Price Action on Daily & 4H Charts- No More Indicators, News or Smaller Time Frames

Trading Systems
83


Given the similarity of this setup on the NZD JPY, we are very likely to see the start of a major Downtrend in favour of the Japanese Yen over the next few years.

Taking a closer look, we can see that the Pennant that represents the Right Tip of the Crown lies on top of the major Uptrend Line.


This means that any break out short would break both the Support and the Uptrend Lines - strong signals for the start of a new trend.


If this Breakout Candle is a Normal Candle and is supported by a strong setup on the 4 Hour Chart that conforms to the criteria of the Trade Sheet that I use, we could capture a comfortable profit of 200 Pips from the breakout.


Given that this would be a Consolidation Breakout, the movement is expected to be very fast, taking only 3 - 12 days to hit this and other short-term targets.

With Consolidation Setups such as these, there is generally a 50-50 chance of a breakout in either direction when these setups are examined in isolation. However, within the context of this large Bear Crown Setup that has taken a year to be formed, a sustained breakout bearish for strong Japanese Yen gains is the more like outcome.

Duane
DRFXTRADING

84

I totally agree with your longer time frame strategy , which also encourages proper money management due to higher ATRs you have to limit your exposure (position size) , its a win win strategy. However the short TFs is very tempting due to adrenalin rush…

85

Yes, you are so right, these are the main reasons that I have switched to the LTFs.

Lower Time Frames offer that attractive element of fast Pips/Money that will always tempt you. I even when back to it from time to time when I had switched to the LTFs. But when the losses from the STFs eventually wiped out the steady gains of Swing Trading, I called it quits for good with Day Trading.

Short-term money, quick fix illusion will always seem the better choice, but Swing Trading always gets better returns with less stress and emotional reactions.

Adrenaline rush is for video games, *** and Champions League semis.

With Real Money, a steady, calm, focused approach is what creates Wealth.

86

You can see my video analysis of the NZD JPY here.

[B]Duane[/B]

87

VIDEO ANALYSIS OF GBP AUD



This Currency Pair has been in a strong Uptrend since 2013, forming Inner and Outer Uptrend Lines. It has now pulled back to the Inner Uptrend Line, from where it may resume the Uptrend with a Bullish Breakout signal.


In pulling to that trend line, the pair formed a Downtrend Line/Counter Trend Line and a small Range below this area. this was eventually broken on Monday May 11th with a strong Bull Candle.


This Range that is being broken is what is known as a Normal Consolidation. It is one of the smaller Consolidations that you will see across the market on the Daily Chart. The distance between the Resistance and Support is very small and the breakout from these setups usually take a few days for their target - known as the Breakout Equivalent- to be hit.

If this breakout bullish going to continue, then we are likely to see a Bull Candle above the Counter Trend Line (CTL) of this 4 Hour Chart.


Once this takes place, the Stop Loss would be placed below the low of the CTL and the target set for 200 Pips.

Normal Consolidations are seen across all time frames, but they offer larger profits with greater stability on the Large Time Frames.

Lets see how this unfolds, hopefully we can some good Pips from this.

Duane
DRFXTRADING

88

GBP JPY VIDEO ANALYSIS OF PENNANT BREAKOUT

This pair has been in a very strong Uptrend that began in 2012, forming an Inner and Outer Uptrend Line and 2 Large Pennant Consolidations.

DAILY CHART - STRONG UPTREND


We can now see that it has started to breakout from this 2nd Pennant with strong Bullish Candles above Resistance.

DAILY CHART - CONSOLIDATION BREAKOUT


The manner in which this started is one of 3 ways in which these Consolidation setups tend to be broken in this market.

  1. The First is when the market simply provides a Single Breakout Candle without any pullbacks.

  2. The Second way is when the market pulls back on the inside of the barrier and then U-Turns to provide the breakout signal

  3. The Third way- which is what has taken place here - is when the market initially breaks the barrier, U-Turns to test the barrier before U-Turning to give the signal that leads to the breakout.


