Lesson: Respecting Da Grids!
Ok. The idea here is that regardless of what an ma value tells you or a trade that your in, you need to be constantly measuring for different fib retracement points that could be affecting your current trade or that you need to be aware of to keep you out of the next setup. I’ll illustrate this with recent price action in the EURJPY.
Image 1: Assume that we are just trading along and we don’t know the outcome of the full chart from the blue arrow onward.
The chart is trending higher, ma values are bullish, the last swing we have measured made a higher high, it pulled back and failed at 62% so we should go long. Well, no. Lets look at the bigger picture here first.
Image 2: What happened right before our setup? On a bigger grid price action came up to overhead resistance and FAILED. It couldn’t break through (at least not yet) so our setup now becomes VERY risky because we are trading into heavy fib resistance now. You always need to respect the bigger grids in play. They superceed any smaller grids. And once again if price action respects them, you respect them and don’t put yourself in a trade that goes counter-trend to what just happened REGARDLESS OF WHAT THE MA’S MIGHT SAY!
Image 3: Lets assume we took the trade anyway. We feel ballsy, are aware of the bigger grid but want to play a small scalp to the upside. Fine. I’d be lying if I said I hadn’t done it before, and that I wouldn’t do it again. We again need to be aware of another grid in play here. Now on any trade you take there will be a grid going counter to your pullback. Thats just how it works. But we want to measure them and be aware of what price is doing at those levels. This is why I try and remove risk at 38%, because there is always a chance it can come back in my face. In this instance had I taken the trade I would be targeting 38% to take my profit there. If not, i would at the very least put my stop at break even so I have no risk should it come back in my face.
Image 4: The highest probability setup yet. Yes, the MA’s say bullish, so if your really conservative look elsewhere, this isn’t for you. But price has just rejected a bigger grid, failed again at a smaller grid and made a lower low. For me, if that happens and price again fails on the pullback i’ll short the **** out of the setup. And again it works!
So just be aware of the different grids in play. I don’t always play the most recent grid. I try and measure two swings backwards to see where overlayed confluence occurs. Typically any further than that and there isn’t much relevance unless you are checking bigger grids for relevance.
Hope this helps! Cheers!
