Video Analysis of the Daily and 4 Hour Charts

Beginner Questions Candlesticks, Chart Patterns, and Price Action
32

[B]OBEYING THE HOLDING PERIOD RULES FOR TRADES[/B]

There is nothing more frustrating than seeing a strong floating profit turn into a loss in a matter of minutes. This can be avoided by establishing and obeying a rule for how long you hold your trades before deciding to close them. Sticking to this rule will help to minimize the losses due to holding out for more Pips than the market is going to give us.

This recent trade on the GBP CAD which had to be closed at the end of my Holding Period for this type of trade shows how crucial this rule is to trading success.

Once you obey this rule, consistent gains will be a regular part of your trading.

[B]
Duane

DRFXSWINGTRADING[/B]

33

After forming the Pennant Setup on its Daily Chart as predicted several weeks ago, this pair could provide us with a trade in the next couple of days.

We will either see it head back inside of the Pennant and take us to Resistance or U-Turn at Support to continue the Bearish Breakout.

If it gives a Bull Candle to start the reversal, it would be an ABC Signal, which as you know leads to Sharp Movements and is a common signal seen when it comes to False Breakouts. If it continues bearish however, it would have to give us a strong Bear Candle that breaks the Counter Trend Line just below Support. Many times when a Consolidation is being broken, we will see the pair breakout initially, then pullback to test the broken S/R before U-Turning.

(Apologies for the fuzziness - the video is actually clearer than this thumbnail)

Once we get a signal in either direction, we are likely to be able to capture at least 150 Pips as long as the setup we see on the Daily & 4H Charts meet our entry rules.

So by Wednesday the latest we should see a signal to get things going.

Get ready to trade it!

[B]Duane

DRFXTRADING[/B]

34

Hey guys,

We have a scenario now on the GBP USD where the Support of its Pennant on the Daily Chart is now taking place. Based on the theory of Consolidations, it could either continue Bearish or reverse to take us back inside of the Pennant.

There are certain technical factors and signals that tell us which of these 2 scenarios will take place and once you know what these are, you`ll be able to trade them profitably every time. This helps to avoids situations such as:

1- Jumping into the market at the first sign of a break of the Pennant only to see the market reverse sharply back inside.

2 - Start trading when we see the market showing signs of heading back inside of the Pennant only to see it U-Turn sharply to continue the breakout.

Both cause losses on a regular basis for traders, but they can be minimized once we know what those factors are that predict which situation will be the correct one.

[B]Duane

DRFXTRADING[/B]

36

Hey everyone,

EURO USD looks to have broken the Support of the large Pennant on its Daily Chart at 1,0815…


From here, it will either continue lower in favour of the USD or reverse to head back inside the Pennant.


(Video is much clearer than this thumbnail- not sure whats up with Babypips…lol)

Ultimate direction is going to depend on the signal we get on the Daily Chart - either way, it will be very profitable as breakouts from Consolidations and False Breakout Reversals are usually fast, providing large Pips in a short time.

Duane
DRFXSWINGTRADING

37

How´s it going all?

NZD CAD is the focus today.

Daily Chart looks to be shaping up to be a Large Range Consolidation, with the Support already formed, leaving the Resistance to be completed. This would be done once current downtrend takes us to the Support to complete the 2nd Resistance point…


With some 255 Pips on offer until hits Support, a strong signal to get things going would offer a short trading opportunity.

This could be done on the 4H Chart, once we get a good signal on the Daily Chart…


As you can see, there was an intitial breakout followed by a pull back to test the Support. Having now U-Turned, it could continue bearish until that Support boundary of the Range is hit.

Breaking and Testing of Consolidation is a common way for these boundaries to be broken…


The next step is to fill out the Trading Plan that you have to trade these types of setups such as this one…


Assuming that all guidelines are met for Entry, Stop Loss and Targeted Pips, trade can be taken…

The key thing now is to wait for the right type of Signal from the Daily Chart.

