Pullback Setups

I'd like to share with you a kind of setup that I use on my day-to-day basis. This type of setup happens almost every single day.

Even in low liquidity days like today, one is able to squeeze a few pips here and there.

I will demonstrate two setups (GBPUSD & GBPJPY) that I actually took today. Both of these fell into the optimal conditions state that is to be satisfied by trend, average daily range size, stop loss proximity and timing.

There was a potential third trade I chose not to take because it violated one of these optimal conditions requirements: timing. In order to take the GBPCHF trade, I would have to open a position after or right after or at London close. Therefore, it violated my own set of rules eventhough it would be a profitable trade after all.

Here are the trades:

Pound Dollar - the vertical line breaks the market into daily sessions.

Pound Yen - Much alike the previous day, all conditions were present.

GBPCHF - The pattern repeated itself once again. However, timing was an issue.

I usually take profit at around 80-84% of the average daily range of the particular instrument or a few minute prior to the end of the trading session (NY close). However, it's not necessary for a trade to reach TP every single time in order for a trader to be profitable. As mentioned before, this pattern occurs ina a day-to-day basis. The combination of small profitable trades like these, will surely add-up in ones monthly statement. A mechanical/systematic approach will also provide a very stress-free way of trading.

All the best to you all.

Types of Traders - Some Parody

During my rather short trading career, I have come across all types of traders.

Some come around as newbies wanting to learn and focusing on a single strategy. Others have diverted to all kinds of books and other nuances to a point where there is no way that trader will follow a single line of thought as to identify or deploy and effective trading method.

I have come across the successful trader. The one that is indeed profitable and has no need to boast his ideas. I have come across the scammer who is able to sell his product without the convincing numbers. I have come across the professional trader who is proud of what he does and actually try to help people.

I have come across the fundamental trader. I have come across the technical trader. I have come across the artistic trader, whose trend lines are real pieces of work!

But the trader that probably 'bothers' me the most is the "dummy account/technical/forex thread bully trader". This trader profile is simply surreal.

Lets see a few of the characteristics of such a player:

1) Most-likely hides behind a broker dummy account and trades money that he doesn't have. A second option, is that he/she has funded a real account but FAILS to pull the trigger even when the most perfect setup shows up;
2) Is able to predict the future;
3) Doesn't like to be criticized;
4) Has the most beautiful drawings and explanations about those drawings. And based on that, is able to anticipate setups. But... chickens out when it comes to execution time.
5) Has a thread of his/her own and posts the most perfect drawings and setups but in reality never took one of those setups;
6) Through the thread he/she tries to promote a GOD_LIKE aura of him/herself;
7) The results of the drawings or the drawings itself are posted AFTER the fact. Never before.
8) This trader profile has another interesting characteristic: He bullies around those who criticize his drawings, methods or results.
9) Usually, one has no idea of the real results of such a 'GREAT' trader. Most-likely, he will never come up with numbers;
10) Last but not least: This type of player claims to have tons of experience. However, he/she has failed to pulled the trigger even once. Statistics and backtesting is far from his/her reality. As a matter of fact, his/her self proclaimed art/experience is way more valuable than numbers/statistics/backtesting.

With such an extensive profile list, it shouldn't be hard to identify such a trader next time you come across one of these...

;-)

USDx and Majors

It seems to me that the USD has a short-term bearish outlook.

The USDx is consolidating inside a potential diamond formation that has 77.82 as the next supportive level. Price  will most-likely bounce up from this key-level thus completing the formation. It shall than drop towards the 76.50 level before it resume its uptrend. There is also a MACD bear divergence pointing towards 76.50.

Likewise, the pound has a bullish divergence pointing towards the 1.5931 minimum target level. Therefore a correction for the pound is also guaranteed.

The Euro also has a few MACD bull divergences pointing towards 1.3644 at first and the other one towards the 1.3867. Both are confirmed minimum targets.

Therefore,expect a short-term bearish buck for the next few days.

Cheers.

USD Uptrend Correction

 Following previous posts, I still maintain that the USD uptrend will resume sometime soon. Next wave should, most-likely, begin next week or so.

 I insist that the moves are somewhat easier to predict while timing is more difficult.

 Last week was a consolidation period for the USD against many currencies. Mainly the majors. Both the Euro and the Pound, broke a diamond formation to the upside. Needless to mention that a consolidation is known to be somewhat a market hesitation/indecision on what to do next. More than that, it shows that those who went in short begin to book profits making prices go up to a satisfactory level where a second wave of sellers are willing to jump in.It works exactly like a department store giving out discounts. There are those who only jump in when there is a clear trend. 

Therefore, the minimum targets for the Pound and the Euro respectively are: 1.6085 and 1.4091. Swissey will most likely be the greatest gainer against the USD and could probably reach 0.8445 due to a H&S formation observed on the daily chart. Gold could well reach 1770.00 @ short term.

 Thel USDx has a minimum correction target of 75.70. From this level on it becomes too risky to sell the buck IMHO.

