Strength weakness across pairs confirming?

If currencies are agreeing across the board your odds of success improve. Here gbp and eur move at the same time against jpy, see the red lines at 5.35 and 8.25. Jpy is obviously then weak against multiple pairs.

You can have a similar position with say gbp being strong (or weak) against multiple pairs.

Some general trading rules of thumb

Nothing works 100% of the time but these are some good general guidelines. Don't believe a word I say check it out for yourself. None of this is rocket science and good to have in the back of your mind:

- If London open fails to move in a certain direction then a move in the opposite direction has a high probability of success.

Not suggesting you jump on everything but consider when your trade rules agree. Here London open failed to move higher and when the low of the immediate range (yesterdays high) was tested 1.8410 there was a nice move lower.

- A break and retest of a range has a high probability of success. See the arrow up.

- If London open has had a quick 50-70 pip move (depending on the pair) that will most likely be it for a couple of hours.

- If the London morning session is quiet then the US session is likely to be good, after all a pair has to get to its ADR.

Current 1hr chart set up

I have these 8 pairs on 1 screen so that I can immediately see if a specific currency is strong/weak as aud is at the moment or if eur or gbp is strong/weak against many crosses.

I am looking at a strategy at the moment which is why the specific macd and rsi settings are on.

Trend v support/resistance

You never know what will win out trend or support/resistance. All you can hope for is to spot the SR level and see how price reacts.

After the Asian session move up this morning both GBPCAD and GBPAUD stopped at easily identifiable levels for several hours and had negative close 3 bar reversals (below the previous 2 candle closes) with little/no lower wicks. Great set ups for further moves lower.

I like to watch for confirmation across more than 1 pair. Either from various gbp crosses, see above, or against a specific currency eg gbpaud and euraud. This morning several gbp pairs closed lower and in addition euraud also closed lower.

Picking the right pair to trade doesn't work every time but in this case gbp was weak. Then euraud also confirmed, it would suggest gbpaud a good option to trade (gbp weak across more than 1 pair, aud strong across more than 1 pair). However any aud sell (eur or gbp) would have worked out as aud was strong against both and any gbp sell would have worked at it was weak (against cad and aud).

Trades taken since the last post in June.

An update on some of the trades taken.

 

4hr charts W pivots

The 4hr charts again clearly show the importance of the W pivots and support/resistance levels and the relatively few number of significant moves that can be expected in a week (2 to 5).

Not all wicks are created equal EURAUD - what happened next

This goes back to the 5th June when we looked at the large hammer and what seemed like the rejection of a move lower. This suggested a move up would happen but we had doubts based on how we view the market. The flow of the market from 6th June would have been the deciding factor.

Hindsight is always a perfect science, but your trading can be greatly assisted when these scenarios occur live if certain candle patterns can be expected. The lower high, engulfing negative closes below the moving averages on the 1hr on 9 June was certainly not the kind of price action expected of a market moving up.

Please see these popular posts that looks at flow and our view of the market:

http://vantagefx.blogspot.com/2013/11/trading-101.html
http://vantagefx.blogspot.com/2013/06/question-on-absolute-basics-of-method.html
http://vantagefx.blogspot.com/2012/11/question.html
http://vantagefx.blogspot.com/2012/11/recap-29-nov-method-expanded-multi-time.html 

Not all wicks are created equal - EURAUD

The lower wick on EURAUD D chart shows a clear rejection of the move below the support area 1.4600. On Friday we followed this up with a large doji. However we are still below the D 8lwma, below the RSI 50 level and RSI has not crossed up.

I am not convinced by any candle that cannot cause a close the other side of 8lwma. Could this be the start of a move up, of course. We are possibly 2 days (lower wick and the doji) into the 3-7 day reversal pattern we typically look for in a change of direction.

The 4hr shows the higher low and RSI cross up, but we are still below the 50 level and the upper trend line has not been broken. I haven't shown the lower trend line that forms the triangle.

Either way the flow needs to confirm next week.

Trade of the week

EURAUD - On 2 June price moved up into the identified resistance area 1.4730 and closed with a large upper wick. The 1hr chart is shown but entry was taken off 15 min after a 2b/evening star/3 bar reversal of the high. Exited at the lows of the recent range for +78.

News in the US session took price down to W M1 1.4514. Something is going right when the biggest disappointment in the week is an exit for +78.

