessons I've sent you before in my emails (so I basically gave you this trade for free!)The trade picked up 23 pips and these sort of trades happen more than once a day!But I digress... How about we take a look at the opportunity?

20160308 EURUSD 5M

In the screenshot above you can see the entry point and exit point. Today we'll talk about the entry only (but bonus points for the person who can tell me why that was the exit point - it was the perfect time for it).Now, I know you're probably thinking "what's the big deal? That's just a standard pin-bar setup. Everyone knows pin-bars! Pfft how basic!"Very true - it is a pin-bar setup. But if pin-bars all worked so nicely, why doesn't everyone just trade those all the time and get filthy rich?The answer is: pin-bars actually have a lower probability of success than most people think. The pin-bar is only one part of the setup - you need to find the clues for the good ones!For example, why didn't this similar pin-bar setup work? This one would have been a disaster:

EURUSDH1

In actual fact, on this chart our entry using The Duomo Method would have been at point A. It was a perfect double-confirmation Fibonacci and Swing High setup.Those sort of trades are like gold dust, and look what would have happened:

EURUSDH1 2

Pretty sweet, huh?!Anyway, let's continue (the cynical guys should have closed the page now... So it's just you and me, kid!)

Stage 1

So first things first, I sent a Tweet this morning:

tweet march 8

That Tweet linked to a blog post here, that showed my horizontal analysis of the market, since we were in a range/market with an uncertain direction.Using this analysis, I had identified certain obstacles to the price.If we overcame those obstacles, we could see a break out. If we didn't, we would see a reversal.Because, guess what... The obstacles are significant levels (re-watch the mini-series if you're lost at this point!)So at this moment, we knew which areas would take our focus.

Stage 2

Let's look at the entry again:

20160308 EURUSD 5M

The entry was right on the 'higher high' we needed to break and was clearly a failure.However, beyond that... it was an 'Empire State' setup, or 'Frankfurt Special' as I called it last year for one of my lessons.Check this video out (and please shower me in praise for how much better quality our videos have been this year, compared to this one from last year):https://www.youtube.com/watch?v=mvk2h-qW8zUAnd that covers it all really.

  • First I identified my significant levels.
  • Then I waited for an indication of direction based on those levels.
  • Then I found a low-risk setup that seemed appropriate - this time it was a perfect 'Empire State'.
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