As posted before, DJI has reached the minimum target of 11700 and it should keep going up for a short period of time before it makes another drop. Oil WTI has also surpassed the 90.55 minimum target and will keep going up for a while, but should also take another plunge soon.

The USD should keep going up with world economy risk being off thus generating the end of the carry trade bonanza. Next post I will talk a little bit about the Carry Trade itself.

I had made this post on Oct. 22 in my Facebook page (personal) but only for those who can read in portuguese. I apologize the delay in placing this post here.

All the best to all.

The U.S. Dollar and Commodities

As stated earlier, the U.S. dollar (USD) should gain against all currencies, except the JPY, in the coming years. I predict the USDX, currently at 76.50 + / -, to be about 99.50 + / -  by 2013.

What does this mean for commodities? The U.S. dollar has an inverse correlation with some commodities and stock market indices (equities).

So lets see,

Oil: The oil should keep falling the rising dollar. So we should see oil prices much lower than it currently is. The WTI is currently around 84.00, will rise to 90.50 approx. and then it should begin to fall again. Quite possibly we will see a barrel priced @ USD50.00 in a few years.

Gold: Gold is the current bubble. After reaching 1920 points and being considered the safe harbor, gold presents itself with  a huge MACD divergence on the weekly chart. This divergence should lead to a minimum target of 1043.900 in the upcoming years.  George Soros, not surprinsingly,  bought spot Gold as well as companies that exploit gold a few years ago. Soros sold most of his investments in gold by July / August this year. Needless to mention that Gold is also inversely related to the USD.

Silver: Almost a twin of Gold. We must also see Silver much lower in the coming years.

This will reflect directly in stocks related to commodities in Brazil for example. We should note, for example, significant drop in stocks of Petrobras and Vale in the coming years.  

The recommendation is to go short selling in the commodity spot corrections and also the papers linked to the commodity itself.

That is, when we look at the DOW @ 11,700 and oil above 90.00, the USDX at 76.00, you can indulge yourself short selling (short selling) Oil, Gold, Silver, Petrobras and Vale with good leverage. Conservative stops above the highs of the day, week or month depending on your risk appetite.

As stated before, the USD and other assets are in for a short-term correction. The minimum targets for these corrections are  already within reach. Possibly this could happen Monday. Let's look closely at the market at the beginning of next week.

Once they are reached , these targets should resume the dollar uptrend, the decline in stocks and commodities in the long run.

Cheers to all.

;-)

#Equities & #Majors Cross Analysis

By performing some cross analysis, one can almost foresee what will probably happen short-mid-long term in the different assets.

So lets begin:

USDx - As mentioned in earlier posts, there are a couple of gaps to be filled together with MACD must-reach bear targets towards the 76.66 level. 76.00 is also a a MACD bear target and aprox. the 50% retracement level.

GBPUSD - Overdue confirmed MACD bull divergences point to the 1.6088 level aprox.

EURUSD - There is a clear gap to be filled @ the 1.3382 level.  Also a clear divergence on the 8H chart pointing towards the 1.3936 level.

USDCHF - Bear MACD divergence pointing towards the 0.8646 level.

DOW - MACD bull divergence on daily confirmed by RSI pointing towards the 11700 level.

SP - Also a MACD bull divergence confirmed by RSI on Dailies pointing towards the 1228 level.

To sum it all up, we should see a drop/correction in the USD coupled with a short term rally in equities and probably in commodities too.

Lets wait and see what happens.

Cheers to all.

#USDBRL

Como venho dizendo em meu blog, é de minha expectativa de que o dólar siga subindo até pelo menos o ano de 2013 frente a todas outras moedas com exceção do Yen Japonês (JPY).

O target inicial da divergencia MACD, confirmada por RSI é de 2.0334. Porém é MUITO possível que esse target seja ultrapassado em muito pois  análise do USD frente aos majors e frente ao seu próprio índice indicam para um USD muito elevado nos próximos anos.

A boa notícia fica por conta do EURO  que deve inverter a paridade com o USD tornando assim viagens para os países da zona do Euro   assim como importações também a partir desses países, muito mais vantajosos.

No curto prazo, vejo uma correção para baixo do USD. Possivelmente veremos o USD a 1,74 neste ano, porém, retomaremos a tendência de alta pois o movimento principal virou para alta no dia 12 de Setembro.

Segue o gráfico do USDBRL:

Gráfico diário: Uma divergência MACD indica um target inicial de 2.0334. Esse target, no entanto, deve ser superado em muito.

#USDx and #Majors: Short Term Relief

Usdx has left runaway gaps while going up these last couple of weeks. Gaps are known to be covered sometime. In reality, they are 'unpaid debts'. Therefore I expect USDx to make a retrace towards the 78.72 level at first and than continue its descent downwards towards the 76.66 level.

This will bring some relief to other currencies especially the Majors. The Euro, for example,  is expected to gain some ground in the following weeks before it resumes its descent towards lower levels. Again, below parity is a must for EURUSD in the upcoming years.


Here is the chart for USDx:

USDx will most-likely cover the gaps sooner than later. A short-term correction is to be expected before uptrend resumes.

