I have wasted a lot of time and money since 2006 trying to learn Forex. My biggest downfall was never sticking to one system for any length of time. Once I lost money, I gave up and went to the next system. I am sure I have made a few car payments for some e-book writers. I took a couple of years off and for some reason this week, in the back of my mind I have some unfinished business with the Pips.
I basically thought to myself, to get started again, what is the easiest way to approach this now that the dust has settled from all the garbage in? Obviously, the first thing that came to my mind was risk management, taking low risk entry’s that have high probability and a nice risk to reward ratio to cover the losses. Next, I decided to only trade a technical pattern that is consistent and has a higher probability to win more than lose.
For me the easiest pattern to watch with a set of defined rules as it fulfills itself is the Head and Shoulders pattern for a reversal trade. I also Like to trade the next possible 2 waves in the direction of the trend after the Head and Shoulders confirms the neckline break, so trend continuation patterns are also on my list. So that is my focus for this second journey.
This is the most Keep It Simple set up that I will be watching for on 1 hour charts which means that the pattern usually takes about 4 to 5 days to set up. I can care less about any market sentiment. This is all about being technical with greater than 2:1 reward to risk and high probability.
There are more than a few ways to trade this pattern. My goal is to focus on getting my entry on the right shoulder, after the head is confirmed, as close to the heads high/low as possible for the best risk/reward and then riding the trade to the 1.618 extension after taking some profit, of course, before the neckline break with remaining trade set at break even.
The basic set up for a short. The most important steps are for the head to slam into previous support/resistance with rejection to or beyond the previous support (for a short set up). Once this condition is met, RS is in play and will be watched to find an entry as close as possible to the head. This is where the rules will be defined over the next couple of months or so. Another goal of mine is to only use MACD and nothing else.
Observing RS for short opportunity, market closed.
The 1 hour histogram divergence is the same as the MACD and signal line divergence on the 15 min chart.
Price slammed into a 3 week high and was rejected beyond previous left shoulder support.
Head confirmed and RS is in play.
There are now 2 daily lower highs on both sides of the high that formed the head.
No entry due to market closed. 79% level looks pretty sweet for short entry with stop above head.
