I went LONG NZDUSD

My most thought out and complete trade, ever!

Final update and thoughts post trade.

1st position hit limit for 159.9 pips gained.  Newly added (4th position) hit limit and closed for 61.6 pip gain.  Original position 2 and 3 hit trailing stop and closed for 140.2 pips each.

My most thought out and complete trade ever, and still I did not remain in the trade until targets reached.  I over managed and was to aggressive with the stops.  The final two open positions closed after hitting aggressive trailing stop on “shake out” day.  Had trailing stop been better placed, targets would have been achieved as price move up sharply after “shake out,” right up to 0.81015

Though price had put in a double top and moved down to the 21 ema sharply, I could have been more patient as this alone was not a signal that price was reversing trend from up to down.  I have a lot of tools I could have used to help determine if this was a reversal or pull back.  In hind sight, almost all of my tools showed it did not signal a reversal though live the signals were and remained bullish.

The aggressive trailing stop was poorly placed as it was both above the 4-hour 21 ema, and at a previous resistance area that was coming back to be tested as a, now, support level.  This is not an ideal area to sell especially in a bullish trend and impulse legs.  The resistance turn support held and price quickly propelled up to targets.

I have to let my winners run and be more patient.  Had I read the charts with a little more focus and patience, A long trade should not have stops above the 21 ema, and at a recent broken resistance level.  It would have been better placed below the immediate impulse leg which began at the opening of the week.   I was concerned with locking gains and lost sight of the trade set up and it’s that it’s potential was still in place–price action was bullish not bearish.  I had little to fear except greed.

The fear and greed cost me, since closing this trade, prematurely, I have missed out on a few excellent trade set ups for NZDUSD.  This is just another example of losing even when I close for a gain.  I lost my focus, edge and confidence as my emotions were focused on missing out hitting identified targets.  This distracted me from seeing and feeling the rhythm of price and I became unsure.  I need to trade with more focus, patience and never stop reading the charts while keeping my emotions out of the process.

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Update Monday July 22nd, added a new Long Position

Update of open Long trades in NZDUSD.  Added a new long position and adjusted targets.

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The Entry on July 12th.  Writing blog July 19th. 

I have been studying price action of NZDUSD, almost exclusively the past month or so.  Here is the NZDUSD Case Study.

From the rotation, price moved up sharply breaking structure resistance to the upside.  I thought, if price moves back down to the previous resistance it should now hold as support and I should take a long entry.  Priced moved down and closed below the 21 EMA but also put in an immediate short term double bottom and price remained above the lower lows.

Seeing all of this, I took three long positions.  It was not the best entry at price kept moving against me, but stops were not hit.  Stops were big as they were below the established lower low below .77000 and limits were big too.

Partial target taken at double top of the recent highs from July 11th.  The next target is at a previous LH, from June 19th, which is below .81000 and also near the .382 level of the impulse leg retrace.  Extended target is further above, at the high of June 14th, and just above .81000, but may get adjusted if target two is achieved.

Partial Target hit and remaining position are positive and risk free.  Two positions remain open.

At the time of writing, Friday evening, 1 position hit limit and closed with two positions still open and stops at positive levels.  The daily chart is looking bullish and the 4-hour chart has run into some resistance. This is expected resistance and why position partially closed here.

Next Wednesday July 24th, 5pm EST, NZD official cash rate announcement followed by statement.

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The Overview

NZDUSD fell sharply from about .85800 down to .76800 creating a down impulse leg.  But, I started following it from .81300 down to the low of about .76800 which was hit on June 24th.  From here July NFP numbers, and FOMC minutes were on the horizon.

Before the release of the NFP numbers, I was studying which way price may move and noticed a pattern I have seen many times before.  I call it “rotation.”  Rotation is market moves switching sides, in this case unloading shorts and picking longs.

I was initially looking, even expecting, price to retrace up to the .382 level before NFP and FOMC releases.  That did not happen as price moved side ways, in a range between  of about .77000 to .78200, for about 11 or 12 trading days.  As price unfolded in this range, I thought a direction would be given with the release of both NFP and the FOMC minutes.  Either price would continue it’s way down establishing new lower lows or begin it’s retrace to .382 or higher of the big down impulse leg.

Here is a chart daily chart highlighting the identified points.  With the release of both NFP and FOMC price did move sharply down, from where it was, but it did not produce a new LL below the June 24th low.  This led me to believe that a bottom was already found at about .77000

I should start to look for long trades up to the .382 level.  If price won’t break a support or resistance level then it is likely to go in the opposite direction.  In this case, it found support at .77000 and could not break it.