#Majors - Change In The Direction of The Main Move and Criticism

Cable has changed the direction of the main move of the year (MMOTY) today. Euro should follow soon as well as the other majors. When this happens, usually there is some extension expected. In this case favoring the bullish USD. AUDUSD also broke a very impotant supportive trend line and is heading to change the MMOTY.

Elsewhere, USDx is about to reach a bullish MACD must-reach target @ 78.86. As mentioned quite a few times during this year, the USD will remain bullish possibly well into 2013. Other targets to the upside are 92.63 and 99.51.

I am not going to jump on my horses and criticize fellow analysts, however, during the last few months, I read so many hesitant and illogical analysis from everywhere while all one needed to do was be able ro read the charts accordingly. It bugs me to see so many fellow analysts hesitating not only to see te obvious but also failing to observe matters from a speculator point of view. Some of them, just as economists, calling a few assets as being a safe haven. Most-likely, they will come up and call this a reversal 'as expected'.

On the other hand, I received much criticism from everywhere for having a firm forecast about the future (now becoming present). But at least, I was firm and will not change this while time goes by. I just hope I don't see those who were hesitant and critical about many things  come forward and say they knew all about this beforehand.

I guess the market is providing the appropriate answers.

As mentioned here earlier this year as well, next bubble due to burst is GOLD. The aforementioned 'safe-haven'.

Being right or wrong brings me no direct profits (although I am long-term  LONG in the USD). However, trying to predict the 'future', is a great means to exercise my TA capabilities. It's good exercise for the brain.

I am not Nostradamus but...

The predictions are slowly turning into reality as published earlier:

http://mcapitalmarkets.blogspot.com/2011/06/is-us-dollar-really-doomed.html

Spread Widening

Some of the brokers tricks are well know to all of us. Today I encountered an old friend of ours: spread widening.

A perfect example of stops been taken out, without actually surpassing the high/low, of the day happened today.

AUDCAD provided a perfect sell opportunity today. While one of my feeds/broker took out my stops above the daily high, the other didn't quite perform the same way.

The spreads were widened aggressively due to the jobless claims news in the US.

Oh well...

Perfect Price Action #USDJPY

Every now and then, the market throws a straight opportunity at us. It is up to us to read these and take action.

The PA provided by USDJPY for the last few days, gave us an excellent opportunity for a LONG entry in the direction of the weekly move.

After price made a consolidation on Friday and again yesterday, late on the day (Monday), PA provided a higher high. Then, today, price went to have a look at the earlier lows, this time around, it made a higher low, which provided an entry with very tight stop loss.

Have a look at the chart.

A perfect entry towards the direction of the weekly move was provided today.

Lack Of Discipline

A plan is only of value if you actually have the patience and the discipline to follow it. While this can be difficult, it is necessary if you expect to be successful, and it is this very reason why developing a plan prior to the trade is so fundamental. As rates fluctuate, you can easily get caught up in the market and it is only human nature that you will begin to second-guess your actions. If, for instance, the rate moves up surpassing your original take profit point, you may be tempted to hold out for an even higher return; alternatively, if the price drops below your limit level but you believe there is a big rebound just around the corner, you may be tempted to keep the order open on the hopes of a reversal.

But does either scenario really make sense? If before you entered the trade you had a sound reason for establishing both your take profit and your loss limit levels, how likely is it that conditions have changed so much that now you are prepared to throw your previous assessments out the window in the heat of the battle? Can you be sure that you are not acting on emotion rather than sound analysis?

This is why a plan is so important – it allows you to avoid the emotion that is bound to arise during times of volatility.

Now this is not to say that a trading plan can never be revised – in fact, your overall objectives should be re-examined every few months or even more frequently if required. As well, it may be necessary sometimes to abandon a plan mid-trade if market conditions warrant but this should be the exception and not the norm.

And yes, sometimes the market can be so volatile that no amount of planning will produce positive results. In this case, maybe the best option is simply not to trade until you can get a better handle on things. Never allow yourself to fall into the “I have to do something” trap – sometimes the best plan is to do nothing.

Automated Trading Experience

Experience sometimes brings us to some intriguing conclusions. Throughout my trading career I have come across many different types of trader and trader profiles. By trader profiles, I mean the different characteristics that 'build' a trader. I have seen boastful traders, proud traders, cool traders, anxious traders and even those that are very calm. However, I have been able to separate a wider sense that encompasses many of the trader characteristics: psychology.

I have personally observed a few traders with great potential fail simply because they could not handle the decision making process of a trade. They would fail to take a trade. They would rush into trades. They would close trades too early either by not letting their profits run or they would move their stops to brea keven with no logic behind it.  They could not simply follow the plan.

I myself have made many mistakes as such and still make them from time to time. 

The idea of lack of discipline is widespread in the trading industry and is one of the main reasons why most traders fail. 

I have never been a big fan of automated trading. The thing about the widespread majority of automated systems, EAs, Robots or however you like to call it is that they are composed of complicated math formulas rather than a well thought mechanical system in which, from time to time, there can be human intervention. Most mathematical formula based EAs, have a breakpoint and cannot be regarded as a healthy investment means in the long run.

