As predicted in the graphs in a previous post here, the GBP JPY started to decline towards the Uptrend Line on the 4 Hour Chart as the pair begins a new Downtrend in favour of the JPY over the next several days...
ANALYSIS AND FORECAST
4 HOUR CHART
MOVEMENT ON 4 HOUR CHART AS FORECAST
FORECAST & ANALYSIS VIDEO
The reason it was expected to decline is because the Daily Chart is gradually completing the formation of a Pennant Setup. It was expected to therefore form a 2nd Resistance Point to complete the Resistance Boundary as it heads back to the Support Boundary already formed.
The ability to make this type of accurate forecast comes from being able to recognize certain Candlestick Patterns that lead to the formation of these Consolidation Setups. This allows us to spot when reversals are likely to take place to avoid trading losses and take advantage of them by trading these moves while the setup is being formed.
Now, although my Swing Trading Strategies don`t permit me to trade all of these moves such as this GBP JPY one for various reasons - (some too risky, too small, or require large Stops), the ability to recognize these patterns across all Currency Pairs gives you a tremendous skill that is in high demand and very rare in Forex Trading - the ability to Accurately Forecast the Market.
This is the most fundamental of skills that you need in order to be successful. It is the first step in being able to determine market direction and therefore the profit potential of these moves using your trading strategy. Even though I prefer and HIGHLY RECOMMEND the use of Swing Trading, the ability to predict the Daily and 4 Hour Charts is also of tremendous value to Day Traders. Once you know where the market is gonna be headed and by how much using the signals of these time frames, you´ll know exactly how much you can target each day and be better able to get out before reversals take place.
Naturally, it will require several months of practice to fully master this skill, but once you do, you`ll be a lot more confident that your trades will hit their trading targets with a Higher Rate of Success, regardless of the trading strategy you ultimately decide to use.
Last edited by DRFXTRADING; 09-11-2016 at 04:07 PM.
As you can see from the Chart, after the very aggressive start, the gains became a little bit flat in the middle of the summer, with the Returns stagnating at 25% during this period. This coincided with the period of cyclical illiquidity in the markets and also reflected some fine-tuning of the strategy to go after more frequent trades.
These gains translate to a very good Monthly Returns so far. I would say that after an excellent start that provided significant returns in January and February, it has now leveled off to rates that are consistent with many Swing Trading in general.
For most of 2014 to 2015, most of my trades have targeted moves that offered at least 140 Pips to 200 Pips. However, I have now realized that many setups offer good trades of 100 Pips a lot more frequently, which often hit their targets within just 1 or 2 days and sometimes hours after entry. This compares to the average holding period of 5-7 days for the larger trades. What this means now is that with the combination of these two types of trades, larger and more frequent gains are now more likely to be realized within a very short period of time.
The Chart below shows the summary of trades made this year. As you can see in the Duration column, most of these trades have been captured within 2 days. This means I dont have to wait that long for trades to be hit which translates into less anxiety and uncertainty which can prevent trading success.
For persons who have been used to Day Tradng, these smaller holding periods can offer an excellent way to transition to Swing Trading which can often feel like a very frightening leap to take given the need to hold trades longer. However, once you get accustomed to this style of trading, it will longer be intimidating to hold trades for this long.
Another great benefit of Swing Trading is that trading is done an average of 3 times per month. This prevents you from overtrading and allows you a lot of "breathing room" between trades to remain objective. Revenge trading is an Ugly Demon that gets into our heads whenever we lose at Day Trading, causing unnecessary losing streaks as we become more emotional. By only trading when it is necessary, you can be better able to target the best, most profitable trades, while minimizing your portfolio´s exposure to market volatility.
So in summary, while this isnt your perfect "Dream" or "Holy Grail" strategy - whatever that is - it offers an excellent example of how Swing Trading can provide consistent returns over the Short and Long-Term while preserving your capital against emotional trading and market turbulence.
Even though we Can trade every day in a market thats open 24 hours daily, it doesnt mean that we Should. This is a very dangerous market with high failure rates due to the extreme levels of intra-day volatility. Even some Weekly movements that Swing Traders target can become very dangerous as well. It therefore means that the less frequently you trade, the more you can stay away from getting caught in these traps of volatility and stay focused on the Best, High-Paying Trades every month.
Last edited by DRFXTRADING; 09-26-2016 at 03:55 PM.
The latest trade provided a 175 Pip gain on the GBP CAD as part of the recent decline. This was taking place within a Range Setup that was being formed on the Daily Chart.
A pair of Double Tops and a break of the Uptrend Line were the signals indicating the start of the Bearish Move. I then waited until the 4H Chart provided a Setup & Signal to take advantage of the expected downtrend.
Since these were deemed strong enough, I decided to trade it. I placed my Stop Loss above the high of the U-Turn and targeted an area where I believed it would head towards before pulling back- how did I know it would pullback there? (Trade Secret)
Below is the Video Analysis of the Trade Setup.
As you have seen in this video, the main elements of the trade were;
- Identifying The Candlestick Patterns that Form Consolidations
-Trading these Waves with Strong Setups And Signals
- Double Top Signals
- Breaks of Uptrend Lines
- U-Turn Signals & Counter Trend Line Breaks
I believed that the trade would have taken 5 Days to hit its target but after only 2 days, the target was hit..
The main thing about this that you´ll notice is that the trade was exited just ahead of the start of a sharp pullback that lasted 3 days. This would have easily taken out the Stop Loss had I not exited at that area...
Not only did this confirm the accuracy of the Exit Strategy but it also showed that it was in sync with the Strategies of the major Currency Traders around the world.
So being able to identify when Consolidations are being formed with certain types of Candles allows you to be able to take advantage of these waves. Once we see these signs and can spot the strong Daily and 4H Signals that start these moves, strong trading gains are possible.
MAIN ELEMENTS OF TRADE
- Spotting & Trading Waves that Form Consolidations
- Trading Strong Daily & 4 Hour Chart Signals
- Appropriately Setting Trading Targets to Avoid Pullbacks
- Being Disciplined to Hold Trades over Several Days
Did you trade this move as well?
Questions, comments welcomed
Last edited by DRFXTRADING; 09-29-2016 at 02:56 PM.