A-B-C-D Trade - page 290
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During Asian, the latest Greek bailout agreement and tranche was approved. EUR/USD spiked up.
Keeping with our theme to cluster the subject matter as best we can, we have another chart with the camarilladt indicator. It's a clutter chart, that includes MurreyMath1.0 (MML), Andrew's Pitchfork (APF), RSI(4), and volume.
This 30-min chart plots APF (yellow):
Handle = Feb 20th 13:00 high 1.32757
Upper corner = Feb 21st 03:00 high 1.32921
Lower corner = Feb 21st 02:30 low 1.31856
We didn't show the interiors fibs derived from adding AML_v1-1, in order to keep chart from getting unreadable.
The Feb 21st 02:30 candle was the power move after news was released. The next 03:00 candle had a red volume bar, indicating declining aspect.
As Europe came on, price made a revisit of high during the 09:00 candle period. The 08:30 and 09:00 candle periods had red volume bars.
We also can notice the candle bodies respect the APF's upper fork. A direct hit to the middle fork occurred during the 10:00 period. This coincided with the pivot level generated by the cam (green ).
There usually is a bounce at the middle fork. This example went for 20 gross pips.
After that pullback, price moved below middle fork and closed at the first interior fib below. When we mouse over the fib generated by the AML indicator (not shown), it is labeled Lower_ML1.
That means it's the first fib below the middle fork. The next one down is labeled Lower_ML2. The opposite is true for levels above the middle fork.
The attached 30-min chart uses PSQ9 Mars at intervals of 45-degrees. Period separator is turned on in chart properties (right click on chart).
We can see the pops up by all 3 sessions, with our comments on the previous 2. The U.S session traded up to the 78.6% retrace fib level (based on plot from day's low/high), which is the same as the Mars 180-degree.
The white vertical line points to declining volume at the 15:30 candle, which also was the case with the next 16:00 peak candle period.
Those are 3 reasons to exit long or enter short at that price level.
A 4th, but more difficult resistance to see, is the FC 31.4% extension based on APF posted earlier. The plot is made from middle fork to upper fork, with the fib channel tool.
Chart 1 is split-screen. Left is session colors with MurreyMath1.0 (MML) and fibs plot using Asian Low/High.
Clean breakout of Asian High 1.32867. German data drove price up to near 200% extension. Here is where the bounce trader can wait.
The peak was near several resistance levels, including:
5/8th MML
Mars 225 and Moon 45-degree (30-min chart on right)
- notice candle bodies stayed below these levels.
A revisit (1.3324) is a quick short opportunity, as price is near again.
Chart 2 is Gann_SQ9 on 1-hour. The peak was near the 90-degree level 1.33262, and candle bodies stayed below that.
Bounce down went to the 45-degree 1.32839, making precise hit during 12:00 hour.
The Gann_SQ9 was left on default angle 22.5. This means the interval between levels is 1/16th of the 360-degree circle.
Gann used the fractions of 360. The indicator can catch different swings if you change the time-frame.
To new viewers. This thread is largely comprised of indicators and techniques based on support and resistance (S&R).
There is only 2 ways to trade S&R. Breakout or bounce. It is also used as guidance for exit by momentum traders.
Some plot S&R on higher time-frames for guidance. We can see the "major" S&R levels on 4-hour, daily, etc. There would be a greater chance of a bounce or reversal off major S&R.
All techniques need to have money management. The higher your reward/risk (R/R) ratio, the less you have to win to be profitable. Obviously your target take-profit (TP) has to be realistic.
Here's another example of R/R:
On a $10,000 account, at 2% risk per trade.
R/R of 2:1 can be actual win of 40 pips and stop-loss of 20 pips.
Each month trader wins 3 and loses 3 times, a 50% win ratio.
End of each month, trader has a positive result of $600.
Taking it a step farther, if trader allows money to compound (no withdrawals), the balance at the end of one year is $20,000.
Here's the 30-min EUR/USD again, with PSQ9 indicator. We like to use a 30-min chart as some of the sessions and data releases are at the half-hour.
A zoom-in on this chart, with fib plot using European session Low/high of 1.32669/1.33415.
The attention is to the bounce of the 08:00 low during the 14:30 candle period. This is the U.S. open, based on the stock market hours. Remember to change at daylight savings. Here's a link for that at worldtimezone.com:
Worldwide stock markets map shows the current open closed holiday status and current time for stock exchange- 24 hour format
A change in session can often mean a change in direction, especially during the European session. The market reacts to economic data and world events. The European session contains the most data releases.
We don't advocate being in the market, as day traders, during these periods. Otherwise, trader should be trained to trade the news (data). Price can whipsaw and take out the small stop-losses.
We feel that this is a major reason some day traders lose more than they win. They were either never taught to stay out, or chose to ignore it.
If a traders ignores data, they better have a large stop-loss and/or understand the risk/consequence.
If the unwitting traders keeps getting burned, they may think it is due to their technique. Generally, this would be a wrong analysis.
Let things subside for about 30-mins after data. Don't chase the market. Let it come to you. Understanding S&R and using money management will help tremendously.
Back to the example. The target for a bounce trade at the 08:00 low, also had the Mars-180 degree residing there. That's another confirmation or reason.