On the other hand, if one has a sound trading plan, has logical places as to place the SL, where/how/when to enter the market as well as a TP level and all this can be translated into an automated system, than I tend to believe that one might get the upper hand: the discipline and psychological aspects of trading will be left out.

The market has artificial intelligence and no place for emotions or sentiment. Period. Be on the wrong side, lose money and the market will not be merciful on you: It will take your money and won't give it back to you.

Therefore, the counter weapon for that is to also use artificial intelligence through a sound trading plan thus leaving all kind of emotions outside.

Also, I came to a personal conclusion that trading is game of averages. You will win some, loose some. However, if you can land an average high  enough so that profit is sufficient as to counter the risk involved, than you are in business. I believe that automated or semi-automated systems can help us achieve these goals and with less stress.

By this, I don't mean that you don't have to do your work every day. On the contrary, this means that you have extra inputs as to provide extra room for improvement in your own trading system. Also, some decisions are there to be made such as: reversing a position or not? Should I be in the market during heavy news days? If I am in the market during te news, is it prudent to reverse?  and so on...

Cutting it short, I decided to 'migrate' 4 of the trading systems I use into automated systems. The first one is up and running but filled with small bugs. Therefore it is still not fully operational but operational enough as to provide a general idea.

The system has been up and running (forward testing) from the 24th and it was down for a day (the 28th). It has been able to rightfully increase a $100k account by more than 1% just in these last few days (actually just 4 actual trading days) . Needless to say that backtest on the system provided impressive results as well.

If you are interested in following the beta version of the system just click on the link below:

http://www.myfxbook.com/members/maurosandrade/ftt-18-4-stand-set/154655

Too early to congratulate my programmer or the system itself. However, I can call it a good start.

Cheers and Happy trading to all.

#EURAUD Intra Year Trade

I missed this oppotunity on this double-bottom most-likely to take out the whole years range north. As price is channeling sideways covering the whole years price action, it could even become a triple bottom giving us a possibility to enter a third touch of the lower trend line.

Another possibility is to enter at the break of the upper line of the channel.

Perfect double bottom so far. Can become a triple bottom. A position north can be established @ the bottoms third attempt or at the neckline break.

#ES and #EDJI Technical Pictures

It seems like we are going to see some more slide in the equity markets pretty soon.

The S&P 500 e-mini is showing the index inside a triangle formation in the 30-60 min time frames. The main diagonal is pointing up. Therefore it suggests it being a continuation pattern.

Pretty much the same can be said abot the e-DJI. We could see the future index as low as 9750 points sooner than expected.

I wouldn't be surprised to see further yearly expansion south since the Dow changed the main move of the year to down last week. A good extension is expected.

The e-DJI consolidation: 9750could be within range pretty soon.

ES 30 min chart: further slide is also expected.

#AUDUSD Long Term Outlook

This pair has perhaps the most exciting technical picture at the moment.
After reaching historic highs, the aussie reached and bounced from a trend line (to the pip) observed on the weekly/monthly charts. Just draw a line connecting the highs of 2004/2008/2011. On the other hand, I also ask you to draw a descending TL extending from the lows of 2004/2008 and projecting on. This should be enough to give you the idea of a broadening triangle that most-likely will turn into a diamond in the future.
There is an RSI divergence on the weekly chart that only confirms a MACD divergence that has a must-reach target of 0.9536. However, we should see this pair trading much lower in the following years.

On the daily/weekly chart, PA broke an ascending channel formation and now found support at a very interesting trend line that can be drawn from the low of 2007, the low of dec. 2010 , the low of the current year + yesterdays low. A next approach to this trend line will most-likely mean the kiss of death and the aussie will resume its path down.

So I guess it's very likely that we shall see an Australian Dollar, much, much lower in the following years.

Once again, time will tell.

The daily chart showing the rising channel as well as the trendline that extends from the low of 2007. Price stopped its temporary descent right @ this trend line.

The weekly chart: a bounce towards much lower levels is expected. This broadening formation might turn into a huge diamond.

#EURUSD Outlook (Diamond Pattern)

After some time drifting up and down, it seems that the Euro has finally shown its face. The pair is inside a diamond formation that will most-likely break south and will double it current short-term downtrend.

It took some while to form this one, but all the other formations seemed to be too obvious.

Also, price is currently trading very close to the lower border of an ascending channel that extends from the low of June, 2010. A break (very likely) will send this pair towards the 1.2300 area.

I still maintain my projection for an EURO below parity for the following years.

#ES and #EDJI diamonds

The e-mini futures for September for both the S&P 500 and for the Dow Jones have very similar pictures.

They both have been trading for some time now inside a diamond formation that can be observed on the daily/weekly charts.

The ES one demonstrates it has penetrated the lower right side and will most-likely head down with a minimum objective target @ 1127 points. However, I truly believe it will head much, much lower.

