After forming the Pennant Setup on its Daily Chart as predicted several weeks ago, the CHF JPY 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.
[B]GBP USD - BEARISH BREAKOUT FROM PENNANT OR BULLISH REVERSAL?[/B]
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.
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.
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.
If so, my advice is to ensure you have a Trading Plan Trade Sheet.
I used to be nervous too especially trading smaller time frames. These move very quickly and the minute you enter a trade, there is a possibility to lose very quickly - not a nice feeling. You get a lot of unnecessary tension and nerves. This is one of the many reasons I and others switched to the larger time frames and Swing Trading.
Nevertheless, whatever time frame you use…get a Trade Sheet that has rules and checklists to justify each trade. I found that whenever I traded without this, I would be unsure if I had taken everything into account before clicking that button. This uncertainty creates anxiety and fear.
If you have a Trade Sheet that you know will provide you with a good trade 80-90% of the time, you will be more confident. It gives you a visual confirmation that you are making the right decision and that everything has been accounted for.
This is an example of some of the Trade Sheets that I use…
These guide me through all steps involved in the trade - from analysis to closing of the trading platform as well as while the trade is in motion.
If you use something like this during Demo Account phase and the results are good, then just use it on the Live Account and the nerves will fade away and be replaced by celebration of trading wins.
Determine how much Money you need to make from Trading to make it worth it. (ex. $1000 Monthly)
Determine how much you are going to invest in a Real Account. ($1000)
1 and 2 will give you your expected Rate of Return per month - 100%
Determine if you can/want to trade every day or a few days during the month - Day vs Swing Trading
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.
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.
Both were closed when their respective Holding Periods had ended, despite not reaching their initial targets…
It is very tempting for us to hold on to our trades in hopes that our targets are hit, but sometimes do this can lead us to be surprised by reversals that take away the profits we already have. Some of these reversals can be small, 30, 40, 70 Pips…
However, other reversals can be…
This is why holding period rules are important part of my Methodology…
Once you have them, very important to stick to them…ALL THE TIME.
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…
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.
I had left the Forex community for a while and had not been on this website for a while. Glad to see you are still posting your trades every so often. Currently I am a bit busy looking at EAs and helping programmers forward test their creations etc but have still not seen anything in an EA that compares to manual trading. Just demoing at the moment but as I was chatting to you earlier in 2014, I thought I would just pop a post on here to say “Hi”
I am not going to derail this thread just want to make a statement as I see this alot and even agree to some extent. I just want to point out that price action itself is nothing more than a indicator. As you said a indicator is based off past price movements and lags price well so does a pendant, hammer, doji, even support and resistance. They are all based off the left side of the chart (past price movements) and lags current price. I am not saying the price action will not make you a profit as I use it myself just that indicators and price action are made up of the same elements. Using what price has done to determine future price direction.
With the above stated after going through the thread seems like a decent thread I will be tagging along and see if I cant add anything actually productive to there thread.
Hey Bob, all views, criticisms welcomed here… Its an opportunity for me to show the advantages of my strategy and explain aspects of it to those who wanna use it.
Yes, you have a point about the “lagging” and “indicator” aspect of Price Action. But of course, when I´m talking about Indicators I´m referring to statistical/numerical indicators like MAs, RSIs etc.
With Candlestick Signals, even though they do represent past price action, they allow you to catch moves much more quickly. So for example, if a 4H Candlestick appears that tells us what happened in last 4 hours and whats likely to happen in the next 16 to 24 hours, we can enter immediately at that candle to take the ride to our targets as soon as it starts. But with indicators, they take a longer time to give the green light because of the time it takes for them incorporate the new prices from this new Candlestick Signal.
So the “lagging” that I am talking about is the time difference between when the 4H Candle gives a Signal and when the Indicator actually gives the go ahead to trade and not the use of past prices.
Its available on my website which I`ll send you in a private message or by emailing at shepherdduane@ gmail.com. I also have some PDF documents for you to look at to help you decide about using my Methodology.
Essentially its about using Candlestick Signals and Patterns on the Daily Chart and 4H Charts. I target 100 to 200 Pip moves using 5 different Swing Strategies that now target more frequent moves each month. Depending on the Strategy and target, the Holding Period will vary from 2 to 7 Days to maximize on the amount we can get from the trade while not staying in too long to avoid pullbacks.
This last point is crucial to my strategy. Many strategies will tell you when to enter, where to place your stop loss etc, but fall short when it comes to telling you when to exit if target is not yet hit.
So far example, in this last trade on the EURO JPY, I was targetting 120 Pips in a recent bullish move on this pair last week…
This pair was expected to form a Consolidation and was gonna rally to create another bullish wave as it formed that setup. The Maximum Holding Period for this trade was set at 2 Days but at the end of this period, profit was only 25 Pips- much lower than the target. In obeying this rule, I exited the trade at this lower trading gain.
Now many persons who dont have this rule as part of their strategy would have been tempted to hold out for more- because after all, the market still looked bullish. But what I`ve realized over the years is that certain types of trades that target a certain number of pips take a specific number of days to hit their targets. After that time period is reached- regardless of whether target is hit or not- the market usually begins to pullback, which was the case a few hours later…
25 Pips is much lower than 120 Pips but much better than a trading loss.
So the Methodology plugs the holes left by other strategies by covering all the aspects of trading to ensure success. It targets the best trades using the most reliable signals while at the same time ensures that we are not greedy by establishing clear rules and guidelines to be followed.
GBP JPY actually moved bullish last couple days, but will start to go bearish in next few days…
Looks to be forming a Pennant on Daily Chart based on the Candles formed so far. Based on the pullback starting on Daily Chart and the sideways movements now seen on 4H Chart, looks like its starting to transition towards a downtrend as it begins to U-turn to head back to Support. Trading Short over next few days once that starts gonna be your best bet…
