A-B-C-D Trade - page 6
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Very little volume between sessions.
EUR/USD at 1.2614 with small fluctuations. Should it hit the strong support at 1.2615, it will bounce up.
If we drew our fibs from the high of the 16:45 GMT candle and the low of 1.2605, the 38.2% retrace is 1.2625.
This is what I call a bounce trade. It needs to have identification of a major support or resistance price. Then we look at the last significant move and draw the retracement fibs.
The breakout method relies on identifying a channel. Review of Asian and European sessions EUR/USD. Sorry, this is a little hard to follow as I cram all 3 moves here.
First attached chart:
We drew lines for the high and low of the previous U.S. session, which was tight.
High = 1.2657 Low = 1.2611
Asian session saw a breakout to upside at 05:55 GMT, when the ABC pattern triggered a Buy. Profit hit the FE 100 of 1.2680. Since A-B was small, my inclination would be to target the FE 161.8
This was an example were it did not extend to the FE 161.8. We need to protect profits at the FE 100 level.
A = 1.2640
B = 1.2667
C = 1.2653
FE 100 = 1.2680
FE 161.8 = 1.2697
BUY Entry 1.2668 (close of 5-min candle above B)
Stop–Los Last 1-min pivot at 1.2662 + 4 pips = 1.2658
FE 100 = 1.2680 = +12 pip reward……Risk/Reward = 10/
FE 161.8 = 1.2697 = +21 pip reward….Risk/Reward = 10/2
There was a second breakout to the downside at 08:25 GMT, from previous U.S. session low. The chart shows the ABC pattern that was already in progress. Therefore we would have been joining a Move-In Progress (MP).
A = 1.2684
B = 1.2633
C = 1.2654
FE 100 = 1.2603
FE 161.8 = 1.2571
U.S. Session Low = 1.2611
Strong Support at 1.2605
The FE 100 was 1.2603, which was close to strong support of 1.2605
The entry would be below the strong support of 1.2605, which means this is a no trade for me since the FE 100 is 1.2603.
In other words, the highest probability of the ABCD is extension to the FE 100. Trading a breakout of the 1.2611 would not make sense since the FE 100 is 1.2603.
The good signal was that the retracement of A-B was only 38.2%, which is C.
The belief is when the retrace is no more than 38.2%, the probability of a long extension is good.
Those that keep it simple and only trade for 15 pips on a breakout made money.
Chart 2 is the European session and first attempt to breakout from the Asian session. Asian Low was 1.2571.
First attempt was right away at start of European session. We can only see it with the 1-min chart (attached).
There were 2 ABC patterns, one larger, one smaller. The larger ABC extended only to the FE 61.8 and the small ABC extended to its FE 161.8
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Chart 3
The next attempt (downside) was the 12:40 GMT 5-min candle. Very small ABC pattern.
See attached 1-min chart.
A = 1.2586
B = 1.2567
C = 1.2578
FE 100 = 1.2559
FE 127 = 1.2554
FE 161.8 = 1.2547
Stop-Loss 1.2578 (Point C) + 4 pips = 1.2582
Entry 1.2562
Prime Profit Target 1.2547 (Since A-B was small).
Risk = 20 pips
Reward = 15 pips
Risk/Reward = 20/15 ………No Tr
If you trade for just 15 pips, you made money.
This is what just happened on a larger picture, the ABCD on the Attached 1-Hour chart.
Also notice that Point C bounced off of the edge of the Ichimoku.
Point C was a 61.8% retrace of A-B.
Fibo Fan pulled from A-B.
Point C hit the 78.6% fib.
It also provided support and resistance as the move went lower.
C-D leg hit the FE 100, for a 60-pip successful trade, after breaking B.
EUR/USD 1-Hour Chart
The Fibo Fan was pulled from A to B. Notice the nice support and resistance.
EUR/USD made a full retrace of 61.8% horizontal but exceed it a bit. It was stopped by the 78.6 Fibo Fan fib.
This afternoon EUR/USD returned to low of May 6th.
ABC Retrace Trade
Here's a trade from the 61.8% retrace point (C) to the 38.2% fib.
Stop-loss must be tight and must be minimum Risk/Reward 1:4 or better.
Set Stop-loss just below the 61.8% fib.
Makes sure spreads are factored in.
This example:
BUY Entry: 1.2558 (after 3 pip spread) at 61.8% fib. Set on automatic pending order.
Stop-loss: 1.2553 (just below "C" low pivot price of 1.2555)
Take Profit: 1.2587 (at 38.2% fib) Set on automatic Take Profit (TP).
Risk = 5 pips
Reward = 29 pips
The distance between A-B was large, 133 pips. This is important as we are looking for a sizable profit between the 61.8% and 38.2% fibs (trading range).
If we win 60% of 10 of these trades (if A-B is the same distance as this example):
Wins = 6 X 29 pips = 174 pips
Losses = 4 X 5 = 20 pips
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Net = 154 pips
You can adjust the cushion for the Stop-Loss or wait for confirmation of bounce, but that will cut down your reward.
Risk factors:
In analyzing retracement behavior, we know that the 2 most probable retrace levels are 38.2% and 61.8%.
We know that at the very least it will pause at these 2 levels.
After it hurdles the 38.2% fib and the 50% fib, the 61.8% is the next and highest probably fib.
Once it hits the 61.8% fib, it will bounce.
The belief is that once it bounces off the 61.8 fib and hurdles the 50% fib, it will go to the 38.2% fib.
The risk is that it will bounce but is contained by the 50% fib. It may even be in a temporary channel between the 61.8% fib and the 50% fib before it breaks one way or the other.
