A-B-C-D Trade - page 22
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EUR/USD did not confirm above 1.2450.
Don't know what the reason was for the gap, nor care too much. speculate that it may have something to do with China indicating they would relax the peg of their currency to the USD, only to state that they will keep it stable, one day later.
Perhaps there were some orders from institutional traders that were later reversed based on the recant.
We'll pull retracement fibs on the 15-min chart, based on:
Low - 19:00 price of 1.2358
High - 21:15 price of 1.2467
Pair just bounced off support at 50% of 1.2413. Now 61.8 1.2400
Inclusion of Tokyo will spice things up with volume/volatility.
Tokyo doing a little buying upon opening. On the 1-Hr, using Point C of 1.2400, despite a slight probe below.
That results in:
FE 100 = 1.2509
FE 127 =1.2539
FE 161.8 = 1.2577
......as we wait to see if B (1.2467 is broken).
break to downside...swings were clear....just hit FE 100 1.22368.
FE 127= 1.2349
FE 161.8 = 1.2325
The last post regarding the downside breakout had a take profit at the FE 100 due to the distance/size of A-B.
Thereafter, the pair retested 1.2467 but retreated mightily well into the European session.
A pivot can be seen on the 5-min (attached).
A = 08:00 GMT 1.2430
B = 10:45 GMT 1.2379
C = 11:10 GMT 1.2410
Asian Low = 01:20 GMT 1.2367
FE 100 = 1.2359
The distance from Point B to the Asian Low was 12 pips.
Distance from A-B was 51 pips, exceeding our 45 pip tolerance, which means we target the FE 100.
The distance from the Asian Low to the FE 100 was 8 pips.
This was not a trade scenario.
Small extension did move down to 1.2349 to establish a new pivot up.
We waited for any new ABC to develop. Using the former Point C as the new Point A, it has hit 1.2349 for a new Point B, and also formed a pivot for new Point C at 1.2397.
Time running out on European session and so we'll look like we'll see if there will be break of Point B (1.2349) during the second half of the U.S. session before New York's equities markets close.
I use the equity market session times since Forex is a 24-hour virtual trading floor and really does not have open/close times. The markets, such as the stock market, often drive the currency markets. Sometimes its the other way around.
Here's a link to a download for a session time program that sits on top of you screen. It's not a MT4 program. It links you computer clock to display which sessions you are in and the distance to the next session, etc.
Forex Market Hours
Guess I should explain last scenario a little more. It kept us out of the false breakout.
The retrace to form Point C was 61.8%.
Since the distance of A to B was 51 pips, and we target the FE 100, this means that there was only 38.2% of the distance of A-B left for profit. That equates to 19 pips.
Remember using the FE 100 as the target means that the C-D leg is equal to the A-B leg in nmber of pips.
The retrace of 61.8% took away 32 pips of the C-D portion, thus leaving 38.2% and 19 pips for gross profit.
HOWEVER, since our rule is to enter after the break of the Asian Low, we lost 12 pips (the distance from Point B to the Asian Low).
We also have to factor in losing some pips on entry because we have to wait for a close of a 5-minute candle below the Asian Low.
We also lose the the number of pips to pay the broker's spread.
If a trader used the 15/15 pips technique, probably lost a little when it retreated back into the Asian range - unless stop-loss was moved to break-even.
....We waited for any new ABC to develop. Using the former Point C as the new Point A, it has hit 1.2349 for a new Point B, and also formed a pivot for new Point C at 1.2397.
Time running out on European session and so we'll look like we'll see if there will be break of Point B (1.2349) during the second half of the U.S. session before New York's equities markets close.....
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Breakout of European low 1.2349 occurred and extension bounced off of the FE 100 price of 1.2315 for 17 net pips if we entered at opening of 17:45 acndle on 5-min chart.
Making its way toward the E 127 price of 1.2293, but may stop/pause at round number 1.2300.
As we are at the close of the European session, let's review EUR/USD's action. 5-min plot, with times in GMT.