The EDJI has not been broken yet, however it will probably take out the right side lower trend line very soon. The minimum objective target for e-DJI is @ 10376 points.

The e-DJI is also developing what could become a huge diamond on the monthly chart. In this case, this index could go down towards around 9000 points in the following years before it picks up some  long-term bullish momentum again. For this level to be reached, it could take some 2.5-3 years. But it seem a very  likely scenario

Here are the charts.

The ES showing the diamond formation on the daily chart. The MOT is around the 1127 area. However, it could go much lower.

Similar picture at the e-mini DJI. MOT is the dotted line. Prices could go as low as the 9000 points in a few years time.

#USDJPY Small Diamond

After providing downtrend action during this week, it seems that we will see some bullish action for the Yen.

Spotted this one earlier today and was witing for confirmation. Lets see what happens.

A diamond on the hourly charts. Some bullish action could be seen sooner than later.

#USDx Outlook

Contrary to the widespread pessimistic views surrounding the buck, I still believe we will see the Dollar much higher in the upcoming years.

The daily chart demonstrates price action inside a broadening triangle formation. If one were not to follow the right sequence of moves, but only consider higher highs and higher lows, than one can assume that price is also inside a rising channel.

It's interesting to see price inside a sideways channel on RSI containing the broadening formation as well. A break on any of these two red lines will turn into the driving force. Whichever way it choses to break. There is also a flat line that extends from last October that contrasts with the lower highs and lower lows made until may of the current year.

Needless to say that a MACD bull divergence points to a must reach target of 75.85.

Once again, time will tell.

#EURUSD Trade Options

A good opportunity of taking a LONG in the direction of the monthly/weekly main move just presented itself during the ASIA session. A position could/should be established in the direction of the main move of the week/month (uptrend) in an attempt to take out the weekly average range.However, I truly believe this low of the week won't hold because the average monthly range was taken out this week. Therefore, we should see monthly range trading until Friday (last trading day of month) thus having higher probabilities of expanding the weekly range (currently around 62%) south of the weekly low.


In case those stops are triggered, a second option would be to take a position on the break (SHORT) of the low of the week. In this case, a the position will be backed up by the main move of the day and the NEW main move of the week. However, in this case, the position will require a bigger SL (above the days high).


A third option would be to skip the break of the weekly low and wait for a pullback towards the daily high where a more acceptable number of pips @ risk will provide a better R:R trade.


Fiber has just encountered a supportive trend line clearly seen on 4h or 5h time frames. On these time frames, a potential H&S formation could be in the makings. In this case, it could be worth trying to catch the top of the projected right shoulder with a very tight stop loss.


Let see what happens.


Cheers.

The 300 min. chart: a possible H&S formation could be in the makings.

A chance to go LONG presented it self as price closed in towards the low of the week when the monthly trend is up and the weekly trend is also up. However, a SHORT position can be established at the break of the low of the week.

#GBPUSD Long Term Technical Picture

The pound has a very interesting technical picture. The weekly chart shows that price reached a resistance trend line that extends from 2008 yesterday.

A short position could be established with a very tight stop loss. This would be a very discretionary trade as the monthly trend is up as well as the weekly trend. It would be based on R:R. By looking at price action added to the closer proximity to the low of the year, it was a clear opportunity to get a possible extension of the yearly range south if it actually happens.

Interestingly enough, both RSI and MACD demonstrate a very discrete but confirmed divergences.

While actual price action shows price making higher highs and higher lows, RSI shows action inside a sideways parallel channel. A break of  of the lower line is expected thus drawing down force pressure.

While chart price actio is inside a rising channel, RSi is clearly showing a sideways channel: divergence. Price reached a key trdline earlier this week.

#USDCAD

Loonie had/has two interesting positions as of now. Earlier during Asia, I took a short position in the direction of the main move on the brak of he lowwhen price was drifting upwards.

Another opportunity was just provided as price pulled back closer to the high of the day.

#EURUSD Range Breakout

The Euro was ranging between a roughly 120 pip parallel channel since thursday of last week. It broke this pattern north during Asia session. Considering the size of this consolidation, it has some more room to go up to around the 1.4550 level.


It was a considerable brekout because it took out the daily high/weekly high as well as last weeks high. A full trend following position.

However, the high of the month remains intact as it is still down.



Asia session took out the high of the day/week/last week. A

USDCHF

It looks as if the swissey has chosen its path for some short time. Most likely, it will head north for some time now.

I usually don't take the first break of a triangle formation as usually the first break means a fake break and therefore, the real market intentions is usually the opposite direction.

Taking the first break on such a formation is too obvious. Therefore, a great opportunity for stop hunting.

Lets see if this formation confirm my thoughts.

Best.

The first break of such a formation confirms the real market intentions.

#Dow Jones Diamond Formations

The Dow is inside a diamond formation on the daily chart. It seems to me that it will be a reversal pattern. Depending where the pattern breaks, the minimum objective target should be around 10.500 - 10.600 points. There is also a confirmed MACD bear divergence that will send price initially to the 10.900 points level. This is a must reach level. Timing, however is unknown.