As attractive as this signal has been on the Daily Chart, the size of the Stop Losses required to trade this breakout on the 4 Hour Chart have been too large.

Based on where we would have entered at the close of the Daily Candle, the Stop Loss would have been 332 Pips for the 1st entry option. With the 2nd Bullish Signal, the Stop would have been 169 Pips- both of which are too large for the average Retail Trader.

4 HOUR CHART - ENTRY SETUPS


So the overall setup and breakout signal on the Daily Chart were strong, but unfortunately can’t be traded based on the Stop Losses required.

In these situations, we simply either wait on another setup on this pair that offers a smaller Stop Loss, or move on to another pair.

89

VIDEO ANALYSIS OF NZD CAD FALSE BREAKOUT

The last time we examined this pair in April this year, we had projected a sharp decline in favour of the Canadian Dollar based on the False Breakout pattern that had been unfolding. The Bullish Candles that attempted to break out long from the Pennant were eventually taken out by the slow Bearish Candles that took us back inside of the Consolidation. Based on this movement and the fact that False Breakouts usually lead to breaks at the opposing end of the Pennant, we had projected the pair to break towards the major Outer Uptrend Line.

DAILY CHART - FALSE BREAKOUT & PROJECTED DECLINE


Looking at the current situation on the Daily Chart, we can see that this forecast had in fact materialized over the last few weeks. Starting from the high of the start of the reversal, the pair has declined sharply by approximately 800 Pips.

DAILY CHART - SHARP DECLINE


Now, how could you have taken advantage of this profitable move?

Having seen the start of the breakout below the Support of the Pennant, the first thing to do would have been to draw the Downtrend Lines that were being formed.

DAILY CHART - DOWNTREND LINES


These Downtrend Lines can be used for the placement of Stop Losses with the assurance that your profits will be protected throughout the trade. The next step would have been to enter short at around the 0,9100 area, with a Stop Loss of 100 Pips placed above the Inner Downtrend Line. Your Limit Order would initially be set to the Outer Uptrend Line for a profit of 370 Pips.

DAILY CHART - ENTRY SETUP


As the market began to move in you favour, you would have moved your Stop Loss lower, breaking even initially and then locking in profits below your Entry. This would have continued until the market started to reverse bullish just above the Outer Uptrend Line target. Your Stop Loss would “sadly” have been taken out and you would have pocketed 300 Pips in gains.

DAILY CHART - 300 PIP PROFIT


This is one of the ways in which Breakouts and False Breakouts can be profitably traded in this market. Many of these opportunities are likely to continue to present themselves for us given the current environment of low liquidity that now characterizes the major Currency Pairs. As Swing Traders, we simply need to spot these setups and the appropriate signals provided to take advantage of them, for continued monetary reward.

[B]
Duane

DRFXTRADING[/B]

90

The EURO USD may be in the early stages of forming a Consolidation Setup based on the nature of the sharp rally that has taken place over the last few days. If we see this play out over the course of the next few weeks, there may be an opportunity for us to trade within the boundaries of Support and Resistance until a breakout takes place.

As we can see in the chart below, the pair has finally broken the Large Pennant Consolidation that was formed between 2008 and 2014.

DAILY CHART - PENNANT BREAKOUT


Given the size of this Consolidation, we should expect this breakout to continue in favour of the USD for the Medium to Long-Term heading into 2016. However, as we can appreciate more clearly from the chart below, the EURO has started to rally in defiance of this overall outlook.

DAILY CHART - BREAK OF INNER TREND LINE


The Inner Downtrend Line was broken with a pair of Double Bottoms. This has been followed by a sharp rally that appears to be taking the pair to the Outer Downtrend Line. If that barrier is hit, the pair could continue even higher towards the Long-Term Downtrend Line before breaking back inside of the Pennant.