[B]Duane

DRFXSWINGTRADING[/B]

39

[B]DETERMINING YOUR PIP TARGET PER TRADE[/B]

Take a Top - Down Approach.

  1. Determine how much Money you need to make from Trading to make it worth it. (ex. $1000 Monthly)

  2. Determine how much you are going to invest in a Real Account. ($1000)

  3. 1 and 2 will give you your expected Rate of Return per month - 100%

  4. Determine if you can/want to trade every day or a few days during the month - Day vs Swing Trading

  5. After choosing, determine how many times per month on average yu will trade. (ex. 10 times)

6 . This then gives you the average dollar amount per trade you need to get to that $1000 per month - $100

7 . Then use this $100 along with the risk per trade (ex. 5%) to determine the Risk/Reward Ratio per trade you need.

  - If you risk 5% per trade ($50) then you need a strategy that gives you a 2 to 1 Reward Ratio ($100/$50) on average

Naturally, as your account balance increases/decreases, the dollar amount of the gain per trade will change.

This approach takes the uncertainty out of how many Pips to get per trade since you now know the bigger picture. The challenge is then to determine which trading strategy can get you this consistently.

[B]Duane
DRFXSWINGTRADING
[/B]

40

Hey all,

November was the first month of testing additional Swing Trading Strategies that are the more aggressive versions of the current Methodology I now use/shown in this thread. Combined, the trades made provided a Return of 19% from just 5 trades with most coming from Consolidation Setups. All follow a certain set of rules based on the setup seen and were not random trades made.

ADVERTISING - 19% DEMO NOV 2015.jpg700×221 22.5 KB

These strategies target 150 Pips per trade on average (100 to 200 Pips) as they take advantage of Weekly Range movements across the currency market each week. On average, there are 8 of these moves that take place every month. So if you aimed to capture just 2 of these each week, you will be able to generate Large Rates of Return on your Account each month.

[B]STRATEGY 1 - Trading Strong Consolidation Breakouts and Trends

STRATEGY 2 - Trading Slow Consolidation Breakouts

STRATEGY 3 - Trading Within Consolidations Using Daily Chart Signals

STRATEGY 4 - Trading Within Consolidations Using only Support & Resistance for Entry

STRATEGY 5 - Trading Within Consolidations Using 4 Hour Signals
[/B]

FXCM Charts are used to identify Candlestick Signals as FXCM uses the New York Close of the Daily Candle.

TRADE 1 - GBP CAD - STRATEGY 4

This pair began to move sideways for a few days and eventually formed a small Range Setup on the 4 Hour Chart

On November 2, having determined that the setup and signals on the Daily and 4 Hour Charts were in sync with the criteria for this strategy, a short position was opened just below Resistance.

The target was set to the Support boundary for a planned gain of 120 Pips but was exited for a gain of 102 Pips as the market had not yet hit that target by the end of the established holding period.


As can be seen in the Video, the decision to exit instead holding out for the extra 20 Pips was the correct one.

With this Swing Trading Methodology, you have to obey the rules related to the length of time that we remain in a trade. This helps to keep your trading objective so that your temptation to capture additional Pips does not compromise your success and long-term profitability.

41

TRADE 2 - USD CHF CONSOLIDATION BREAKOUT - STRATEGY 1

This trade attempted to take advantage of the breakout from a large Consolidation Pennant Setup on the Daily Chart on November 17.

The breakout took place at the Resistance boundary and was expected to continue higher as the Uptrend became stronger.


However, the trade was exited for a small loss of 35 Pips when it was realized that an important target on the 4 Hour Chart was overlooked.​

The target for this trade was set to the Breakout Equivalent of the Range Setup that started the overall breakout. This B.E. area was at the 1,0350 area and would have provided a gain of 190 Pips. The Breakout Equivalent is the area I have identified as where breakouts from Consolidations head to before pulling back. This helps in eliminating the uncertainty of where to exit our trades during the fast but tricky moves.