A = 01:15 high 1.2353
B = 02:15 low 1.2284 (distance A-B = 69 pips)
C = 07:15 high 1.2327 (61.8% retrace of A-B)
Asian Low = 1.2284 (same as Point B)
FE 100 = 1.2258 (profit target = 26 gross pips)
FE 127 = 1.2239
FE 161.8 = 1.2215
Entry = 1.2278 (open of 09:20 candle after break candle closed)
FE 100 was hit at 10:45
Stop-loss analysis
Options:
1) just above 1.2300 as that has acted as S&R (slightly higher risk versus reward)
2) just above retrace fib 1.2295*
3) just above 1-min pivot 1.2296
4) just above Point B (same as Asian Low, but not recommended by me)
5) just above Point C ( destroys our risk/reward)
* To ascertain retrace fib, drag fib retrace tool from low 1.2285 to high of 1.2367.
Stop-loss based on selecting 1.2296 + spread and 1-pip cushion = 1.2300
Risk/Reward = 22/20 net pips
The attached 5-min chart illustrates how exact the pair respected these fib levels. Blue fibs are the extension fibs, and black are the retrace fibs.
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Note that the previous ABC pull's FE 161.8 was met. It is not uncommon for the market t0 respect both ABCs
The area of 1.2241 is also the 32.8% retrace in the big picture, as seen better on the daily chart. Pull:
Low = June 7th low 1.1976
High = June 20th high 1.2467
My last post took some time and i didn't want to cram everything into one.
Let's now look at the 2 subsequent pivots after the first break of the Asian low.
If we plotted a new ABC on the false breakout, we would arrive at a FE 100 of 1.2248. We monitor that but are ready to take profit at 1.2258, as per my last post.
The 2nd pivot was very small but explains why the pair stopped where it did, at its FE 100 price of 1.2254.
Although we took profit at 1.2258 per last post, we can further understand what the market is doing as depicted with the last 2 ABCs.
In the middle of a breakout to the downside. However, the swing of Point B was far from the Asian Low (15 pips). Thus within the ABCD guidlines, we do no take this trade, based on risk/reward.
Attached 5-min chart in GMT:
A = 08:15high 1.2305
B = 11:30 low 1.2259 (46-pip distance from A-B)
C = 12:30 high 1.2286
Asian Low = 1.2244
FE 100 = 1.2245
FE 127 = 1.2233
FE 161.8 = 1.2217 (hit)
Open price of candle following "break candle" = 1.2231
The distance from A-B was 46 pips, which is right at my divided for trading to either the FE 100 or the FE 161.8. Each trader must make this decision, or compromise. Moving stop-loss essential as well.
A 15/15 pip stop/take profit after break of Point B technique was a winner.
Edit: forgot to mention there were medium data released during Euro session and this is the weekly US oil inventory release. Big one is FOMC interest rate decision, which is expected to remain the same. Check economic calendar.
For those of you interested in trading off the news.
Attached is 5-min chart of USD/CHF, which has been selected due to the FOMC interest rate meeting. There is always residual components that can move the market, even if rates left unchanged.
In this case, and we don't want to get too involved with fundamentals, the contents on the Feds statement weren't exactly pro-growth.
We plotted our ABC:
A = 15:20 high 1.1129
B = 16:05 low 1.1079
C = 16:20 high of 1.1098
European Low = 1.1061
Entry 1.1046 as we waited to clear Asian low of 1.1049 as well. Pair was moving fast so we lost a little here as anticipated.
Initial stop-loss just above 5-min pivot of 1.1084 plus spread.
FE 100 = 1.1046
FE 127 = 1.1032 (hit)
FE 161.8 = 1.1015 (take at least half of lots for profit)
FE 236.2 = 1.0977
Data released at 18:15. Market was already below European low at about 1.1053.
We need to watch volume as well as New York close. Many factors can work against us, such as squaring of positions on other pairs. We don't want to tighten our stop-loss yet based on this (temporary).