What did not happen is insightful, too

In Forex trading, when studying price action:

It’s not only about what happened, what did not happen is insightful, too

When I look at the charts it is easy to only focus on what happened, but often there is invaluable insights in what did not happen.

Only focusing on what happened may limit my ability to really read what is happening.  Here is a quick video that may assist in illustrating my point.  Then below is some chart examples.

Here are some price examples from the chart of what happens when I can identify where price does not go.

Understanding the relationship between where price does go and does NOT go will help in placing stops and limits.  Trading levels instead of individual bars and time periods will also make me a more patient trader allowing to filter out the noise.

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.

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.

EURUSD June 10th – 14th

Tracking price action on the daily, 4-hour and 1-hour charts for the trading week
June 10th -14th, 2013

Thursday update EURUSD:

  • Price still moving sharply up.
  • Any move down would be a pull back until price has a full break of structure and rotates below the 21 ema the up trend will continue.

Tuesday’s EURUSD Trades

  • UPDATE: the third trade got stopped out over night for a 20 pip loss.  Stop was poorly placed.  It should have either been moved to break even or the swing low on the blue (chart below).  Price dropped down to my stop and turned immediately and rallied up over 80+ pips which would have easily hit my target of 50 pips.
  • First trade: after price came down and broke structure (break below, close below) to the down side on both the 1-hour and 15 minute charts I decided to take a short trade off the 21 EMA line on the 15-minute chart.  The entries are at 1S with stops at the red line.
  • I originally had stops above the recent high but did not like the rhythm of price and when I saw price coming back to test the 15-minute 21 EMA I moved it down to the most recent swing lower high.
  • I thought if price is above the 21 EMA on both the 1 hour and 4-hour chart so it may not be a good resistance on the 15-minute chart plus, the daily and 4-hour charts are still trending up.  By lowering the stop I got stopped out, but for a lot less than I would have if not adjusted.
  • There were good reasons to adjust the stop as price should have moved further down after breaking structure and if it came back to this level then it would suggest it has more to go up, against me.
  • Second trade was a long trade right after being stopped out short.  This was a quick scalp and quickly recovered some of the losses from the earlier stop out.  I was aggressive with the positive stop here as I thought this was going to be the next move up and price would not come back, but it did.
  • When it came back further down after setting new highs I was a little confused as to where price may want to go.
  • However after watching it play out from about from 10:30am to 2:15 pm EST I decided to take a long trade which is still positive at the time of writing, up about 25 pips.
  • I took the long trade because the pull back down of price did not go where it should have if price was going to bounce down from Resistance.  As the 21 EMA kept holding on all time lines and no new lower low being set plus the daily and 4-hour charts looking bullish, I decided to go long.
  • I am targeting 50 pips (1.33393, which is a 1.272 fib extension level) with about a 22 pip stop level.  The stop is just below an up impulsive bar.  Though, I will watch if price breaks the 21 ema and maybe close for positive or break even is needed.  There is room between the break even point and the 21 ema to adjust accordingly.

Tuesday June 11th, 11:00am EST.  Uncertain of trade signal but biased to upside

eurusd 1 hr stop area jun 11
EURUSD is in an up trend. This chart identifies, If I was in a long trade from where would stops be placed. The purpose of this is to watch when this stop level gets hit, it may indicate to start looking for short trading opportunities. Until it gets it look for long trade entries.
  • The Resistance level of 1.33081 is still holding.  The 10am EST 1 hour bar broke above but closed well below it.
  • Price may move until it finds support either at 1.3180 or even lower at the daily retrace of .382 level (1.31100)
  • Look for a break below close below yellow to confirm further move down.

Monday June 10th

  • As of Monday 10:00am no clear signal though looks like price is forming a shelf on 1.31962
  • Look for price to rally up from here or break below.  Watch for further signals.
eur daily jun 10
EURUSD Daily. Look for short to medium term pullback of price before moving up further. Support around the .382 of current up leg.
Price remain inside Thursday big up bar
  • Weekly chart; last week weekly chart closed up but below the lower high resistance set from the week of April 27th but
  • Daily chart; last weeks Thursday daily bar closed above the high of the lower high from from week of April 27th.
  • On 4 -hour chart identify Thursdays highs and lows as Price may remain within this range
  • Expect a pullback before a continuation Upward.  Support may be found around 1.30741 with possible resistance around 1.34