A-B-C-D Trade - page 12
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The reason EUR/USD went past the FE 161.8 price of 1.2374 (per blue fibs on last chart), is the tight and most recent ABC pull as illustrated on the attched 15-min chart in red.
Once there is a new Point B and/or C established, we need to draw a new ABC.
The market will often respect both.
Cheers
Attached is the 5-min chart of EUR/USD.
Asian session is yellow box.
We can see that the logical ABC (blue) had the FE 100 just above the Asian low (red horizontal line), which means no trade.
We redraw fib extensions (black). It is still moving towards the FE 100 of 1.2212, after bouncing off the first ABC (blue) FE 161.8.
Just hit, will post chart next.
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Note the earlier false breakout of the Asian high. If our rule is to wait until the 5-min candles closes above the high/low, we would not have entered that trade.
The 2nd ABC had entry below 1.2247. After candles closes, entry price at 1.2234.
Stop-loss just above Asian Low of 1.2262 for risk of 32 pips.
Targeting FE 100 at 1.2212 + 3-pip spread and 1-pip cushion = 1.2216
Reward = 18 pips
Risk/Reward = 32/16
Had we used the price just above the 1-min pivot of 1.2255 for stop loss, we wold have stopped out. that scenario would have been a risk/reward of 25/18.
Still not good.
If we targeted just 15 pips, we still would need to keep the stop-loss at 15 pips. The entry at 1.2234 and subsequent bounce to 1.2260 + 3 pips spread would have stopped us out too.
The key was the entry. THe pair was moving very fast as witnessed by the large red candle on it's 3rd attempt to break the Asian low.
There also was the 2nd attempt where we though it had established Point C. That was a false one and since it did not break Point B, no harm/no entry. It went on to re-establish a new Point C. So, we had to readjust our ABC.
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The subsequent movement that is still occurring tells me that since it hit the first ABC's FE 161.8, it is respecting that and may go to the blue FE 236.78% fib price of 1.2178.
Note that major support lies at 1.2143, which was the low from last week and a significant low for past months. Any gain close to that vicinity is off-set by huge automatic buy orders waiting.
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In the end, unless we were targeting beyond the black FE 100, this was not a good risk/reward scenario. I did not trading this one as I slept through the early European session.
Final minutes to European session close, and short covering (ending sell trades) has limited ABCD move tot he FE 127 fib (black line on last chart posted).
The significant low hit last week of 1.2143 was a fresh low since 2005. Since the institutional traders like to round off, we're looking at 1.2150. Any thing close to this and we will see heavy buy orders closing out sell trades.
Experienced traders will also trade the bounce off of this kind of significant support/resistance. I look at the 15-min chart and draw retracement fibs off of the last significant move down.
If the pair breaks that support, it should produce good gains. Advanced/experienced traders only. Often a probe will trigger orders going both ways. Stop orders (buys) can pop the pair back above 1.2150.
Here is the 1-hour where I plotted the ABCD. "Coincidentally", the FE 161.8% fib is at the significant low of 1.2143 as mention on the last post.
EUR/USD 5-min chart.
During Asian session, we had a clean breakout of the U.S. high to the upside. No revisit below Point B nor U.S. high.
Easy stop-loss below 5-min pivot, which was Point C. The Point C retrace was small and thus good profit potential anticipated to extension levels.
Gross pips to:
FE 100 = 33 pips
FE 127 = 46 pips
FE 161.8 = 64 pips
In this trend market, some traders will target above the FE 100. Just adjust your stop-loss as pair goes up.
As we can see, thrust up had power and respected each FE level, with a bounce off the FE 127 before continuing to FE 161.8 and FE 236.2.
There was breakout of the European high that just happened, will post that next.
As posted yesterday, pair had solid bottom of about 1.2150 and bounced nicely upwards and now about 200 pips higher. I did trade a retrace and opted to exit at the 38.2 fib for 21 net pips.
This was Breakout of ASIAN High...sorry
Fast 5-min candle may have prevented some from entering since one of the safety mechanisms is to wait for the first 5-minute candle to close above the previous session's high or low.
European high (pink horizontal line) was just 8 pips above Point B.
Gross pips to:
FE 100 = 24 pips
FE 127 = 40 pips
Extension may have not ended and could very well hit the FE 161.8.
Right now, EUR/USD still in upper range of last ABC, trying to extend to FE 161.8 fib.
Let's look at attached 5-min chart. I used an indicator just pulled from another thread here, the Chin Breakout which has audible alert after breakout of channel.
We draw a small ABC to upside and wait for Point C to hold. The blue fib lines are the retrace levels, while the black lines are the extension fibs.
A-B is relatively small (41 pips), so we target the FE 161.8 price of an extension of 1.2435. Break of Point B is 1.2388. profit target = 53 gross pips
Stop-loss below Point C of 1.2369.
Let's review
Entry about 1.2392 + 3-pip spread = 1.2395
Stop-loss = 1.2367
Target Profit = 1.2435
Risk = 28 pips
Reward = 40 pips
Note volume lower since Europe closed and New York winding down. However, good for teaching.
We'll also review stop-loss options in another post. In general, we need to move of stop-loss to break-even as soon as practical. This can come in the form of when pair hurdles the FE 100. I like to use fib levels to move stop-loss. Another option is pivots.
O.K. we are in on a BUY as pair has risen above 1.2388. Volume is low and thrust thus far missing. New York closing soon. Let's see where the pure technical analysis takes this kind breakout.
We also remember that this may be the finishing of the last ABC with the FE 161.8 at 1.2400, which is also a round number and a psychological price level.
Here's a zoom-in screen shot. Had to readjust my Point B, which changed the target FE 161.8 to 1.2437.
Entered after first 5-min candle closed above channel high of 1.2388, filling at 1.2391.
Set take profit 2 pips below the FE 161.8 of 1.2437 = 1.2435.
Risk (stop loss just below Point C) = 24 pips
Reward = 44 pips
We can see on the attached chart that it bounced off of the FE 61.8 fib and found support at the 23.6 retrace fib (blue).
Understanding how fluctuations move between fibs provide more confidence and calmness in our trading.