I also have indications that price will head even lower. The monthly chart demonstrates a huge broadening triangle formation that could become a diamond formation. This one, however, would be a continuation pattern. If and when price reaches around the 8.000 level and bounces, we should have a complete formation. Therefore I expect a bearish Dow for the next years before it turns back into a bullish trend.

Only history will tell how all of these will unfold. However, when I put together all the analysis regarding the USD, the EURO,commodities as  well as other currencies, it makes all the sense in the world.

Lets see how all this unfolds.

Best to all.

Percent of Average Daily Range Fulfillment for 10 pairs (last 60 days)

As my trading method involve statistics and probabilities, I present this first hand information to you.

I have backtested 10 pairs using MSN historical data and found the valuable information for those of you who trade targeting % of average daily range completion.

It seems that at current market cycle, JPY pairs have a more limited potential to achieve above average ADR percentage. USDJPY and AUDJPY, for example,  had above average (above 50%) performance at no more than 78-82% of ADR completion.

In other pairs, the % of ADR coverage seem to perform better than the JPY crosses.

EURCHF seem to be the overall champ. This pair has above average potential to achieve above 100% ADR completion. With an aprox. 136 pip average daily range, this pair seems to be a good choice for trading at a first glance. Of course, one has other things to consider (trend, SL placement and R:R) just to name a few.

Therefore, there is no point trying to set unachievable goals for a intra-day trade. The distance between your entry and your TP level has to be a very important component of trading tactics. Boarding a fast car (trend), going for an achievable distance (ADR % completion) will give a trader statistic advantage of price reaching the Take Profit level before it reaches the proposed Stop Loss level.

Here is the graph.

Cheers.

PS: Special Thanks for Sorin (AKA SOSO) for helping me compile this valuable data. You can find Sorin Chiorean at his website: www.codeworks.ro

Setting a reasonable TP level has to be a very important part of one traders tactics. 

#USDX and Fibonacci Precision

One of the theories that I believe regarding trading is the retracement (discount) theory. The Fibonacci retracement tool aims to take those discounts and put them into measured levels.

Although I see significance in retracement, it's not every instrument that follows the fib levels accordingly. I would say that most of them don't exactly follow the fib level accordingly. There is always an exception for the rule.

USDx ans USDJPY are exceptions and interestingly enough EURUSD in some ways follow the fib levels as well.

So far, the bullish correction that we observe on the USDx, has followed the fib level in pretty accurate fashion. 61.80%, 50.0% and 38.2% (latest level for buy orders) have been very accurate.

Not only that, but the 61.8 level for the original downtrend channel, seems to be the first MACD bull divergence target @ the 78.90 level.

Although I don't use fib levels on my trading, it seems to me that there is enough amount of money parked on these levels as to make them have significance at least in a few instruments.

Cheers to all.

#EURAUD Diamond and Intraday Trade

A Fellow trader called me to the attention to this consolidation formation that happened towards the end of June on EURAUD.

This is a clear example of how a Geometrical formation, after its break (in this case clearly reversal) sets the pace of the trend. We needed a measured objective target for this and any short entries should be favored during the ride down.

Today was a clear example of this when price made a pullback towards the high of the day and a SHORT entry could/should be established in the direction of the main move. All trends were aligned (monthly/weekly/daily), therefore there were higher probabilities that this pair would try to fill its ADR south of the border. It did.

Both (break of diamond) and pullback were EXCELLENT trading ideas.

A textbook example of a diamond formation on the 60 min.  chart at the top of the range. Its main diagonal pointing up suggested a reversal as it clearly happened.

#USDCHF Diamond Reversal Picture

The daily chart shows see that we need a lower right border that perhaps will be formed in a few days to finish a very symmetrical diamond consolidation form.

Lets see what the low of the week will be. Probably that will determine the lower border.
The green line touch (as a swing low) would determine a good symmetry for this one. Since the main diagonal is pointing DOWN, the odds are that an upward break is most likely to occur.

Looking good so far.



We have other clues that show that a reversal (correction) is imminent. Those being price action being inside a bullish wedge formation and some confirmed MACD/RSI bull divergences already published here.

A projected diamond consolidation formation: although we still need a lower right border, mos-likely will be completed by the end of this week. A correction is very likely.

#EURUSD Breakout

The Euro broke an important trend line and now is heading towards the lower boarder of the channel path it is currently inside.

1.3968 seems to be the nearest support. We are also reaching the lower boarder of a triangle.

I still maintain my post from June 16, 2011 (http://mcapitalmarkets.blogspot.com/2011/06/is-us-dollar-really-doomed.html) where I believe EURUSD is headed towards parity and even below and that the USD will be bullish for quite some time.

Here is the daily chart for EURUSD.

The Euro broke an important trend line on its path down south. I still maintain the prognosis of parity or below parity in the following years.

#GBPUSD Outlook 08/07/2011

The Pound still holds some good opportunities for trading this Friday. Current prices show that we have close to an 80% chance of further expansion south towards the completion of the average weekly range.