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EURUSD Trend Reversal or Pull Back?

EURUSD: Is the 15 day down move over?
Has Euro found a significant level at 1.2756, support?

Update August 19th, one month later.

The take away lesson one month later is trading with identified levels goes a far way to give insights of where price may go and the patience it takes to see it through.  To answer whether it is trend reversal or pull back is still uncertain, but identified levels are still valid and in place.   The analysis was right.

Though the chart and price action has been bullish up for all of July and most of August price is at a double top resistance level at 1.34215.  The impulse down leg of June has retraced almost 100% back up.

If price level 1.34215 (the beginning of the impulse down leg) gets broken and closed above, on the daily chart, then EURUSD may run up to 1.37000. NOTE: the impulse down leg did not produce a new lower.  The March/April lows are still in place, which are also the lows for the year, 1.27460

I need to watch for price action behaviour to determine if buyers or sellers are in control.  If buyers out number the sellers then 1.34215 may get violated and price could run up to 1.37000.  If the sellers are in control and short EURUSD in large amounts, then price will hold at 1.34215 and decline down to key support retracement levels or further.

I need to watch levels and alignment of signals all pointing in the same direction, when this happens that will be the direction price moves in sharply.

Price moved up above the “Buy ?” blue line and continued up where is slowed down a little at .786 after a slight pull back and delay it resumed up to .886 level then pulled back again but still bullish.  A double top at 1.34215 is still play.

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July 15th, 2013

Below are Daily, 4-hour, and 1-hour charts for EURUSD with key support, resistance, and Fibonacci levels identified.  Based on which way price break I will look for entries in that direction.

The charts with their identified levels provide me with “if then” statements allowing for quick and easy evaluation of the charts.  Now that the levels have been identified just need to check in periodically to see if they are reached and how they are reached.  Trading levels like this instead of individual bars, tick-by-tick, is a lot less stressful!

On the 4-hour chart there is a blue line labelled “Buy ?” and one labelled S2.  When price breaks and closes on either side of these lines trade in that direction.

  • If below S2 trade short and target the .618 level, S1, or a double bottom and below if move is strong impulsively.
  • If above “Buy ?” blue line then trade long targeting the recent high and or the .786 retrace level of down impulse leg and further up to a double top at 1.34162 and beyond if move is strong.

Walked away, took a break and Re-focused

Thursday July 11th

After yesterday missed opportunity, I took a break.  When I returned to the computer, I was patient until I got a favourable entry.  This was not an easy, I wanted to enter earlier but thankfully waited.  I kept waiting because price was not showing any signs of finding a bottom support and none were present.

I know capital preservation is far more important than anything else, but I should have let my trade run it’s course yesterday.  Assuming my entry has some thought and a systematic explanation then either stop or limit would get hit.  However, I am glad I walked away and took a break to collect myself as my emotions were taking over.  It worked and this morning I was more patient and controlled.  My emotions were not in control, anymore, I was and it allowed me to execute a high probability low risk trade.

  • I don’t trade the 5 minute chart a lot but went to it to find a buy signal after price came into yesterday’s low.
  • I took a long entry around 9am EST but it was a guess not systematic, so I quickly exited just above break even.  Price had not broken any structure or the 21-ema to the upside and not on a significant support level.
  • After exiting, thankfully, thought if price gets close to the low from yesterday I would look for buying pressure.
  • The 11:20am EST 5-minute bar broke through yesterday (Wednesday’s) low impulsively but the following bar retraced back up impulsively closing above the preceding down IB giving a potential buy signal.
  • I waited for the 15-minute bar to close and it left a bullish pin bar.
  • After seeing the low hold (though, only on 5 and 15-minute chart) I took  a long entry and then another after a little more thought.
  • I placed quick small stops just below the bull pin bar with modest target of 25 and 30 pip limits.
  • It took a couple of hours before limits were hit and stops were never threatened.
  • I was not at the computer when limits hit which may have been a good thing.  If I were at the computer maybe I would have let the second entry go longer but I am happy with achieving targets and letting the trade go as planned.
  • I also noticed a mirror symmetry pattern forming which allowed me to wait for price to fall further.  It also allowed me to see the probability that the down move may terminate at the significant low from yesterday.

Wednesday Update

I had it right but lost sight, got scared off, closing for break even just before price takes off to targets. 
Why?  Impatient?  Inexperience?  Lack of confidence?  Afraid to lose?