The distance of the high/low of fib plot is under 100 pips. We have stated that for large moves, the minimum retrace is 23.6%. For smaller moves, it is 38.2%. This would be considered a smaller move.
Therefore, if the trader is conservative, the 38.2 of 1.32954 is the TP. Entry set automatically just above that low of 1.32669, at 1.32700 plus spread = 1.32720.
This makes the TP 23 pips.
If trader seeks a 2:1 reward/risk ratio, the S/L cannot exceed about 16 pips from entry. That would be 1.32560, and 10 pips below the support 1.32669.
That's a little tight, but is a nature of this kind of trade. Remember, you will still be profitable winning 50% of these trades. Be patient and selective. Don't be trigger happy.
If you have gambling tendencies or often "revenge trade" after a loss, you need to stop and get your head together. The psychology of trading is also very important.
That said, a trader that is confident in their technique(s) will falter much less in the psychological aspect.
Always have a plan and weigh the R/R.
Here's another chart (1-hour) with the more recent subject of using the camarilladt indicator. It plots using the previous day's levels.
We pair it up with the Keltner Channel (KC), Heiken Ashi Smooth (HAS) candles, and MurreyMath1.0 (MML).
Australia is the first major market to start trading since their time is ahead of the others. This pair made a bottom during the 01:00 GMT hour, after 00:30 data.
We don't have the candlewicks turned on, but the low is at the S1 level of 1.05956, as marked by our yellow arrow.
The carmarilladt generated a L3 LONG level (red) at 1.06098. This obviously means it's a BUY level based on this technique. The 0/8th MML level is also nearby at 1.06201. The 0/8th is at the bottom portion of this indicator/technique.
The HAS candles can keep trader calm, and in the trade for potentially larger gains.
Take-profit (TP) targets can be the H5 LB target, 2/8th and 3/8th MML, or fib extension levels.
Fib plot using swings Feb 22nd 07:00 high 1.06851 and today's 01:00 low 1.05962 produces:
100 = high 1.06851 (exit option ahead of data)
127.2 = 1.07093 (hit 09:00)
138.2 = 1.07189
etc.
Stop-loss just below the day's low of 1.05956.
Reward = 70 pips
Risk = 22 pips
R/R ratio = 3:1
Recap: GBP/USD made a full recovery back up to this week's high. Attached is a 1-hour chart with the indicator camarilladt, Keltner Channel (KC), and MML. We also plotted an ABC.
The green vertical line partitions the new day. From Point A (week's low) 1.5647, pair made a run up to 1.5752 during the 01:00 period, to establish Point B. This is also at the 4/8th MML, as well as the mid-channel on the KC.
The 23.6% pullback was Point C. This dip was also to the L3 LONG level, as well as the Pivot level.
TP1 would be determined by time, as 09:30 contained U.K. GDP data. Price made a high of 1.5798 just ahead of data. Other TP levels are the FE (fib extension) levels.
The negative GDP outcome resulted in a small retrace, and loose stop-loss were intact for those attempting to garner larger gains.
Pair extended to the FE 161.8 1.5890 during 18:00.
If using HAS candles, it was blue all the way up.
This Andrew's Pitchfork plot was very easy to see.
Handle = Nov 4th 2010 high 1.42811
Upper corner = May 4th 2011 high 1.49389
Lower corner = Jan 9th 2011 low 1.28745
Change name of APF to AL1, by clicking chart, objects, objects list. Locate APF in description box and change name to AL1.
Insert indicator AML_v1-1, to get interior fibs, which are labeled and can be seen by mousing over them.
Horizontal fib plot:
High = Oct 27th, 2011 1.42464
Low = Jan 13th 1.26229
The Low had BAJA bullish divergence (using RSI 4-period), and near Lower_ML1, which means it is the 1st fib below the mean (middle fork).
A 100-pip bounce down off the middle fork occurred Jan 20th and near the 23.6% retrace fib.
Another very tradeable point was the 38.2 retrace level of 1.32431, hit Jan 27th, 2011. This intersected the Upper ML1 (1st fib above the middle fork mean). This bounce traveled about 230 pips and near the 23.6% fib.
The next peak of Feb 9th was the 2nd peak of a BAJA bearish divergence. This decline also ended up at th 23.6 fib.
Friday's high hit the Upper_ML2 and near the 50% retrace fib.
The Forex market moves in sequences within ranges, until it is interrupted by trends. Figure that out, adding rules, and survive the trends. This is the polar opposite of traditional thinking.
Use of a shrewd, but not reckless money management system, will change it from good to tremendous.
USD/CAD 1 Hour with PSQ9. Fib plot Low = .99057 High = 1.00188.
Price extended to the 127.2% fib yesterday during the 11:00 period. The pairs declined since then, coinciding with the drop in oil, has made a 138.2 to the downside (not shown).
The Mars 270-degree of .9935 is just above the next fib of .9930. This is the support area for a potential bounce up.
*****
EUR/USD 1-hour with Gann_SQ9 made a swing to the 90-degree 1.33694 level and reversed upon the U.S session open.
Currently price just bounced off of the 67.5-degree 1.34519. The 90degree level of 1.34810 is near Feb 24th high of 1.34853.
This is the resistance area for a potential bounce down.