If we get an aligned downtrend (month/week/day) tomorrow, than 2 trades could be possible:

1. If we have a downtrend day, than trade the pullback towards the high of the day targeting the average daily range and/or the weekly range.
2. Take the entry on the break of the weekly/monthly low following the direction of the main move. I will take this one only if the price action   permits placing a SL at a reasonable distance if compared to the potential profit.

Lets see what is reserved for us tomorrow.

In the case of a downtrending day tomorrow, the entry should be guided by tomorrow's high of the day towards the main move.

Price is much closer to an expansion south. Therefore, If tomorrow's price action allows, a position on the months/weeks break could be taken. 

#EURUSD Outlook 08/07/2011

The EURO doesn't seem to be a very interesting pair to trade tomorrow as it has completed its average weekly range already. A very limited option would be to take an intraday short on the pullback if price action permits (downtrend tomorrow as well). However, it wouldn't be too attractive, at least to me.

Better odds is that we should see some 'range' trading tomorrow.

A break below this months low (week as well) seem too distant as to enable us to place reasonable intraday stops. Therefore, I'll check back on this pair next week.

Here is the hourly chart for it.

A break above the turquoise line would mean a counter trend trade. Not suitable for this particular strong downtrend. The option could be to enter on a pullback towards tomorrows high, if we indeed have a downtrending day. I will seat out on this one tomorrow.

#USDCHF Hourly Triangle

The Franc has formed a tringle observed on the hourly chart.

Current price levels suggest that the swissey has roughly a 38.2% chance of completing it's average weekly range to the downside, thus taking out the low of the week and the month. This leaves us with around 61.8% chances of observing an expansion north.

So the break towards the top of the triangle seems the better choice as long as we have some inspiring price action tomorrow (daily trend should be up). If indeed price action permits a a SL to be placed below tomorrows low at a reasonable R:R, than a good trade could be setting up. Will see when time comes.

0.84342 level on the chart represents 50% of this weeks price action. The blue line level, above @ 0.85056 represents the high of the week. The higher peak to the left is the high of the month.

Price inside a triangle formation. We could see a break of the formation as well as a break of the weekly high as well as the monthly high thus far.

#USDCHF Holding On As A Safe Haven

Contrary to the other majors and many of their connected crosses, the swissey has been holding on as the safe haven for investors during turbulent days. However many indications says that a strong correction upwards is imminent (wedge + divergences), it seems that this particular pair is draining milk from rock.

 Literally.

As though the US Dollar Index is regaining ground (after a bounce from a triangle's lower trend line), the Franc is into a short-term downtrend. After having completed about 62% of its weekly average range, having the weeks and the months trend both aligned SOUTH, we should see a completion of this weeks range to the downside. However, as an outlook, not for trading sakes, I wouldn't be surprised if this months high is taken sooner than later.

For trading sakes, shorts are WAY more promising as of now.

On lower time frames, we can see a pretty flat, sideways channel which the top break, will represent the break of the monthly high so far.

Here is the daily chart for the Franc.

The Franc have all indications of a move upwards. However, we are still in downtrend mode. 

#GBPUSD Breakout

Cable has finally made the break of the monthly low and made a run towards its average daily range.

Other GBP crosses have followed.

Therefore, MANY pairs have a strong short/mid-term outlook.

Look for SHORTS.

Regards.

#EURUSD & #NZDUSD

Euro and kiwi have just changed the main move of the week/day/month to down. Therefore, these 2 pairs have a 'strong' downtrend probably for the remainder of the week. Look for shorts. Breakouts towards the end of NY session were good trade ideas.

#EURO Crosses Breakouts

Some Euro Crosses had very nice breakouts as announced earlier.

EURCHF broke it's days low during the Asia session and it took out the weekly low in the direction of the weekly trend. It has reached 100% of its average daily trading range. The low of the month still remains to be taken out thus putting it in FULL downtrend mode for the remainder of this week.

EURGBP had a similar situation to EURCHF and took the whole range as well. However, EURGBP also changed the main move of the month making it a strong downtrending pair. Look for SHORT entries on this pair.

EURNZD took almost the whole range as well on the break of the week low in the direction of the main move. The low of the month sent this pair on a full downtrend mode for this week/month so far. Look for short entries here.

On other European currencies crosses:

CHFJPY: A great breakout of the high of the week in the same direction of the month, makes this pair very interesting to trade on the next few days. Not only it completed its average trading daily range as it took out the high of the month thus changing the month move to UP. If we have a close near todays high, expect some upwards expansion tomorrow as well. Look for longs on this pair.

GBPCAD: This pair took out the high of the week as well as the high of the month thus aligning all three trends (daily, weekly, monthly) to an upwards condition. Look for longs on pullbacks or high (daily, weekly, monthly) breakouts.

GBPAUD: Also had a nice breakout on the daily/weekly highs in the direction of the move. All 3 moves (UP) are aligned. Also a great pair to trade in the next few days.

#EURCHF Follow Through

#EURCHF also had a nice weekly breakout with a very consistent follow through. Some 30, fast pips, could have been made.

