I had also forecast a similar but much larger Pennant setup to be formed on the EURO USD as far back as June this year...
...which seems to be happening/happened now...
The market tends to give us a heads up as to when these patters are going to be formed (such as weak breaks of CTLs in the NZD USD example). Another signal is when we have 2 consecutive waves of Bullish and Bearish Waves of the same size that appear at the end of a large trend...
...that eventually lead to the Pennant being formed..
This is what I had seen in June and what I expected to be formed.
Trading within them is always possible such as in this example here...
..but sometimes the waves within them are too volatile to be worth the risk. Right now I am waiting on the right signals to trade this EURO but so far it looks as if I might have to forgo it.
Trading within them can be done several times until the breakout takes place which will offer even greater profit potential.
My current strategy (forward testing on demo) is identifying S/R and recent trends on daily charts, and using price action signals on 4 hour charts to enter with the trend as a pullback to the trend line is seen. I'm not currently trying to trade breakouts, but I am keeping an eye on the subject and studying them to possibly trade them in the future.
Support and Resistance can be good tools..if you catch the best ones you can definitely get Pips from them. Problem I always had was knowing whcih of them would be strong enough and how many Pips I could get from them. Another issue was how far to place the Stop Loss since some S/R required only 10 Pips while some required 50 Pips..was difficult to create a strategy based on these moving parts.
What are your targets and Stop Losses?
Breakouts are very powerful setups, and once you analyze and trade them correctly with the right strategy, they can be a good weapon in your arsenal.
Yep I ran into the same issues with support and resistance early in my studies. Now I only mark really obvious ones, especially if they coincide with a psychological level. I've found trend lines to be much better indications of where price is likely to reverse, so S/R only come into play when I'm setting stops and targets to determine if the trade is too risky.
I've been setting my orders with a 1:1 risk-reward, first setting my stop at a logical point below the trend line (for longs) or above the trend line (for shorts), then ensuring that my target seems logically reachable. Lately I have been moving my stop along the trend line to reduce my risk while still allowing for price to bounce in my favor.
I still have a ways to go before I understand even half of this stuff, but these videos are brilliant! I really appreciate the way you go through these trading situations and fully illustrate the concepts with multiple examples and show the varied opportunities involved in these situations. Cheers!!
Yes, Trend Lines are good Stop Loss areas/better than S/R once the trend is going to continue.
with a 1:1 risk-reward
target seems logically reachable
Why only 1;1? you shouldnt be aiming to get Profits equivalent to Losses. Aim Higher. This will give you a cushion for losses.
What determines your targets now for this 1;1 ratio? it sounds as if its not clearly defined as yet and that it changes along the way.
Ideally, targets should set based on a firm set of rules. It is true that the actual number of pips can vary depending on what the market offers. But the reason for choosing a target should be based on a firm set of criteria.
This candle leads to another false breakout as it "tricks" traders
...Yet another example of how Consolidation Breakouts with Large Candles lead to False Breakouts....another trap of the market..
EURO USD looked set to break higher with this Large Candle...
...but I expected it to at least pause before either moving sideways or reversing sharply....
This is because these Large Candles, as attractive as they are, hardly lead to successful breakouts.
Figuring this out and identifying the types of Candles that actually lead to profitable breaks was what I had to do...
I cant tell how much money was lost and time spent in spotting the right signals to trade- made a big difference in results.
Although this has taken place on the Daily Chart, these Large Candles are seen across all time frames as well. Its not so much the size in terms of Pips but relative to the other Candles on the time frame being traded. So whether you are a Day or Swing Trader, they will appear from time to time.
Once you can make this distinction, it becomes much easier to avoid these traps.
Last edited by DRFXTRADING; 08-30-2015 at 05:28 PM.