On the other hand, it could also U-Turn bearish to resume the overall direction of the Consolidation Breakout at either the Outer or Long-Term Downtrend Line.

DAILY CHART - FORECAST SCENARIOS


Despite the possibility of a bullish scenario that takes us back inside of the Pennant, the current strength of the Downtrend makes a bearish U-Turn the more likely outcome over the next few weeks. Another reason for this bearish outlook has to do with the nature of the candles that have led to the current rally taking place. The sharp movement, the small candles and the fact that the reversal follows a very long trend, are some of the signs of the start of a Consolidation Setup.

This means that we could see a pullback at either of those two Trend Lines to form the 1st Resistance point of a Consolidation Setup.

DAILY CHART - PROJECTED CONSOLIDATION


If this materializes, then we will have opportunities to trade between Support and Resistance until the breakout takes place. We will do this by firstly determining the time frame that is controlling the signals and then analyze and trade accordingly for our 100 to 200 Pip Targets.

[B]
Duane

DRFXTRADING[/B]

91

[B]GBP USD - FALSE BREAKOUT RALLY AHEAD[/B]

After 2 failed attempts to breakout short in favour of the USD, we may start to see the pair break back inside of the Pennant towards Resistance.

[video]https://youtu.be/uhbnMZw26Cg[/video]

92

TREND-ENDING RULE MAY LIMIT USD JPY GAINS

[video]https://youtu.be/OqNuuGLtlQc[/video]

USD JPY been in a very long uptrend since 2012, now finally taken a breather with the sideways, Consolidation Pennant Boundary formed.


Taking a closer look, we can see that a small Range has also been formed within this Pennant. The Resistance was broken with a Bull Candle that indicates the start of a possible rally…


However, there is something on the 4H Chart (a Rule related to Trends) that indicates this breakout may not take place.


It is the same rule that led to the pullback on the NZD JPY that appeared set to head lower after a strong signal that broke the Pennant on Daily Chart…


I was actually getting ready to trade it when I realized that the 4H Chart had violated this Rule…


I would have lost on this one had I not spotted in time. I had to cancel my Entry ORder that was set to take me into the trade.

The rule relates to an aspect of Trends that tells us when they will end so that we can get out in time or avoid entering too late.

Duane

93

[B]VIDEO ANALYSIS OF USD JPY[/B]

USD JPY ANALYSIS - TREND-ENDING RULE LEADS TO PULLBACK - MAY 22, 2015

As expected, this pair had started to pullback bearish after an initial Bull Candle signal above the Range Setup.

It will either continue Bearish to return inside of the Range or test and then U-Turn at Resistance to continue the breakout.

If it resumes the Bullish breakout, it will first hit the Resistance of the larger Pennant and then either pullback or breakout for sharp USD gains.

94

Hi DR,

I am a newbie on 6 month old and very keen to have a better live style but having practiced on small time frames, 5mins, 15mins etc, I realize that the forward way to go is as suggested by yourself and based on Pure Price Action, therefore, my first question is, do you still offer “Persons who get the Manual receive your Trade Setups for Entry 15 Minutes before you execute them which we could use on your live account” please? If yes, what is the procedure please?
Thanks.
Regards,
Vincenzo.

95

Hello everyone, its been a crazy few months, havent posted in awhile.

Let me get things back on track with a summary of my trading over the last 13 Months.

In the Table Below, you will see the 15 trades that led to the 35% Rate of Return from my Swing Trading strategy. I use a risk per trade of 5% that I believe is appropriate for this style of trading.


Even if you used a 2% Risk per Trade, you would have achieved a 14% Return- still strong relative to other asset classes aimed at Long-Term wealth creation. Relative to the most popular Benchmark Returns/Indices such as the BarclayHedge, this is a very strong performance for a conservative style of trading this dangerous financial market.


