The EURUSD and the GBPUSD went in a nose dive, a.k.a. free fall downwards spiral, yesterday and we saw the very bearish momentum continue today. Yesterday’s day candles had huge wicks on top and bearish closes, signaling a major sell off after the spike up on the open of the New Year.
Interestingly enough the AUDUSD had a full size bullish day candle with hardly any wick on the top. The NZDUSD had something similar, albeit with a bit more wick on the top. Only one reason can explain that! The crosses had moved tremendously downwards. The GBPAUD, f.e., had move down 200 pips in a single day.
With that information in hand I started to closely scan the crosses of the mentioned currencies. This seemed to have more potential then trading the currencies against the Dollar. Selling the EURUSD and GBPUSD, despite the huge day wick, was still not the most appealing to me for 2 reasons:
1) I never take Fib entries against the trend on the 240 min chart (which is still up)
2) Only if I get my strategy confirmation of a break out trade on the 1 hour chart will I think about shorting the market. For that signal to kick in, price needed to touch the 1.3175 price level on the EURUSD before making its move down. It went to +/- 1.3170 and never came back. On the GBPUSD I had no strategy signal present.
Rules are rules and I did not touch the EURUSD, nor the GU. I am curios though, did you trade the EURUSD or GBPUSD? Please let me know and drop a comment how you did.
I focused on the crosses: EURNZD, EURAUD, GBPNZD, GBPAUD. Of those 4 currencies, I had a clear strategy signal on the GBPNZD, while on the other 3 currencies price had already over extended a bit too much. In any case I was only going to trade one of these crosses so I carefully studied the day, 4 hour and 1 hour charts of the GBPNZD.
I concluded that:
a) There was a huge sell off on the day chart
b) A correction to the 500 fib of the day candle already took place
c) That was followed by bearish 4 hour candles
d) I zoomed into the 1 hour chart and saw several impulsive one hour candles to the downside.
I calculated my risk, calculated how many lots I could buy with the stop level at 1.9537 and entered the trade at 1.9482. A 55 pip stop. The trade was split into 3 parts and the first target at 1.9370, which was a 1.272 target of the day candle fib, has been reached.
This gave me the first profit of the New Year, and the first reason for a small pat on the back! 😉
The 2nd take profit is 1.931 and the 3rd is a trailing stop. I will keep you updated on the development of this trade.
Result: winning trade / still in trade
Current picture of pair:
My 2nd trade was on the NZDJPY.
The reasons for the trade:
1) This currency pair is an uptrend – just like any other Yen pair on earth I can imagine!
2) It made a bull flag corrective pattern last night and the oscillator was back to the zero line.
3) Also, the size of the correction in relationship to my 2 moving averages was substantial enough in time and pips to merit an entry. In these cases there is a higher statistical probability of continuing upward with the trend.
The entry was made at 75.62 and the stop loss was placed at 75.17. After letting a sideways move of a couple of hour’s complete, price gained momentum and pulled ahead into positive territory. The 1 hour candle had a bit of a wick on the top which gave me some worry. It was not a clear cut impulsive break. The candle after that alerted me even more. Not only a wick on the top, but a doji. A 1 hour doji is not always a danger sign but if analyzed together with my time management methodology, it for sure signaled the end of my trade. I moved the stop to break even, just in case price would move higher from there, but the trade indeed got taken out. My time management plan saved me from losing this trade, as price made a bigger correction downwards.
Result: Break even
My 3rd trade of the day was a long on the AUDUSD. I took a very small risk on this trade as the AUDUSD was approaching a huge weekly resistance area.
However I still attempted a small buy, despite the weekly line, due to:
a) The strong daily impulse yesterday
b) The bull flag correction on the 1 hour chart.
c) An impulsive bounce from the bottom of the bull flag.
d) Most of the time a huge day momentum like yesterday gets at least a small push up before crashing, so I can move my trade to break even when approaching the previous day high
I tried a small risk on an entry at 1.0490. Stop loss very tight at 1.0467. Take profits at 1.054 / 1.0565 / trailing stop.
After a small dip which threatened my stop loss, the buyers pushed price up and away for 3 hours in a row. I placed my stop loss to Break Even to protect myself and hoped for the best. At this moment the trade is close to hitting the first target and 34 pips as I write. Will keep you updated.
Result: trade at break even but still open / no profit booked yet
Those were my trades of the day! And that also concludes my trading for the day… I will not take any more positions today: not only is getting late on my end of the world, but I also do not see anything I particular like at the moment. Plus I want to be careful with NFP tomorrow. All I will do is keep my current trades open and trail stop them to target.
Before I close I want to ask you if you:
a) Did you trade anything today?
b) And if so, which trades did you take?
Please post your trades in the comment section!
Good trading everyone!
Latest posts by admin (see all)
- How To Plan a Trade From Start to Finish - May 3, 2016
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