FOMC Minutes release at 2pm EST today.  This produced some price swing which has left me unsure.  However, the swings have remained with an identified range.  Possibly, need to look at higher time line for more direction in conjunction of the time lines.

I need to re-focus and move forward!  Now that price has broken resistance look for pull backs to get in LONG, again.

Once again I trade with the news and tried to interpret the news it and failed.

First chart, 1-hour chart

  • Maybe I was a little to quick to exit the trade for break even but it had move a bit against me almost approaching stops.  Stops were below the short term fib point A.  And, from past experience price volatility between 5pm – 7/8pm EST is almost inconsistent.  Sometimes capital preservation is more important than being right.
  • It is important to note, though price has been volatile it has been so within identified levels.  I need to wait until price breaks these levels and then evaluate accordingly.
  • I have two Fibonacci retracement levels drawn with two different starting point but the same ending point B.  The smaller fib did not have a 100% retrace (identified support low was not breached and or broken).  I had the right idea but lost sight, inexperience?  Lack of confidence?  Afraid to lose?
  • The low before rallying up also ended at an identified fibonacci extension 1.618 level.  I should have not been so quick to close for break even!  I had it right, yet made no money!

I NEED TO IMPROVE MY TRADE MANAGEMENT!  I COULD HAVE CLOSED PARTIAL LOTS.  DID NOT HAVE TO EXIT ALL POSITIONS.  SHOULD HAVE ADJUSTED STOPS AND LEFT TRADE OPEN.  I NEED TO LET MY WINNERS RUN SO THEY CAN PAY FOR THE LOSING ONES.

Second chart, 4-hour chart

  • All last week and coming out of last week I thought NZDUSD is rotating for an up rally.  It did!  I waited patiently for confirmation and identified correctly pull back support levels.
  • After breaking structure to the upside, priced pulled back to an identified structure support level.  I also said I would wait until the 1pm and 5pm EST 4-hour bars were closed to determine if the level would hold.  It did, I was right and still made no money.  I have to learn to read volatility, see how price reacts to levels.  It is best to trade from a level than to a level.

11am EST Wednesday July 10th

NZDUSD has moved up and now dropping back, is this the pull back to get in long or does it have more to go down?

  • Resistance levels has held, blue box at top.  Price has broken the 21 ema on the 1-hour chart and some support levels.  The Fib .382 and .618 levels do not yet show that they will hold.
  • I have drawn two different fib retracements both having the same B point but differing A points.  There was confluence at the between the two with the .382 and .618 aliging equally.
  • Took a long there but did not like the rhythm of price and quickly exited.  Would need to see some interim structure levels broken to the upside before considering that the levels will hold.

Price, as of time of typing, on the 4-hour chart is now below the 21 ema.  Will wait to see where it closes at 1pm EST and then the 5pm EST bar, as well.

1-hour Breakout strategy on News release

NZDUSD 1-hour break out strategy on NFP news release

Here is another example of a highly reliable strategy to further train my reticular activating system (RAS).  Though, the specific example here is on NZDUSD 1-hour it can apply to any currency pair on any time line.  I like it on the 15-minute and 1-hour charts.   The same set up on the 15-minute timeline is shown in the second chart.

Training my RAS to look for these will improve my odds of recognizing and acting on it live and improving my chart time analysis.

  • This set up took a several days to develop and the key was knowing when major news is being announced.  In this case, the US Non Farm Payroll (NFP).
  • The first step is identifying extreme highs and lows and watching how price behaves at them.
    • There are two highs identified by the red horizontal lines at 0.78577 and 0.78293
    • There are two lows marked by the red horizontal lines at 0.77093 and 0.76821
  • The next step is to identify the most recent HH and see that a new one  is made above 0.78577
  • The Thursday before NFP released price moved up sharply, right to the 0.78577 level.  The 9am and 10am EST 1-hour bars were impulsively up but did not break the resistance red line.
  • Over the next 14-17 hours price slowly pulled back to an earlier resistance level that was taken out by the 9 and 10am EST bar.
  • A price shelf is formed on the small horizontal support blue line labelled 3.
  • This is where the reliability of this set up increases.  From the blue line price moves up trades and closes above the 0.78293 level.  Now, the NFP news release could have easily carried price further up breaking the 0.78577 level.  In that event I would have written and said price moved up sharply pulled back close to the .382 level and then continued up another leg.
  • But, when price does not do that and instead breaks down below blue line 3, after the news release, it says that “No'” price will go down and likely to the next support level.  This is what it did.
  • In addition to breaking blue line 3 price also broke trend lines 1 and 2.  Again, if price was going to move further up after the news release there should not be any reason for it to be below these lines, including the 21 ema.  As I can see since Wednesday price has been moving up with the 21 ema and the trend lines as moving support.
  • Often with misdirection like this the bar before the breakout is the opposite colour.  This was again true in this case, the big impulse bar down is preceded by an up bar.  I call this “misdirection before and impulse bar.”  It can only be confirmed as such after the IB is closed.
  • Note: as priced drops on IB and then further on the next two 1-hour bars there is no price action indication to take a counter trade.  There is an excellent example of when to take a long trade here after the break of the pennant up and above the 21, but that is for another article.
  • The entry could have been on the break of any of lines 1, 2 and or 3.  Stop goes above the redline of 0.78577 and limits first target at 0.7735.  with a double bottom adjusted target given the sharp move down with no sign of a pull back.  It was an ideal impulse drop to a significant support.