However, it was later realized that the Breakout Equivalent of the 4 Hour Chart’s Range was at the 1,0200 area and would have led to a pullback - customary at these areas - before that 1,0350 target was reached.

Despite the fact that the market was expected to continue higher after this pullback, it was uncertain whether or not it would now do so within the holding period and without taking out the Stop Loss. This led to the reluctant but necessary decision to exit for the small loss.

Mistakes and oversights like these take place from time to time and are par for the course. The key is to ensure that they are not repeated and that we meticulously analyze all aspects of the time frames before trading.

42

TRADE 3 - AUD USD - TRADING WITHIN CONSOLIDATION USING DAILY CHART SIGNALS

In this trade on November 19, the Daily Chart had provided us with a strong bullish ABC Signal above the Support of the Pennant to start heading back to Resistance at 0,7310.

Based on the characteristics of this setup, the Daily Chart was needed to give us the signal to trade instead of the 4 Hour Chart or entering at the Support boundary.


ABC signals are among those that lead to very fast breakouts across the currency market. Once spotted and traded, these signals tend to provide hundreds of Pips in gains within a very short period of time.

CANDLESTICK FORMS.jpg700×360 20.7 KB

Given this strong ABC Signal, therefore, this trade was expected to hit the target unhindered. However, by the end of the holding period, the trade had to be closed as the pair began to stall at one of the Downtrend Line that has defined the bearish direction of this pair.

Usually these trend lines are ignored once the pair is headed to the other side of a Consolidation but this was one of those instances in which they held firm




This trade was another example of the importance of closing trades early once the holding period has expired. A small gain of 23 Pips is always better than a loss and as you can see from the pullback that has started, this is what is likely to have taken place in the days ahead.

43

TRADE 4 - EURO JPY CONSOLIDATION BREAKOUT STRATEGY 1

On November 20, a strong signal was given on the Daily Chart to start a sharp breakout from the Pennant Setup.

This was expected to provide sharp gains in favour of the Japanese Yen heading into December as the Euro continued to lose ground across the Forex.

The initial break of Support was followed by a brief period of sideways movement that formed a small Pennant Setup. This was a way of ‘testing’ the boundary before continuing the breakout with the bearish signal.



A target of 172 Pips was set at the Breakout Equivalent of this smaller Pennant but due to the lack of market activity during this holiday period, the trade was only up by 47 Pips - smaller than expected but a win nevertheless.


In situations such as this, re-entry is possible once liquidity returns to the market and the signal is strong enough to justify trading it to the original target.

44

TRADE 5 - CHF JPY - SLOW BREAKOUT - STRATEGY 2

This new trading strategy takes advantage of breakouts that would have otherwise have been ignored given the small nature of the candles that often lead to unexpected reversals. However, it has been now been realized that these can be very profitable once we are able to distinguish between those that lead to these reversals and those that successfully hit their targets.

On November 21, this pair provided such an opportunity with a signal to indicate the resumption of the breakout that started back in October. The expected breakout was in keeping with the new Downtrend that was formed as the pair continued to break farther below the major Uptrend Line in place since 2012.



This was another example of the market pulling back to ‘test’ the broken boundary before U-Turning to resume the breakout. It is one of the three common ways in which the market can start breaks from these setups (3).


The target of 172 Pips was set to coincide with the Breakout Equivalent of this Pennant but at the end of the holding period, the market had come very close to the Limit Order before pulling back to close the last day at 101 Pips.


The candles that continued the breakout were small as expected but they still moved by over 100 Pips to confirm that these would be the ones that offered profitability. Once again, this was a trade that had to be closed early in order to comply with the very important holding period rule that is essential for trading success. This helps to control our ego and our greed that can get in the way of profitability.

Another important feature of this trade was that this overall setup and breakout was forecast several weeks ago in September using the tools of Candlestick Patterns in the Manual. As you will see from the video below, the formation of this Pennant and the breakout were expected based on several key Technical Factors that control the movements on the Forex Market.

With this Methodology, you can not only predict major market patterns ahead of other traders, but also confidently trade them when the right setup is eventually provided.


Duane
DRFXSWINGTRADING

45

The recent trades on the CHF JPY and the EURO JPY highilght the accuracy of the Holding Period rules in specifying when to exit trades in anticipation of market reversals. Some of these reversals can be small, 30, 40, 70 Pips…

Other reversals can be…



46

Higher Time Frames make you understand the larger picture of what is happening on the LTFs.

Take the recent spike in the CHF JPY on Thursday.

It may have seemed like a simple trend change with breaks of Downtrend Lines taking place on the 30 Minute Chart…


…but examining the Daily Chart, you can see a Large Consolidation being formed …


…which is based on certain patterns of candles that generally lead to these Consolidations…


This means that the rally was always gonna to take place to form Support and most persons who saw this would have stopped selling in anticipation of this rally…


Duane
DRFXSWINGTRADING

47

This successful trade took advantage of the sharp False Breakout Reversal from the Pennant Consolidation on the Daily Chart that started on December 3, 2015. As with all of these types of setups, the initial breakout attempt was quickly taken out by a strong, opposing signal that led to a breakout at the other end of the Consolidation. Given that this setup was in sync with the theory of False Breakouts, the trade provided a strong gain of 140 Pips.

The graph below shows one of the examples of False Breakouts that take place across the Forex.


As you can see from the Daily Chart of the GBP CAD below, the setup was almost exactly the same as the one above.


(FXCM Used for Chart Signals based on New York Close of Daily Candle)

Trade was made, led to 140 Pips, using 4H Chart…


(Dukascopy, where I have my Live Account, used for Trade Execution)

Exit took place before reversal now starting


Maiin Factors

  • False Breakouts
  • Daily Candle Signals
  • Entry using 4 H Chart

Duane
DRFXSWINGTRADING

48

GBP USD - TRADE UPDATE DEC. 22, 2015

Overall looking Bearish given the Consolidation breakouts on the Daily Chart


However, 4H Signal given is too weak to trade now…


This means we gonna have to wait for another 4H or Daily Signal that is stronger to justify entry

Duane
DRFXSWINGTRADING

49

[B]GBP USD TRADING LOSS[/B]

Recent trade on the GBP USD resulted in an unexpected loss. The Setups and Signals on the Daily and 4 Hour Charts appeared to be strong enough to justify the trade. Nevertheless, the market pulled back to take out the trade.

In the video, you will see this discussed along with the possible explanations and forecasts for this pair.

[B]
Duane
DRFXSWINGTRADING[/B]

50

Thread continued here

http://forums.babypips.com/show-me-the-money-swing-trading-/77786-aggressive-swing-trading.html#post739592

51

Hey all, back with you.

Latest trade gave us a 149 Pip gain on the EURO USD as it headed to Support of Pennant on Daily Chart.

This was the overall setup as seen in this chart and the Video Analysis


Entry took place using the 4 Hour Chart, with the target set to just above the Support of the Daily Pennant.


After a few days, target was hit.



Overall, Return from these Strategies is now 25%


This trade continues to show how we can better results by focusing on the larger time frames. These offer larger movements and more reliable signals to take advantage of these trends.

Stop Losses should be placed at areas that will protect trades against temporary pullbacks before our targets are hit. Support and Resistance and Trend Lines - once strong enough - great places for Stop Losses.

MAIN TECHNICAL HIGHLIGHTS OF TRADE

[B]

  • Trading Within Consolidations

  • Using Strong Daily Candle Signals

  • Using Strong Stop Loss Areas on the 4 Hour Chart

  • Waiting Patiently Until Target is Hit

  • Strong Gains Possible with Swing Trading[/B]

Regards

Duane
DRFXSWINGTRADING

52

I think that Yen will likely depreciate in value over the coming week because of the policies coming from the BoJ who are actively trying to drive the Yen down here’s an article I read last week about various currency pairs and their outlooks.

53

What about the growing risk-off environment we’re seeing across global markets? How would a ballooning of that strategy impact your opinion?