4hr charts W pivots

As usual the 4hr charts show the importance of the W pivots (please note this historical pivot indi does not show the mid pivots), support and resistance levels and the number of significant moves that can be expected in a week (2-5).

Our trade of the week

A remarkably good salesman I knew told me that despite having massive success most of his sales were nothing out of the ordinary, but 1 out of 20 or so was something special. He actually looked forward to the run of the mill sales, knowing his numbers he 'knew' a big sale was around the corner.

Now whilst we really hope to have a better 'home run' record than 1 out of 20, this week we had a few trades but nothing really special. That's OK it happens. So no trade of the week charts today.

4hr charts W pivots

As usual the 4hr charts show the importance of the W pivots (please note this pivot indi does not show the historical pivots just this last weeks), support and resistance levels and the number of trades that can be expected in a week (2-5).

Not all wicks are created equal - UJ and EU comparison

In the last week both EU and UJ had significant lower wicks on their D charts at identified support levels, typically you'd expect them to go up? In this case EU fell and UJ went up.

Apart from saying the US$ was strong, after the fact, most indicators (other than divergence) would not have alerted to a possible direction change on a D chart and even if they did which trade do you take? Buy one of them perhaps picking the wrong one, buy both and getting a winner and loser? Lots of potential risk for little reward.

I believe price action itself would have alerted the way (we had a 42 pip successful trade buying UJ and did not trade EU down, see the useful link my trades at forex factory).

 

On the D charts, on 21 May both pairs have shown their 2nd significant lower wick in and around proven support/resistance areas. Giving good reason to expect moves up on 22nd May. If we take our general trade analysis viewpoint neither pair has validated a change of D trend, no 3 - 7 day reversal pattern with a close above the 8lwma, RSI either not crossed above signal line or unconvincing, RSI below 50 level, no engulfing 3 bar reversals closes (close above the previous 2 candle closes).

So for us any buys would need our counter trend rules to apply. This revolves around reversal candle patterns at proven support/resistance areas and W pivots.

So the D charts on 21 May suggest a move up. We need to focus on the 1hr price action on 22nd May for buy signals.

EU 22 May, at London open it makes a higher low, following the D candle a strong signal indeed that there is a buy. However 2 doji's then a 3 bar reversal (close below the 2 previous candle closes) follow at the Asian session high 1.3685, see the left arrow down. If we had been buyers this would give us serious concern. Firstly according to our D trend rules we have not got a confirmed change in trend to buys, we remain below our 1hr blue moving average that is angled down and now the 1hr flow up has failed. The higher low did not follow through and gave a lower high/double top. From there the lower high lower low flow continues giving another sell signal on 23 May.

In contrast the move up in UJ to 101.60 on 21 May breaks the lower high lower low flow on 1hr. There is a higher low in the Asian session and from there the higher high higher low flow continues easily seen with price action above the blue moving average which is angled up.

In summary then the 1hr price action that follows the D candle gives good clues on how to trade after the D lower wicks.



Our trade of the week

Our trade of the week was held over the weekend. On 14 May a strong negative close would be expected to continue (even if after some retrace).
Our counter trend rules:

 If we are considering counter trend we want over whelming additional information to consider, such as:

- Proven support/resistance levels.
- W pivots.
- Divergence on higher time frames.
- Price action proving it does not want to progress for hours, double tops/bottoms , higher lows/lower highs, evening/morning star patterns, engulfing closes.
- Psych levels eg round numbers

In addition to the right kind of price action on 1hr or 15 min, double tops/bottoms , higher lows/lower highs, evening/morning star patterns, engulfing closes.

Our counter trend rules were met. Price was in a proven support/resistance area from Feb-Mar '14 and a W pivot 1.6728 (click on the charts to see in greater detail). On 15th we had divergence on 4hr and 1hr, price moving for hours that it did not want to go lower and a classic higher low on 15 min and 1hr.

Entry 1.6775, we exited at the W pivot R1/round number 1.6900 for 121 pips.

4hr charts W pivots

As usual the 4hr charts show the importance of the W pivots (please note this historical pivot indi does not show the mid pivots), support and resistance levels and the number of trades that can be expected in a week (2-5).

4hr charts W pivots

As usual the 4hr charts show the importance of the W pivots (please note this historical pivot indi does not show the mid pivots), support and resistance levels and the number of trades that can be expected in a week (2-5).