We have been consolidating in many pairs for a few weeks now, especially with EURUSD, GBPUSD, AUDUSD etc. I only like to trade with the trend, so if we take GBPUSD as an example, you can see on the MACD signal lines that we’ve had 4 bullish divergences, but the price kept coming down. It looks like however this may finally be the bottom and we may get a bigger push higher. However, this is just my instinct, but I should technically be going ahead and shorting it if my system is telling me to “trade the trend” as I did successfully have a short trade setup on GBPUSD last week. However, if I shorted it with one of my setups this week I would have been stopped out.
My question is, should I keep trading the trend short until the trend really looks over (based on price action and trendline break to the long side), or should I avoid trading the pair as soon as we enter consolidation and wait for several weeks before the trend continues in either direction again?
Has anyone opened any new swing positions this week or at the end of last week or are you not getting any high probability setups because of the consolidation? I know there is the ECB announcement on Thursday so I wonder if we will see a trend breakout this week. I also look at many pairs including US indices as well, so I am not lacking any trades and don’t really need another strategy for range trading.
As you can see here in these charts…the GBP USD was in fact within Consolidation and I had warned about trading short because of the weakness of the Bear Candle that attempted to start the breakout/resume the Downtrend…
I am actually looking to go long here if the right bullish signal is given later this week…
STEPS TO TAKE TO SPOT/MASTER CONSOLIDATION
Become familiar with the various types of Consolidations and how to draw them using Japanese Candlesticks
Become familiar with the types of Candles that end trends and the Trends/Waves that lead to the formation of Consolidations so you can recognize when the market is transitioning from Trends to Consolidations allowing you to switch your strategy in time!..
The problem is, even though E/U is making higher lows, it is still making lower highs (consolidating). According to Dow theory,the downtrend isn’t over until the last lower high is broken. Only then will you have a new uptrend.
