Forex Tips

The majors are showing some life again.  There were nice setups in the EUR (see below) NZD and JPY during the UK session.

After a quick move up in the first hour of the European session, the London traders began to push the EUR back down.  An entry short is found – giving us a 3:1 Reward for our Risk with a 13 pip stop loss above structure.  After 3 attempts higher, it is clear that sellers are entering orders above both the Asian session high and yesterday’s high.  After 2 candles into the trade, we see a candle with a wicky bottom which is also a double bottom.  We move our emergency stop loss down to plus 2 pips…making it a profit stop.  At this stage we are stress-free and if a reversal occurs…there is no harm to our account.  Our first pause is expected to be at the 1.3700 figure area.  Price will test this area, then will most likely test the Asian low. Price continues down and tags our Target 1 level.  It then moves to our Target 2 and begins to bounce.  We don’t want to give back profits at this level once reached, so we close the trade just above it – on the bounce… locking in some quick gains.

Good luck with your trading!

Back tomorrow if we find a trade.

The AUD set up for a long trade -climbed to its Asian high where it essentially topped out for the session. After a quick move to the downside after London open… luring in breakout traders, the AUD reversed to run stops.  We enter long with a 13 pip stop loss giving us a greater than 3:1 R/R to our Target 2.

Beautiful session for trading!!!  I was busy with the CHF, JPY and NZD.  A EUR trade was the inverse of the CHF.  I will show the CHF below as it was very easy to see the setup and execute.  The other majors aligned beautifully, so it was a day of harmony and perfect symmetry.  As a trader if you know how to spot and execute this trade pattern alone, the rewards can be considerable.  It’s better to have several high probability trade setups to capitalize on because the market delivers different setups throughout the month and lately trading has been quite tricky and sedate.

The CHF set up for a short after the 1st round of US economic news.   As it had exceeded its range significantly in the first half of the UK session, I look for a reversal not a continuation.  Price showed signs of weakness enabling a 19 pip stop loss above structure, for a potential 59 pips to the Asian low.  Once the US session is underway, I will take a 2:1 R/R, whereas in the first half of the UK session, I hunt for a  3:1 R/R.

As price drops, we are able to move our stop loss to positive territory in advance of the second round of US economic news.  When the worst case scenario is you make only a few pips… it’s really not that bad at all and we call it “stress-free trading”.  The idea is never to be greedy, always always always trade with an emergency stop loss,  never take large stops ( your pockets are not as deep as an institution’s ), protect profits when you’re trade is positive, and always be aware of potential volatility due to major economic news releases.

The CHF continued down after the Philly Fed M.I. and we continued to lock in profits as price headed lower.  The pattern completes and we exit after noting the buyers entering where institutional longs would first defend their positions today.

A day like today with any one trade can make your week.  If you had nimble fingers and could trade more than one pair… even better!  This comes with experience.  The important consideration is to not to over-trade or over-leverage.  Keep your potential risk of capital loss very small!

Good luck with your trading!

Back tomorrow if we find a trade.

A fairly quiet Tuesday session, but the NZD set up for a fairly quick short late in the session.  The key to the setup was that price had done its range and was reversing in the US session with US news behind us.  Once the candles look convincing to the downside… we enter short.   We’re not really trying to get a 3:1 or 2:1 R/R with only 2 hours left in our session.  We want to capture as many pips as we can to the downside from one level to the next and ideally tag Target 2.  We want to see how price reacts as it tests each level, completes our pattern – all before our session ends.

Price moves down quickly and completes our first pattern which corresponded with yesterday’s high.  At this point the European market is closing and there is an hour left in the overlap of the UK and US traders.  Price goes sideways after bouncing at yesterday’s high.  We have moved our profit stop down to protect 15 pips and remain optimistic that price may dip further.  It doesn’t, and we are closed at our profit stop for modest gains.

Good luck with your trading!

Back tomorrow if we find a trade.

Finally a day of activity!  The GBP set up was my favourite trade and moved further than expected.  After a couple of weeks of compressed trading ranges, we finally got some action today to end the week.  When trading ranges are very tight, we need to be careful not to get lured into dismal trades that go in our favour a by a few pips and then against us by a few pips.  It’s been like watching paint dry the past couple of weeks.

We had a big hint this week that the direction for the EUR and GBP would be down.   This is evidenced by what happened at the options barrier of 1.40 for the EUR and 1.70 for the GBP.  In other words, the BIG traders would not let it through and sold hard!  The Daily chart is screaming this message.  This is not a random reversal.

Looking closer at the GBP on an hourly chart, my students will see price moved down in the UK session and closed below 2 important tools that we use that aligned close to the 1.6900 figure.  Knowing many institutional traders are seeing the same message, we go short on the break near 1.6894.  I’m not keen of the R:R in this case, but the confluence is too powerful to resist.  A stop loss of 16 pips above structure seems expensive to get to Target 2 which is only 19 pips away.  Our stop loss is a hard stop in the event of extreme volatility in this case.  If the market goes against this trade, I can always click out and take a 6 or 7 pip hit, but I need a hard stop loss in the event that something unforeseen occurs and the trade moves against me violently.  If this ever happens to a trader just using a psychological stop…that is a stop loss in their head not in their platform…they typically find themselves to be like a deer in the headlights, as price erodes their account while they stare in disbelief and are unable to react.  Trust me…I’ve been there years ago and it cost me dearly, and you never want to go there a second time!

Price today moves down stalling at our targets as we anticipate.  This allows us to protect these levels so the market takes us out if price reverses… but we have locked in profits at strategic and statistically significant levels…and let the market do what it will do.   As price continues to move in our favour, we tighten our profit stop down and end up being taken out for a nice gain after giving back 13 pips from the session low.  All in all, a nice way to end the week.  Other trades set up after this one closed but this was the trade that made the week fun.

Good luck with your trading!  Enjoy your weekend!

Back Tuesday if we find a trade.

Tricky trading so far this week with pips being few and far between.  I don’t usually show small trades but I’m not finding any large ones so far this week.

It appears that a number of USD long hedge funds decided enough was enough and liquidated their positions earlier this week.

With Janet Yellen stating today… late in the session that, “a high degree of monetary accommodation remains warranted” we know why the longs were frustrated with their positions.  Never fight the market!

As the EUR bottomed today and reversed, an entry long is taken.  Price rises above the the Asian session highs but is unable to close above.  We move our profit stop to below the Asian session highs…more precisely just under the UK session quadruple tops and we are promptly closed on the next candle as price begins to retreat downward.  With Yellen’s testimony around the corner, we remain out of the market due to the potential volatility.

Let’s hope for some high probability setups for the balance of the week.  If you don’t see what you like, it’s best to come back another day.

Good luck with your trading!

Back tomorrow if we find a trade.