Hello again guys,
This will be my last, as I need to leave the office a little earlier today.
We are going to be working with H1 Charts.
What I want to do is go through a trade analysis of the GBP Long.
From the entry, through the correction, to the next rally and to the EMA Bunch which is still taking place as we speak.
Our Entry signified with #1 was based on several indications:
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There was a visible EMA Spread occurring, which means the price was evidently getting read for the next big move and was shaping its way out of the previous EMA Bunch-Range, which I have accented with the red negative sign.
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RSI had broken over 50 confirming the strength and possible intention of the move.
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Stochastics weren�t quite in the oversold zone, which is great because it means we were just catching the rally. The rally development of a price normally takes place while stochastics are in the oversold or overbought region; this is when the move is strong and extremely supported.
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Last but not least we had a 5/10 E-MA Cross-followed by a beautiful Chinese fan like EMA spread.
This is an �all go� situation. This is where all the Pip Ninjas pounce out of the dark after hours of hiding and act!
I can�t stress enough how important it is to be patient. You can loose all your money trading in EMA Bunches, so don�t!
Just sit and wait until the market clears out.
The price finds resistance at 1.9655 signified with #2 then corrects (#3)
Why? Pff… Heck if I know. It just did. There was a rally, so logically there was going to be a correction soon enough, why 9655 I don�t know and frankly still can�t find out on my charts. It could have been traders Squaring out prior to news, it could have been some old quadrillionaire accidentally pressing the SELL button on his platform when he doze off or maybe some dog in the middle of a deserted village in Madagascar farted and accidentally set of the security alarm off in a Top Secret Underground Nuclear Weapons Research Facility-causing someone to jerk in fright and accidentally set of a launch command for a missile attack on BIG BEN.
Heck� The truth is we are TAs, Technical AnalyzOrz. That means we don�t care. There is enough trend lines and indicators and oscillators and other tools that work well enough to let us know how to react to such situations, when to trade and when not to.
We have facts and that�s enough for us to work with.
So what should we have done then once the correction started, well� You should have drawn your Fibs of course. If you did as you will not on the chart on the left, the most likely Support was 38.2 which coincided with 9578 which was a previous R turned S Aaand, it was also 10 EMA on H1. So there you have it you�ve got 3 factors. Its better than not having any, at least we know what MIGHT happen, once again we try and abstract ourselves from any surprises.
Holding on to a trade during a correction isn�t an easy job, and you will need time and patience to gain the discipline required to be able to wait for the price to retrace and get back to its previous course of movement.
So that�s Point 2 and 3 all you had to do was sit on your hands.
The price rallies like umn� a rally and then an EMA Bunch forms O_o (#4/5)
There isn�t much to explain here, but I would like to let you know how to reassure your participation in a trade like this.
When you get out of an EMA Bunch and you�ve got a nice EMA spread you should pretty much have a configuration like this, in order from bottom to top:
SMA 200 at the bottom
SMA 100 on top of that
EMA 50 on top of that (BLUE)
EMA 20 on top of that (GREEN)
EMA 10 on top of that (RED)
That is what a good move will look like on the chart.
Most corrections of the price on a lower time frame will be handled by the 10 and 20 EMAs on the higher time frames (H1 for eg).
Let that sink in and look at the charts on the right and left to understand exactly what I mean.
This is a great way to keep you from getting excited when you trade.
When the price breaks or gets into a clinch with EMA 20 and 50 EMA you need to become suspicious. It is pretty possible when this occurs that an EMA Bunch is forming. Use RSI/Stochs/MACD/S&R to confirm if you should exit and when to do so optimally. Additionally, our bias in such a situation, should you choose to hold the position during the Bunch should be neither bullish nor bearish.
It is difficult if not ridiculous to try and attain a bias from within a consolidation. Wait for decisive breaks before forming an opinion.
Just as a fighter in a ring facing an opponent. You need to remain calm and react only when they act, attack only once they have attacked you. When your opponent doesn�t move, not his body, not his eyes, there is no way to understand what his next action will be. What you need to understand is that when the price consolidates and gets into an EMA Bunch you need to wait for an action so you can react. What happens during that consolidation, is your opponent thinking, thinking about how to attack, where to attack. Although we would like to know that, we are not mind readers, so the best we can do as TAs is hone our skills to recognize patterns that may predict the move. These are the patterns you need to learn and memorize so you can recognize them when price breaks out of a range. Your reaction should be calm and immediate. Only time will train you to react to each of these situations with precision and excellence.
It is almost impossible for me at this moment to know if the price will go up or down right now that we are in an EMA Bunch, the best thing to do is wait for the market stop thinking and let it act, so that we can react and get rich
All I am going to do now is sit on my hands until I get an action.
That�s all I can say for now.
Regards,
E. Lang