Tim Black is the host of the live trading room for the Asian Trading session. Tim has a computer programming background and is good at Technical Analysis. Tim is good with the charts and a great teacher and friend. We are having a limited time offer for our Service it ends on Monday.
Hi fellow traders! I’m looking at a very nice swing short on the AUD/CAD this morning. Lots of reversal confirmation and a nice 2:1 minimum RR.
Let’s start by looking at the AUD/CAD weekly chart:
As you can see, the week ending 08/13/10 gave us a Green Bar Ignored. A green bar ignored is a very bearish signal (especially on a weekly time frame.) The week just ended has given us a nice retracement of the prior week’s bar.
Now, let’s check it out on the daily time frame:
Here you can see that we are getting lower highs and lower lows. You will also note that price action is approaching daily trend line resistance.
And finally, let’s drill down to the 4 hour chart to look for an entry:
On the 4 hour chart, we see an indecision candle as the price approaches the daily trend resistance.
So, here’s the plan: We are going to look for a bearish 4 hour candle that CLOSES below the prior candle’s low (at 0.9342) to enter short. You MUST WAIT for the confirmation of a candle close before entering this trade. If there is a candle close above the trend line before we get into this trade, the trade is invalidated.
You can place your stop above the trend line (ideally, you should wait for a 4 hour close above the trend line before stopping out.) The targets are near the 61.8% retracement and above the 100% retracement of this prior move up. I believe we will break this 100% retracement low, so be sure to leave a runner (small slice to catch a bigger move.)
This trade should give us a nice 2:1 reward:risk ratio at the first target.
As always, be sure you size your trade so a stop loss will not exceed your risk parameters. And above all, BE PATIENT. WAIT for a 4 hour candle CLOSE to enter the trade.
If you want to follow my management of this trade (and other trades), follow me on Twitter: @IsItCoffeeYet.
May the pips be with you!
Secret Asian Man 😉
Winner’s Edge Trading, as seen on: