Thank you for your response Sweet,
First of all since you are trading the Asian session I highly recommend that you Initiate your trades between 6pm-8:30pm est. This is because during this time the majority of the D’s for the pair are developing. Also I discourage trading between 9pm-12am est. The reason being that during this time I have personally experienced many “fake outs”. Although 9pm-12am is an excellent time to look for up coming patterns that will form around the London session.
Pattern wise, I strictly trade Butterfly and Gartley 222 patterns and I scan for just about every other pattern that is taught here on baby pips for an indication of price direction. One of the most useful patterns though to learn are the candle stick patterns. Learning these patterns will allow you to easily “read” how the market is behaving at any given time and eventually allow you to develop a “feel” for the market".
As for the stop loss… yes heh, you do not see a physical stop placed because I use a visual stop. Pleas note that the “D” I use for any given pattern must land on or near (5 pip range) a fibonacci point. If price closes above or bellow the fibonacci line then I will close my trade. I use the 30, 15, or 5 min time frame to determine the close depending on which time frame I found the pattern. If I am trading the 60-30 min I will normally wait for a 30 min close. If I am trading the 15-5 min I will wait for a 5 minute close.
Bellow I will illustrate how I use my fibonacci tool to Identify and execute a pattern. Also, please note that the pattern bellow is of the current EUR/JPY Daily and should show you why the market is behaving the way it has been for the past month.
The white column represents X-A Fibonacci levels. These fibs will show the where possible D’s may form. X is always found at an extreme point in price. In this case we are drawing the fibs from the highest swing to the lowest swing left to right (This is done vice versa when looking for a bullish trade).
The pink column represents a possible A B leg. The fibs here are used to determine where the C point is. In this case, my B-C leg lands on a .618 level. This usually indicates that when the C-D leg is forming, D will find support or resistance when it is symmetrical to A-B. This tends to be true in the majority of Gartley 222 patterns you find.
The Black column illustrates the relationship between the AB and CD legs. I use fibonacci in this point for percentage purposes only. In other words, I draw my fibs from the tip of A to the tip of B and move the fib tool to the tip of C. This will then illustrate what is drawn in the image above and show a 0-2.618% relationship between the AB and CD legs.
Initiating a trade:
Once the chart is fully dissected, I search for convergence in the chart. Convergence is shown when The XA Fibbonacci points merge or are in close proximity to x percentage of the CD leg. In this example, the XA leg converges precisely on the 1.272 Fib of XA and the 2.618 extreme of the CD leg. As a result if you opened this chart in the beginning of April and saw this pattern forming you would have had a sell entry waiting for you right on the 1.272.
This pair usually begins to retrace when it reaches the .500 fib level. Because of this, you should keep an I on this pair when it reaches that point because their will be most likely a major “D” at that point. In addition the pattern shows the reason why the pair has been “tanking” down for the past 3 weeks giving you those beautiful bearish trades (Sorry for all of you stuck on the opposite end).
Please note that the following analysis was done on the Daily chart of the EUR/JPY. This means that you should be careful when making a bullish trade until this pattern completes. Be mindful though that these types of patterns develop in every time frame and are counter trend trades. Which is the reason why you can see that I made profit on a bullish trade in the 30 min time frame.
The image bellow Illustrates a current pattern on the Daily chart. The pattern bellow is a Gartely 222. In this case, the XA leg was drawn from Base to Wick and shows convergence in the 1.272% of CD. The pattern has not failed and is still valid and should reach the Green line drawn on the chart (131.738 of price). This is the reason behind why price behaved so violently in the area where I had originally purchased this morning (as shown on first post on the 30 min frame).
To any one that is Confused with the ABCD and the whole Gartley/Butterfly patterns I highly recommend reading the book “Trade what you See” by Larry Pesavento.
Note as you can see from the posts above, I can deffinately predict moves that can range from 100-500+ pip gains the reason why I have narrowed my profit down to 30 pips a day and simply increasing margin for higher proffit, is because of the fact that it eliminates the feel of greediness and gambling for me. Which is something that I believe is the downfall to any trader. When you remove emotions from your trading style you become a better trader. This is why I also recommend reading the book: “The Disciplined Trader” by Mark Douglas.
Amazon.com: The Disciplined Trader: Developing Winning Attitudes: Mark Douglas: Books