In the case of the EURAUD; this is a typical Break Out set up. If you watch the price movement, it’s very likely that price is going to sharply descend in that direction. It is very common for this to happen once price pushes outside of a consolidation range. For more information on that, I would advise you look at Break Out strategies. I don’t particularly want to generalize it because it has it’s own specific mechanics.
As for seeing clean and clear indicators. Let’s take a look at the the EURUSD chart.
As you can see, I’ve circled four formations.
The first one is a large bearish engulfing bar. Note how leading up to it we have a series of gains, and then boom; a drop. This is an entry point because price clearly wants to head down when you compare the size of that candlestick with the previous and the fact that it closed near the bottom of the range. See how small the bottom wick is?
The second could be construed as a doji. Note the two bars before it are indicating a pull back, it has a nice tail wick on the upside and a narrow one on the bottom. It is a pullback and a rejection that is in favor of the downtrend. This is another tradeable signal.
The third is another bearish engulfing bar that comes after a period of consolidation. Note the slight pull back and two previous doji candles. Price was hesitating, trying to figure out where it was going to go. But since we’re in a downtrend, bias is going to be in that direction. This is later confirmed by that large bearish engulfing bar giving us another entry point.
Each one of those three signals is crystal clear and would have given 2:1 returns at least provided we were patient enough to wait for the market to give them to us. You have to let the market do what it’s going to do. Sometimes it takes time.
Now, let’s look at number 4. The fourth circle has a pull back and another engulfing bar that signals that price should continue down. But it does not. Why doesn’t it? Well; if we had seen that signal and looked at our economic calendar, we would see that United States Non-Farm Payrolls occurs near the beginning of every month. Even though we see a good set up here, we don’t trade it because the NFP is a really high volatility event. As we can see, if we had placed our stop behind the engulfing candle where it goes; we would’ve been stopped out. It’s never a good idea to have an open position in a dollar based pair when the NFP are looming.
Since we knew this event was coming, we’d stay out of the market and wait for a different opportunity.
That’s what I mean by clear and concise. You can look at any of those set ups and they are crystal clear. Those are the ones you want to trade. All this crap in the last couple of weeks is just muddled noise on the daily charts. Might have been able to find some opportunities on the 4h or smaller; but I don’t really focus on those so I can’t comment.
As a Price Action trader, the strategy is applicable on any pair. I just look to see where the clearest signals are. I check probably two dozen pairs for set ups.
And learning from other people is the best way to learn. It’s easy to get the mechanical knowledge on how things work. It’s another to see it applied.