Reviewing EURUSD 4-hour July 7th

Reviewing price action lessons from the past few weeks:
June & July 2013

Update, Monday July 15th, 6pm EST.     Where  and when to enter EURUSD?

The original post below discussed the up trend followed by the symmetrically equal down trend for EURUSD, 4-hour chart.  Below, I wrote reminding myself not to look for or take LONG trades until a structure resistance level LH level has been broken.  Price was stair stepping it’s way down and would continue to move impulsively down until a bottom is found.  Confirming a bottom could not happen until a structure level is broken.  This has now happened!

A structure LH is now broken along with the 21 EMA, and it was done impulsively.  Now that an up impulse leg is in place, I need to look for Longing entries.

Note: based on my system of trading there were no signal, on the 4-hour chart, to go long until now.  The IB bar which broke the the 21 ema and then structure is the signal therefore, until this signal is given no long entry was present.  The following bar was a continuation bar up which too was impulsive in nature.  Only now is a retrace occurring possibly providing an opportunity to enter long.  Need to check daily chart for insights.

 

Original Post, Sunday July 7th, 2013

To establish and train my reticular activating system below is a review of price action for EURUSD on the 4-hour chart.  The principles guiding these patterns repeat themselves many many times on all time lines and all currency pairs.  Using fractal trading can help provide insights to determine trend pull back versus trend turn around and bring harmony between differing time lines.  The key is to see the rhythm with in price and exercise patience, focus, discipline, and confidence in my analysis.

The chart below shows Mirror Symmetry between the move up and the current move back down.  This fantastic symmetrical trending move provided high probability low risk trade set up but more importantly it prevents low probability high risk trades.

EURUSD 4-hour chart

Analyzing the 4-hour chart well can be done as it takes 4-hours before a bar is complete, however, because it takes 4-hours I can lose patience and focus putting myself at risk for low probability trades.  The key is to trade levels not the individual bars.  Either a level is his or not.

Trading using price structure, Impulse Bars, the 21 ema, trend lines with price waves measured by LL, HL, HH and LH, and common sense can help see high probability set ups with low risk.  Entry and trade management requires confidence of my analysis and to wait until each 4 hour bar is closed before adjustments, if necessary, are made.

These reliable price behaviour repeat over and over as they are governed by fundamental technical principles.  If price is rejected at a support or resistance level (structure) then it suggesting it’s heavily defended and price should move to the opposite level.  For example, if a resistance level holds then likely price may move to the opposite support level and vice versa.

If price moves sharply in one direction leaving an impulse bar it suggest price has strong momentum in that direction.  If an impulse bar breaks a structure level and or the 21 ema it further shows its strength and it makes no sense to trade against it.

I do not trade the news, but it is important to know when news is being released.  If the release of major news items moves price to key levels and then breaks it, I should not go against the move, but see they are in harmony and trade with it.

As price moves and establishes HH, HL or LL and HL it leaves points that can be connected.  These form trend lines.  A trend line may serve as moving support and resistance structure level and they are governed very similar to the horizontal lines.

A impulse bar which breaks “a line” can be reliable, but one that is preceded by the opposite colour candlestick becomes more powerful (See, both circle 1 and circle 2, IB in above chart).  Circle 1 shows two consecutive up bars that together can be called an Impulse move.  Notice how the bar preceding the two up bars was a down bar, I call this “misdirection before and impulse bar. “ Similarly, at the peak before the big down impulse bar the preceding bar was an up bar.  An IB and surety of a structure broken or held cannot be known until the bar closes.

Trending moves are in place until structure level(s) has been unquestioningly been taken out!  That is in the current down move unless the most recent LH and 21 ema are both broken the down leg will remain in play and how it is taken out matters.