Hi and welcome to my “Trending Now” trading journal.
As the astute amongst you may have already guessed, this is going to be a record of my thoughts and ideas and trades, using the fundamentals of trend trading.
The main tenets of the strategy are high risk to reward ratios (1:5 - 1:10 in many cases) and very selective rules for taking positions.
On average, trades will use stop losses of 10 - 20 pips, precision entries being vital to the strategy.
The main focus of the strategy is to maintain an extremely low draw down, as such, trades will risk only 0.5% per net position on any one pair. The strategy will usually only trade one pair at a time but perhaps two in strong trending conditions.
Picking Trades
The trend will be defined by looking for the strongest SR levels on daily/weekly charts and then looking to see the current trend on the 4 hour chart.
When there is a trend present on the 4 hour chart and we are trading towards, or away from, a strong SR level, we will start to look for pull backs on the 1 hour and 15 minutes charts.
We will look for harmonic corrections in the pull backs from small charts (5 - 15 mins) to time entries and trades will be entered by limit order.
Target gains are 5 - 10% a month, keeping inside of 10% draw down at all times.
Greatest Hits
To illustrate examples of what the strategy looks to do, here are some of the best trades taken recently.
EURUSD 1:10 Risk:Reward
USDCHF 1:7 Risk:Reward
GBPJPY 1:7 Risk:Reward
Active Trade
Although overall this has traded in a range on the 4 hour chart for some time, the buyers seem to have the momentum and GBPJPY can produce strong short term trending moves. It has came down into a strong support level, where it has formed a cypher pattern.
Stop is 17 pips, target is 200 pips.
Watch Listed Pairs
As strange as it seems to start a trend following journal looking at possible trend reversals, that is what we are going to do.
The daily chart trend on AUDUSD has been to the upside but overall on the weekly chart, we are very high in the range it has been trading in and still in a downtrend.
We have formed a butterfly pattern on the daily chart and this could lead to us seeing this pair begin to trend downwards over the next month(s).
We’d like to see this spike a little lower and if it does, we are going to look for the retrace to test the completion level again, we will be looking to sell here with stops just above the highs.
Active Trade
Short crude oil. Gartley pattern in a down trend correction.
Stop 27 pips, target 196 pips
Watch List Pair.
Double potential harmonic pattern on USDJPY. While this does not help us to determine the direction in the immediate future, it does give us very big support or resistance levels if the market moves in either direction.
We can look for short/medium (or even long) term reversals from these levels and we can also watch for important break outs of them to help to establish a larger trending move may be developing.
Watch List Pair.
EURUSD, after a strong close to the week, it seems possible the EURUSD can continue it’s uptrend, perhaps pushing through the next resistance at 1.18 and making it’s way into the 1.200 area.
A bullish butterfly formation completing at the previous structural high would give us a good entry level to rejoin this trend.
To get the best risk reward on this trade, this is the optimum sort of action to look for, the initial bounce from the level followed by a correction and retest. We can limit order to enter on this level and have our stops very tight under the initial low. Getting paid 500% or more of your risk on this trade is very feasible, if it makes this move.
Watch List Pair
AUDUSD, we maintain the outlook that the butterfly pattern may lead to a reversal but we also have our eye on a bullish trend continuation set up.
We may see price form a cypher trend continuation pattern upon a retrace into 0.7640.
If we continue to trend, the next big upside level is 0.825.
Watch List Pair.
CHFJPY, after forming a head and shoulders pattern, we have seen a strong and consistent sell off on the 4 hour chart. This sell off still seems to have the immediate momentum behind it and there may be opportunities for short trades upon corrections of the 4 hour fall. It is also worth watching the lower zone indicated for a potential chance to rejoin the bigger trending move.
Watch List Pair
GBPUSD, currently showing multiple bearish signals, GBPUSD could be due some correction. A butterfly pattern completed.
Then the D level was retested with a small crab pattern.
These are both possible sell signals. If we see price lower, we also have a trend continuation buy signal when we complete a gartley pattern. We could have good buying opportunities in around 1.1340 - 20. Stops around 1.1280, unless tighter stops can be gained by smaller chart entries.
Watch List Pair
GBPJPY, if this set up completes, this may be our best trading opportunity over the coming weeks/months.
A bullish butterfly may be setting up on the GBPJPY daily chart and from there we may see price make a sharp burst upwards comparable in pips size to the previous corrective move up, which was 2,500 pips. This pair is a strong trending pair and it can produce many good risk:reward opportunities if it shows signs of buying momentum from around 133 - 133.20.
Swing Analysis.
After a significant time of ranging, EURUSD has been rocketing upwards of late. The level the decline stopped at was a completion level of a butterfly, with the 161 level marginally breaking but price now bouncing upwards.
If we strip out all the noise what we have here is a move to a low, a retest of the low and now another move extending a bit above the previous high backed with very strong momentum. If you are a person with a good memory, you may remember us seeing exactly this type of price action on the GBPUSD where we made the long term top on the Scotland vote.
Things can look similar up to a point and end up very different so not too much should be read into this alone but it is something to keep in consideration, if we were to see similar moves on EURUSD we could be looking at seeing EURUSD trading significantly lower than the bottom of the range we have been in over the last year.
EURUSD Imgur: The magic of the Internet
GBPUSD Imgur: The magic of the Internet
