#Trade Analysis $EURAUD Examining the #Tunnel #Trading Method

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I have decided to be a bit more public with some of the trading techniques I am currently using in hopes of helping other traders who may (or may not) be struggling in the FX market..

What I would like to discuss in this post is based on a couple things.. Mainly the Tunnel Trading method and also the use of my own proprietary method of drawing "levels". I am not prepared however, at this time, to publicly reveal the technique I use for drawing these particular levels. (You might be able to loosen my tongue with say... $1,499.99 USD LMAO)

I think as we examine the following chart you will be able to see how extremely accurate these "levels" are and also how valuable trading the tunnel method can be.

The included chart is a 4 hour MT4 chart and drawn on my demo account.

The Tunnel Method of trading, as *I* use it, involves the combination of two EMAs (exponential moving averages). The settings for these two averages are exponential 144 and exponential 169 both based on closing price. These two EMAs create the "tunnel" itself and pretty much represent the center of 100 and 200 EMAs. On the charts below my 144 is magenta in color while the 169 is white. Also on these charts please note the white EMA 13 which in tunnel trading is used as a filter but as you can see on the charts it is also valuable as a tool in attempting to judge price momentum/continuation. As price remains below (in this case) this oft tested 13 EMA the momentum seems to remain strong and a break back above serves as a good warning signal that the momentum of the move may be weakening. Taking some profits on a break back above might not be a bad idea ;) But in general as long as price remains below the 13 EMA you are free to enter a trade in the direction of the trend as indicated by the tunnel itself.

Basically the main rule in tunnel trading is to trade in the direction of price in regard to the tunnel itself and stops are placed and adjusted as the trade progresses above the tunnel itself (in this case, below the tunnel in the case of a long position).

So lets get to the chart!




I will now briefly discuss the 4 [demo] short trades I was involved in on Friday 01.07.2011 I entered short twice at 1.3072 and 1.3074 but suffered losses on both of those entries on stops of 1.3093 (-20.85) and 1.3103 (-28.74) as price retested my 1.3094 price level.

And reentered twice some time later at 1.3072 and 1.3073 hitting my 1st target and taking half off at 1.3023 (+48.78) (just above my 1.3013 "level") and manually closed the 2nd half of the trade at 1.2996 (+76.65) against my original target of 1.2943 (Which ended being at least very nearly hit)

While fairly happy with these trades I think I can improve on them a lot by NOT using such tight stops in the future.

Hope you enjoyed my brief excursion into the world of forex trading ;)

Greg