A-B-C-D Trade - page 118
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Obviously, the technical trader was on sidelines ahead of U.K. Retail Sales. In our example, exit at Point B was +20 pips. If hung in through ABCD, = +40 pips to lower trend line or 138.2.
Data came in much higher than projected. GBP/USD had been on rise for 2 days, thus it was priced in. Spike candle upon data release subsided back about 50% of candle. That's the danger in chasing. Leave news/data trading to traders that specialize in it.
EUR/GBP down spike retraced back to pivot. More downward pressure from this pair can drag EUR/USD through support.
End week squaring also happening throughout balance of day.
EUR/USD testing support. Plot:Low = Feb 16th 13:30 1.3461High = Feb 17th 23:30 1.362650% fib = 1.3544, which is about same as Feb 17h 13:30 low 1.3542. That means it would be a 100% retrace.Candle count from left base to head = 20 candles.Shoulder to head 11 and 10 candlesCandle count head to current (08:30) = 18 candles.
Let's use count on 1-Hour:
Left base to head = 11 candles
Shoulders to head 7 and 6 candles
Head to projected right base = 11 candles if hit during 10:00 hour.
Pair now sitting on 38.2%, with our target as next support. If it drops in next 54 minutes, we would not have to file a complaint with the Head & Shoulders Shampoo Security and Exchange Commission.
Here it comes.
Chart
Chart of EUR/USD completed Head & Shoulders.
As some viewers are aware of, the EURO spike was a reaction to a particular statement made by a ECB Board member.
Mr. Smaghi, a candidate to replace outgoing ECB President, Trichet, "signaled" that they can raise interest rates to curb inflation.
That's all it takes. EUR/USD now at upper fib channel line marking high price of 1.3655.
EUR/USD broke upper trend line and extending. Ahead are 138.2 = 1.3689 and 161.8 = 1.3728.
Round number 1.3700 also significant.
78.6 fib from major Feb 9th move down is 1.3676.
Now, let's take a look at how an ABC plot can explain current price action.
A = session low 1.3544 or 1.3546
B = session high 1.3645
C = 14:30 pivot 1.3609
FE 61.8 = 1.3671.
Market is confirming this by stalling here. This means the accuracy of next fibs are in play.
FE 78.6 = 1.3688
FE 100 = 1.3709
Etc.
EUR/USD has reached 1st major fib 1.3687 area, and is most conservative exit. Remember a rush for end week squaring of positions will influence price movement.
We'll try to catch up on a lot of unfinished business this weekend, such as:
Posting the BAJA Divergence Signal Log on google docs template, and some observations and general stats. The log would be adjustable to the % of overall intra-day gain a trader can reasonably capture.
More on Head & Shoulders Patterns (meanwhile, you can research too).
Adding another partial exit calculator.
Right now, we randomly selected a BAJA signal to show how a trader can exit. It was also back-to-back signals.
Attached:
1st BAJA SELL Signal
1st chart is 30-min with 2nd peak Dec 28th 03:30. Draw a vertical line on that candle, then switch to the 15-min trigger chart.
2nd chart is 15-min: Using the Ehler's Fisher Transform (EFT) indicator, we have the SELL entry at open of 04:15 candle price of 1.3243 (arrow).
Stop-loss just above pivot high of 1.3254 + 4 = 1.3258. Risk = 15 pips.
We plotted retrace fibs: Low = Dec 27th 23:00 1.5159 and High = Dec 28th 03:30 1.3254. When targeting the 38.2% fib of 1.3218 as the calculation would be to add spread and cushion of 4 pips = take-profit (TP), 1.3222. Reward = 21 pips.
R/R 21/15 and 1.4:1
This is called a plan, which you should have BEFORE entering the market. The advanced notice the 30-min BAJA 2nd peak/dip signal gives the trader is valuable since it allows time to calculate. Intra-day trading is a fast moving business. You don't want to make a rushed decision.
Now for trade management and exit. We have inserted a HAS and MA-30 onto chart just to give viewers an idea of trend.
We also point out that the EFT can do this job too. Look at how the EFT moves above and below the mid-point zero line. This means you don't need 50,000 indicators. The EFT can also be used as a trend indicator.
Let's now focus on the RSI(4)*. We have an arrow point up on the 15-min divergence dip at end of 07:15 candle, close price 1.3214. This would be a conservative exit, but is very effective. The RSI is set on a fast period of 4. So, you'll see a sensitive reaction to peaks and dips on the 15-min.
If trader didn't take that exit, look at next dip, where the RSI is even higher. This denotes down trend losing strength. Also notice that the trend indicators are lagging. This technique gets us out before those lagging indicators.
****
2nd BAJA SELL Signal
This was a 2nd peak on the 1-Hour because the 30-min did not qualify as that RSI was not lower than 1st. peak.
Draw vertical line on the 11:00 1-hour candle. Switch to 15-min trigger chart. SELL entry at open of 12:30 candle price 1.3265 (arrow). S/L 1.3274 + 4 = 1.3278. Risk = 13 pips.
Take-profit target. If we use the first fib plot, we can see in hindsight that the reversal made an extension to the 161.8 of 1.3100.
However, in formulating prior to entry, we can see:
- One logical TP would be trading to most recent pivot low of 1.3209 + 4 or 5 pips to cover spread and cushion = 1.3214 TP. Reward = +51 net pips. R/R = 3.9:1
- Move high of fib retracement plot to 1.3274, which would produce 38.2 = 1.3230 and 50% = 1.3217, etc. All very good R/R.
The stop-loss was tight/excellent and allows for the kind of R/R we must have.
Once again, we have a BAJA on the BUY side during the 15-min candle end 16:00 close price 1.3112. This is + 153 pips. R/R 11.7:1 LOL.
The trend indicators were lagging again, of course. Some traders use the mid-point of the RSI(4) for exit and/or change in direction.
Fibs are still the foundation, however. The rest are accessories.
Obviously, it is not reasonable to expect to ride all of these big moves. But we can go with partial exit and "trend the balance", as this example allows. Move S/L above each pivot or fib to protect profits.
An exit EA is also an option. Here's one, but we don't have the instructions. We'll try to post a couple more.
*You need to change the input parameter of the RSI to 4 period. In Levels, use 15 and 85 for oversold/overbought and 50 for mid-point as settings.
Here's a Head & Shoulders indicator. However, it did not catch the H&S that appeared on EUR/USD Friday (although there is one on the Daily)
.
The trend line connects the 2 "arm pits" (LOL), which are the pivots below each shoulder. Price crossing this line denotes the breakout. One guru conveys a good tip: the trend line should be going in the opposite direction of breakout, to be best scenario.
Also, a "symmetric" pattern is not necessary.
Attached Example Chart #1 is USD/CAD 30-min. This is inverted H&S, which is to say it's upside down. Notice the red trend line is pointing down, while trade direction is up. That is correct, as in opposite direction. The break of this trend line established pattern, and can be entry point.
Example #2 is USD/JPY 1-Hour, with trend line in wrong direction. It doesn't invalidate pattern, just can't use trend line for breakout.