(Names of CTAs withheld to comply with redistribution terms of BarclayHedge)


(Names of CTAs withheld to comply with redistribution terms of BarclayHedge)

My trades are done on average twice per month, targeting the best paying opportunities that offer between 100 and 200 Pips. Although this is the targeted range, there have been times when trades have had to be closed below that 100-Pip minimum. This was because they had not yet reached their target within the established Holding Period. Once this limit is reached, trades are closed regardless of their floating loss or profit. This Holding Period Rules is a good anchor to use in your trading because it allows the market the time needed to reach our targets while ensuring we do not stay in the trade longer than is necessary.

The performance started out shakily with that initial 100 Pip loss on the AUD USD, but since then, it recovered quite well with consistent and large gains such as 231 Pips, 199 Pips and 200 Pips. These led to that peak of 53%. One of the advantages of Swing Trading is that the time in between trades allows you to regain your composure after losses. You are better able to analyse these losses objectively and be able to approach the next winning trade with greater objectivity and confidence.

The main challenge with these trades and Swing Trading in general, however, is to patiently allow the market to go to our/its targets. There are times when the market will provide quick gains in 1 to 3 days…


…but on other occasions, we have to wait until the last day for the target to be hit and have faith that despite pullbacks along the way, the market will eventually give us our reward…


Towards the end of this 13- Month period, however, I have encountered a bit of bad luck, with 3 consecutive losses. Nevertheless, once I get back on track and ensure that these mistakes/issues are not repeated, I will not be very far away from reaching my targets from this strategy.

For a Long-Term focused strategy of making money consistently away from unnecessary short-term volatility in this market, Swing Trading is the best bet. Day Trading has its many benefits and there are many people who can make money this way. But Swing Trading allows greater flexibility since it does not require constant monitoring of the market and minimizes your exposure to the market by only focusing on the best, highest paying trades each month.

Lets see what the next few months bring, hopefully there are more winning trades on offer from this exciting market.

[B]Duane

DRFXTRADING[/B]

96

Hey Vincenzo,

Yes I still do. I will contact you.

The 5 Mins and 15 Mins charts were time frames I used to trade on as well. Quick moves and fast gains.

Problem was that these moves were too fast…and the Pips were to small to amount to much amid losses.

Regards

Duane

97

How´s the weekend going so far everyone?

NZD CAD could continue bearish if we see a strong U-Turn above the Range Setup that is just below the broken Uptrend Line - a major Uptrend Line that was broken following the formation of a strong pair of Double Tops.


This Candlestick Formation is one of the strongest that you will see in the Currency Market. They often lead to sharp and fast movements wherever they are formed in a similar way that ABCs often do as well…

CANDLESTICK FORMS.jpg700×360 20.7 KB

They can appear at the end of trends to indicate that a reversal will take place as well as above Conslidation Resistance to indicate the start of False Breakout Reversals.


So given the large size of these Double Tops and the current position of the pair below the major Uptrend Line, a U-Turn bearish is likely to indicate the start of strong CAD gains for the rest of 2015 heading into 2016…

98

The Trade Setups and results provided over the last 13 Months have so far proven that my Swing Trading Methodology has tremendous potential to provide Long-Term Wealth. This Swing Trading Strategy was created after my failed attempts at Day Trading over several years despite many attempts with various types of strategies. With no alternative left but to look at the higher time frames for “help”, I finally realized that success from Forex Trading would only be possible by trading the more stable movements of these charts.


One of the important lessons to be learnt from Swing Trading is that even though trading is not that frequent, constant monitoring and practice is necessary. These opportunities tend to arise 1 to 3 times per month but if a certain setup arises that you are not familiar with, you can hesitate and decide to forgo it, regretting it later on - as I have. By frequently reviewing past examples of various types of setups that the Methodology targets, one can remain sharp and prepared.