Keep eyes on cross-over indicators, as well as other support and resistance indicators.
I use the FX Sniper’s Ergodic CCI & Trigger.
Also use the Fractal.
Both of these support indicators confirmed the bounce and upward movement on the attached chart.
Fibo Fan can also be used, and you can see it supply very good S/R lines.
We saw a breakout from the Asian low
A = 1.2575
B = 1.2493
C= 1.2529
FE 100 = 1.2227
FE 127 = 1.2425
FE 161.8 = 1.2396
The ABC points were easy to identify, as depicted on the attached 5-min chart. The Asian low was actually 1.2493, since the break below that occurred during the 09:00 GMT 1-min candle. The indicator "Time" will draw the low wrong. You can adjust the parameters to 08:59 to color the end of Asia
The Stop-loss if using the 1-min pivot for support and resistance was:
Low of 08:44 (1-min candle) = 1.2508 + 4 pips = 1.2512
Sell Entry below Point B, which was also the Asian low. I got filled at 1.2482 in a fast moving break of B, using the 1-min chart as the trigger. I waited for confirmation that Point B was holding. That cost me some pips but the FE 100 had enough profit to keep this above 1:1 risk/reward.
The expansion nailed the FE 100 of 1.2447. Add 3 pips for spread = 1.2450 for = 35 pips profit.
Risk = 30 pips
Reward = 35 pips
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To the right of the attached chart, we can see another ABCD move (red).
A = 1.2511
B = 1.2425
C = 1.2462
FE 100 = 1.2376
FE 1.27 = 1.2353
FE 161.8 = 1.2323
It hit the FE 100 and is now bouncing between fibs.
Long night, carrying over to U.S. before end of week. Enjoy your weekend.
Cheers
Edit: Attached is another chart after indicator adjusted to reflect 08:59 as end of Asia. Made all teh difference in the world as far as visualization.
Here's a biger picture of the ABCD on the 15-min. Conceivably, one could have traded this after the first pattern. I did not due to a need for a nap.
A = 1.2575
B = 1.2431
C = 1.2533
FE 100 = 1.2389
The attached chart says it all. Re-approaching the 50% retrace fib hit previously. About 40 pips away, so basically, we're there.
Therefore, this is a very critical price area. Will it bounce up, or break that 50% fib?
If it breaks the fib, it will be a gigantic ABCD move. Draw the Points ABC, and project the FE levels yourselves to practice. I'll post it soon, before market reopens.
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Fibo Fan provided support at diagonal 50% fib. The diagonal 61.8% will back up the horizontal 50%, at least temporarily.
Indicators on chart:
Gann Hi-Lo (green line)
ADX Crosses (blue and red arrows)
200- Period Moving Average (white line) Very critical, since pair is basically right there. It should bounce first.
EUR/USD
Monthly Chart:
A = 1.6038
B = 1.2329
C = 1.5143
FE 100 = 1.1434
EUR/USD made a previous attempt to break “B” in Feb. 200
If the Euro undergoes a collapse, this is the next logical stop. It could take weeks or months, however.
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Daily and 1-Hour Charts:
A = 1.3677
B = 1.2520
C = 1.3094
FE 100 = 1.1937
FE 127 =1.1625
EF 161.8 = 1.1222
Retracement of A to B is C, which is the 50% retrace fib (blue lines are retracement fibs).
There is also a black Fibo Fan line just above the FE 100.
White line is a 200-Period Moving Average. It has provided resistance on 5 different occasions during this down trend.
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Unless there was/is big news over this weekend, I look for some consolidation (going sideways) from the current price level, as well as a retrace. On the large charts, consolidation can mean a channel of 200-400 pips.
If we look at the last significant move, from Jan. 14th to Feb 19th, a subsequent consolidation occurred, as well as a retrace to the 23.7% fib. It became choppy to April 23rd. A similar trend and consolidation occurred in Jan. This is the nature of market movements.
While it looks like larger profits can be had trading off of a longer interval chart, remember that the risk (stop-loss) would also be larger. The trick is to find a smaller support or resistance level that enables a stop loss for the risk/reward to be above 1:1, preferably at least 1:2.
For intra-day traders (day traders), we look at the ABC pattern of the smaller charts, but monitor the longer charts for support & resistance levels, as well as the overall trend.
In order to find the right fit, we must make sure Point C is a retrace of A-B to a fib level.
Overall, when we think about it, the EUR/USD is at equilibrium, about half way between the historic high and low.
Note that the monthly fibs were drawn on the basis of the low on Feb 2002. There is the absolute low on Oct 2000.
Due to the pair's pivot low in Oct 2008, I take that the market is following the low of Feb 2002 as Point A, since the Oct 2008 low is the 50% fib.
As we enter the new week, let's see how Asia trades the EUR/USD. If it starts to BUY, draw retracement fibs based on the high/low of C-D. I'll post those fibs later, but you should try to draw them yourself first.
Looking at the 1-Hour chart, it's sitting at the FE 61.8 (prior to opening of new week). Although this is a minor fib, it can stop here and retrace back up.
Cheers
EUR/USD
Redrew extension fibs.
A = 1.2533
B = 1.2358
C = 1.2438
FE 100 = 1.2263
FE 127 = 1.2216
FE 161.8 = 1.2155
Sorry had to push buttons.
Has pulled back from low of 1.2242, now at 1.2275
A tighter pull off the 5-min chart:
A = 1.2351
B = 1.2288
C = 1.2304
FE 100 = 1.2241 (hit)
FE 127 = 1.2224
FE 161.8 = 1.2202