#USDJPY, #GBPUSD, #EURUSD Range Breakouts

The Yen just had a nice breakout in the direction of the main move. A quick gain could be made. Also, TP @ ADR could be a second option. This was a special breakout with the month main move up as well as the change in the weeks move to UP and the days move as well.


Cable has an opportunity too. However, against the temporary main move of the month which still is UP. So, the probabilities of such a trade are smaller.

The same is being observed in other pairs. EURUSD including.

#USDx

The buck has reached a lower trend line of a triangle formation. Lets see what happens from there on.

#GBPUSD Outlook

GBPUSD is currently inside a channel as observed on the 60 min. and on the 30 min charts.  If and when price takes out the low of this month, so far, than the Pound will change the monthly main move to down. Therefore, if the daily range permits when and if that break occurs, a SHORT position should be established and the SL shall be placed above the intraday high.

Therefore, a very nice setup is in the horizon.

The 30 min. chart showing price action inside a rising channel. A break of this pattern should propose a change in short term trens direction. That wil only occur if and when price breaks below 1.587. A short position could be established in the direction of the main move.

#USDCHF Outlook Next Week and Further

In the short time-frames, we should see the beginning of the week with a bearish start. A bearish wedge formation can be seen on the 30 min and the 60 min. charts. One could take this 'risky' trade counter to the main move of the month (UP). However, I would recommend taking profits as soon as possible once and if the trend line break occurs. A bear MACD target is pointing towards 0.8393. We had incredible ranges for the last two days and closing prices close to the top. Therefore, momentum/acceleration is CLEARLY to the upside. However, we have a holiday in the US on monday. So activity will be lowered and therefore, this 'fall' in price is likely to occur.

On the 240 min chart, price is still inside a descending wedge formation. However June's whole price action is inside a broadening triangle formation (violet lines). It's early to say, however, this could later on turn into a diamond. Still early to say.


The daily chart still points to a correction pattern with price inside two bullish wedges (green and blue lines). A clear MACD bull divergence points to the must reach target of 0.8946.

So I expect this next week to begin bearish, however, price will pick up to the upside most-likely. Needless to mention that the USDx is reaching a critical trend line. A bounce from this trend line will inspire the USD bulls back.

Here are the charts.

The 30 min. chart showing the bearish wedge formation. Holiday in US could trigger this bear action.

The 240 min. chart.: The whole month of June inside a broadening triangle.

The daily chart showing signs of a reversal. Must reached target @ dotted line.

#EURUSD Outlook Next Week

The Euro is currently drifting inside a broadening formation since yesterday (thursday). The whole price-action of Thursday and Friday, in which mos people call it ranging, can give out an oppostunity to take positions. One option would be to take a short position from the upper trend line. However I dislike this a lot because one has no plac to "hide" the SL on such situation. It would also mean that one would be taking a position against the current main move, which is up.

However, taking a short on the break of the months low (today's low) is a good opportunity to take a position on the direction of the new main move.

Therefore, the plan is to take a short position on the break of todays low in the direction of the main move with a targets being the average ranges as well as that MACD bearish divergence target.

A great weekend to all.

The 30 min. chart demonstrating price action inside a broadening triangle formation.

The Macd divergence with the target on the 60 min chart. A position on the break of todays low will be established.

 

#EURUSD Main Move

EURUSD has just changes its main move to down. Most likely will complete rest of the day to downside

#USDCHF Update

The swiss broke an interesting trend line today. A LONG position on the break, in the change of the direction of the move was established and target @ 100% of the average daily range was reached @ 0.8397.

Here is the chart.

This pair has changed the main move of the week to up. If price closes today near the high, expect more bullish action for tomorrow as well.

More expansion upwards is expected.

Broken trend line. Position was previously (buy stop) established above the line and exactly at the change of the main move of the day. Profit taken @ 100% ADR.

#GBPUSD

Cable broke a bearish wedge formation that could be observed on the 30min, hourly time frames.

If price coses NY session close to todays low, we will have better chances for an expansion downwards tomorrow as well.

#EURUSD Outlook 30/06/2011

EURUSD is approaching the lower trend line of an ascending channel after it encountered strong resistance at the 1.4520 level.

MACD bear divergences point that a break is imminent. Entry should be guided towards the change of the main move of the day (break of todays low).

Cheers.

The 30 min chart demonstrating a rising channel formation. Price encountered strong resistance at the 1.4520 level.

#EURNZD Pullback Entry

Nice entry on the pullback for this cross.

Trade in the direction of the months trend, the weeks trend and the days trend. Perfect combination.

Very tight SL already yielding good profit during the early hours of NY.

Lets see where it takes us.

;-)

#USDx and #Majors

The buck is approaching a very important trend line. It is the lower trend line of a triangle formation. Likewise EURO, USDCHF, Cable are all approaching key TLs.

Coincidence or not both EURO and USDxs trend lines almost perfectly coincide with the fib retracement level of 38.2.

Lets see how this plays out.

* I have a very strong cold and could not update earlier.

Best to all.