Monday, February 9, 2015
Avoid weak pre/early US open counter trend candles
As we have often discussed we would avoid getting involved with weak counter trend moves and rather look for the US session to continue the direction set by London. Not saying we would never be buyers but would look for more than 1 weak reversal candle.
Strength/weakness at a glance
Referring to the previous post.
These are the 5 min charts for GBPAUD, EURAUD and GBPNZD. I am looking to try and gauge agreement between pairs from the charts to determine strength and weakness.
Here the 3 pairs are agreeing as at London open (green line). They are all below their purple lines, have failed at highs of their immediate ranges and making lower highs. GBPAUD and EURAUD agreeing suggests AUD strength. GBPNZD agreeing with GBPAUD suggests GBP weakness. As mentioned before I have been watching the GBP NZD/AUD correlation for some time now.
Once I get this agreement I am happy that a pair has broader strength/weakness and then looking to time my entry from a retrace on 1 min chart.
These are the 5 min charts for GBPAUD, EURAUD and GBPNZD. I am looking to try and gauge agreement between pairs from the charts to determine strength and weakness.
Here the 3 pairs are agreeing as at London open (green line). They are all below their purple lines, have failed at highs of their immediate ranges and making lower highs. GBPAUD and EURAUD agreeing suggests AUD strength. GBPNZD agreeing with GBPAUD suggests GBP weakness. As mentioned before I have been watching the GBP NZD/AUD correlation for some time now.
Once I get this agreement I am happy that a pair has broader strength/weakness and then looking to time my entry from a retrace on 1 min chart.
London open trade rules
Clean AB move lower, break and test of range (red line on chart), small BC retrace to form lower high. EURAUD agreeing as was GBPNZD (the correlation between GBPAUD and GBPNZD I have been watching for some time now).
Sunday, February 8, 2015
US session entry from lower time frames
These rules are essentially the same as the London open rules. Trading with the higher time frame trend with entry timed from 1 min (or 5 min) charts. Many traders would say the 1 min is noise, this method attempts to reduce the noise by trading with trending pairs with genuine strength/weakness and entering on retracements (higher lows, lower highs).
- there is often a period of drift after London morning moves, this could be to form a range or small counter (the days) trend move.
- in the absence of a strong counter trend move we would be looking for the US session to revert to the direction set by London.
- trading where currencies are agreeing across 2 or more pairs. It could be both the eur and gbp against either aud, jpy, nzd or cad. Or it could be eur or gbp strong/weak across multiple pairs. See some of the 1/5 min charts posted in January that clearly show the idea, which is to be trading a currency that has genuine strength or weakness.
- higher lows or lower highs (abc or 123 patterns) for entry.
- the test or break and test of a range.
- trading buy above, sell below the 1 min 100 lwma (20 lwma on 5 min) looking for clean AB moves and small BC retraces to set up clean higher lows/lower highs.
- thereafter continuing to take higher lows/lower highs with strongly moving pairs.
- taking care to avoid trading the major news events that can be highly volatile.
- there is often a period of drift after London morning moves, this could be to form a range or small counter (the days) trend move.
- in the absence of a strong counter trend move we would be looking for the US session to revert to the direction set by London.
- trading where currencies are agreeing across 2 or more pairs. It could be both the eur and gbp against either aud, jpy, nzd or cad. Or it could be eur or gbp strong/weak across multiple pairs. See some of the 1/5 min charts posted in January that clearly show the idea, which is to be trading a currency that has genuine strength or weakness.
- higher lows or lower highs (abc or 123 patterns) for entry.
- the test or break and test of a range.
- trading buy above, sell below the 1 min 100 lwma (20 lwma on 5 min) looking for clean AB moves and small BC retraces to set up clean higher lows/lower highs.
- thereafter continuing to take higher lows/lower highs with strongly moving pairs.
- taking care to avoid trading the major news events that can be highly volatile.
4hr charts W pivots
As usual the 4hr charts show the importance of the W pivots, support and resistance levels and the number of decent moves (2 - 5) that can typically be expected in a week.
US open compared to London open
I was asked if this method is also applicable to the US open and to give some suggestions on trading at that time.
A search of this blog for "avoid weak counter trend candles" will show numerous posts with charts that you can have a look at.
If you are trading the 1 hr charts you can be looking for "good" candles that revert to the days trend or where price respects a support/resistance level for hours.
Good candles likely to fall into the engulfing, large wick rejecting a move or 3 bar reversal category (for sells a close below the previous 2 candle closes where 1 must have been a positive close and for buys a close above the previous 2 candle closes where 1 must have been a negative close). Due to the 3 bar reversal definition this implies a true counter trend move and a close back into trend.
If you are trading smaller time frames you could be looking at higher low, lower high entries following the close of a 1hr candle.
Nothing works all the time and the big US news events can be very volatile but these charts show several examples of good candles following through and of course those that don't. Often with a failure the candles high/low is respected so trading a few pips beyond the range would keep you out of a lot of failed trades.
At the moment I am looking at lower time frames for entry.
A search of this blog for "avoid weak counter trend candles" will show numerous posts with charts that you can have a look at.
If you are trading the 1 hr charts you can be looking for "good" candles that revert to the days trend or where price respects a support/resistance level for hours.
Good candles likely to fall into the engulfing, large wick rejecting a move or 3 bar reversal category (for sells a close below the previous 2 candle closes where 1 must have been a positive close and for buys a close above the previous 2 candle closes where 1 must have been a negative close). Due to the 3 bar reversal definition this implies a true counter trend move and a close back into trend.
If you are trading smaller time frames you could be looking at higher low, lower high entries following the close of a 1hr candle.
Nothing works all the time and the big US news events can be very volatile but these charts show several examples of good candles following through and of course those that don't. Often with a failure the candles high/low is respected so trading a few pips beyond the range would keep you out of a lot of failed trades.
At the moment I am looking at lower time frames for entry.
Thursday, February 5, 2015
Test or break and test of range
We have been looking at these for some time, just another two examples.
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