A-B-C-D Trade - page 195
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i wanna know how a gap comes ( for gold higher side gap ) ?
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1) Gaps occur when an event takes place that drives the instrument so forcefully that buy or sell price cannot keep up at the usual intervals. Price will skip levels.
2) Often, it can happen over the weekend, when an event shocks the market and the opening price on Sunday gaps. In this week's example, the S&P downgrade of the U.S. was announced after the markets closed on Friday.
3) Market is caught off guard when economic data is much better or much worse than projected.
thanks for ur clear explanation
Correction: FOMC is 18:15 GMT. Markets awaiting rate decision and statement.
Overnight trading of the Dow Futures and related instruments such as the US30 pivoted during the 02:00 hour. The U.S. session has carried that momentum forward, thus far, to recapture some of yesterday's losses.
EUR/USD neared Sunday Low 1.42871 at European open. Subsequent attempts to breach also thwarted. Pair trading near 38.2 fib of aforementioned wide plot. That is up from earlier 61.8 level.
This interaction confirms Sunday Low as significant S&R for this week.
Gold has retreated 61.8% since gap opening price on Sunday, and now near 50% after bounce.
CHF pairs regaining strength after bounces.
FOMC - held rate. Discussed extending term of portfolio.
DOW and S&P 500 initial reaction is a sharp decline.
FED admits slow growth. Nothing drastic in statement. Vote split, with 3 dissenting.
Their tools are limited, as interest rate is at almost zero.
Gold has moved up about $15. Attached is 30-min chart moments before FOMC statement. We also display BAJA bearish divergence after 09:00 candle.
Nice shorts
SPX500
AUD/CHF
EUR/CHF
Panic has set in. The 3 instruments mentioned are all in profit. Can use script to exit all positions at the same time.
Bond rates have also spiked down. Attached is split-screen of US30 (mimics DOW 30 Futures), SPX500 (mimics S&P 500 Futures), AUD/CHF, and EUR/CHF.
Pullback still very possible under these whipsaw and panic conditions.
Entering sell positions about 20 minutes after 18:15 FOMC release produced the approximate net gains based on exit at 18:43.
EUR/CHF = +138 pips
AUD/CHF = +114 pips
SPX500 = + 14.00
Trading during these volatile periods is reserved for experienced traders.
The attached split screen shows pullbacks. We removed the US30 as that was essentially the same as SPX500, and inserted XAU_USD (mimics gold futures).
The arrow marks 18:15 FOMC release.
Chart 1 displays plots on a 30-min EUR/JPY chart with PSQ9 and SQ9(Price) using start price of 114.162..
Wide plot:
High = Aug 8th 21:00112.517 Low = Aug 9th 02:00 109.080
61.8 = 111.203
Directional extension plot:
Low = Aug 9th 02:00 109.080 High = Aug 9th 07:00 110.643
138.2 = 111.241
Retrace plot:
Low = Aug 9th 18:30 109.212 High = Aug 9th 22:00 111.235
38.2 = 110.462
50 = 110.224
***
The retrace plot's High (22:00) is a peak that registered 79 on the RSI(4), down from the previous candle's reading of 89 (overbought).
This peak was the 61.8 retrace of the wide plot, and the 138.2 extension of the directional plot. It was also the 238-degree level of the SQ9(Price).
The 22:00 candle close red and proceeded to retrace, like EUR/USD.
***
Chart 2 is a split screen of 2 1-hour EUR/USD charts. The chart on the left uses SQ9(Price) with start price of 1.49388, which is an old plot, but still good.
We focus on the previous resistance at 1.4400, reached twice this week. This level is also at the SQ9's 405-degree line.
We plot retrace fibs, but our first choice for the low (1.41942 at 18:00) was not the best, in hindsight.
It's 23.6 retrace fib of 1.43455 did however, match up with the right chart's PSQ9 Moon 180 and Mars 0-degree lines.
The pair went on to also respect plot using low of Aug 9th 00:00 1.41513. This produced the 23.6% retrace fib of 1.43385, and at the same level as the SQ9's 450-degree line.
Either way, this was a good short opportunity with a tight stop-loss and therefore good reward/risk ratio.