The Holding Period for these trades can also be a challenge coming from Day Trading. This can take some getting used to. One way that I conditioned myself to get comfortable with this was to practice opening arbitrary trades on a demo account and simply leaving them there for 10 Days. I checked on them at the end of each day without checking the balance/chart. This allowed me to get used to leaving live trades for the 7 Day Holding Period.

Losses are an inevitable part of Forex Trading. Whereas with Day Trading, there is very little time to adequately regain your composure between trades, the larger time between Swing Trades makes this possible. This is crucial to trading success because we can easily be tempted to jump back into the market to take quick revenge without proper analysis. This is the downfall of many traders and is one of the behaviours that can be avoided with Swing Trading. The key is to review every aspect of the trade, make notes on what went wrong and be sure that these mistakes are not repeated. This will both minimize future losses and give us the necessary time to regain objectivity.

Despite my belief that Swing Trading is the better way of trading, there is always the temptation to try something new that could capture quick Pips in between Swing Trades. Although Swing Trades offer larger gains per trade, they are often a few weeks apart. This leaves time for the “devil” to give us ideas about going back to the lower time frames or even trying different types of trades on the Daily or 4 H Charts that are risky - I have been tempted many times in the last few months.

Although it would be nice to be able to trade more frequently, the reality of trading is that there is no need to trade often to make money. After all, where is stated that in order to make money from this market, we have to Day Trade or trade every week? Currencies and their price movements are difficult to predict especially in the short-term, which is why Central Bank Economists dedicate their lives to modelling these volatile asset prices. While Swing Trading could also be considered short-term- since we are talking about 3-7 Days of holding trades - the movements are more in sync with the Medium-Term, stable direction of a currency pair.

This is why the focus should continue to be on making money over the Long-Term. The trends and setups are much clearer and accurate and are the reasons why - with just 15 trades - the Methodology has returned 35% and 14% (using risks per trade of 5% and 2% respectively) in just 13 months. When compared to the annual returns in the BarclayHedge Rankings and other conservative investment asset classes, I believe it is on the right track. The challenge will therefore be to continue along this path despite the hurdles and the temptation to veer off course.

[B]Duane

DRFXTRADING[/B]

99

Well, this is just a picture with numbers, we can’t tell that there’s a real account with real performance behind it.

100

Hey man, thanks for comment

  1. All of these trades up to Jan.15 were done on my Live Account with Dukascopy as you can see from the graphs of the trades throughout this thread and elsewhere and on Page 8 of the thread where the Duksacopy Account is displayed.

  2. Only the last 3 were done on an FXCM Demo Account. (No Longer trading live with Dukascopy- will open a new Live Account with another broker that protects against Negative Balances)

  3. Combined, they are really meant to reflect the Trade Setups that I send to people who use my strategy since July 1, 2014 and what they have achieved using a hypothetical Balance of US$5000 for illustration - not an actual account.

  4. The only single account that reflects most of these trades that is tracked and verified is an earlier FXCM Demo Account that is shown below …



The JForex Platform on the Dukascopy Account unfortunately doesnt lend itself to being tracked and verified- which would have been ideal.

So none of this is made up. Most of these are Live Trades and the rest are actual trades in the sense that they were also traded, albeit on a Demo Account. When a new Real Account is opened that can be tracked and verified, then it will further confirm the performance of my strategy.

Regards

[B]Duane

DRFXTRADING[/B]

101

Hi Duane,

Since you’re already familiar with the capabilities of FXCM’s platform, you might be interested to know that our UK entity offers negative balance protection of up to 50k per client. Your forum profile mentions that you live in Jamaica which makes you eligible to open an account with FXCM UK.

102

Up to 50K? beyond that we are on our own?

Well thats good news. I thought you guys didnt offer that unless this is a new policy.

Your platform is very good, easy to use etc and above all it can be tracked and verified so that I can further confirm the performance of this strategy.

In the next few weeks I will re-open etc.(I already have one, but its not in use right now)

Regards

Duane