The last example had a very tight time window. If a trader feels uncomfortable with that, trader would simply pass. This is called restraint or discipline. There's always the next opportunities.
Never be in a position where you feel you must force a trade.
That example also highlighted the awareness of time. It was natural for price to pivot ahead of the European session, as the longs were taking profit. We've featured this aspect numerous times.
The link we provided, will show that daylight savings for Europe takes place Mar 25th. This is critical when conducting breakouts of the Asian Session high/low, of course.
Japan, China, and India do not observe daylight savings time.
When using the indicator time_modified, the session times must be adjusted accordingly.
Here's the link again:
Last edited by fxbaja; 03-23-2012 at 06:01 PM.
CAD/JPY GAB HAMA_T3 with Fractals
A few days ago, we had CAD/JPY 4-hour with GAB and HAMA_T3, on a massive upswing.
Now, let's take the same pair and lower it to the 1-hour. The same SQ9(Price) levels are kept. The start price is 80.373, with direction up.
Entry points on pullback from downtrend were Mar 22nd 00:00 and Mar 22 05:00, and marked with blue arrow/lines.
Now, we'll focus on the fractal indicator, which is standard on the MT4 platform. To find it, click insert, indicators, Bill Williams, Fractals.
Fractals are candle formations consisting of 5 candles. There must be one extreme candle in the middle, the 3rd candle. This formation denotes potential turning points.
The indicator will paint a "hatch mark" at the extreme/middle candle. The hatch mark will appear after the 4th candle. If the 5th candle does not conform, the hatch mark will disappear.
We labeled exit options TP1 and TP2 (for take-profit 1 and 2). The extreme candles were
TP1 = Mar 22nd 09:00 and
TP2 = Mar 22nd 17:00
As we can see on the attached chart, the TP1 pivot did not conform, as the 5th candle closed below the extreme candle's low. The hatch mark disappeared.
The TP2 pivot was a conforming fractal pivot. We can see the 2 candles prior to the extreme candle, closed higher than the extreme candle.
Then 2 candles after the extreme candle also closed higher than the extreme candle.
Think of this 5-candle formation as your hand with 5 fingers. The extreme candle is you middle finger. the other candles/fingers must be exceed the length of your middle finger/extreme candle.
The fractals indicator is another tool that can be additional confirmation and guidance for exits. If you learn how to read them, you can anticipate their appearance in advance, or simply wait until it locks in.
In this example, using a conforming fractal pivot allowed trade profits to be maximized.
Just remember that there is a lag, but sometimes it's better to exit than get punished on a reversal that eats up a lot of profit. Trailing your stop-loss is also a factor, of course. The HAMA_T3 candles (pink on our chart) kept trader calm to stay in trade.
Since using the HAMA_T3, which is a fancy Moving Average type of cross-over, lags, this illustrates other techniques for exit.
Dropping down in time-frame to trigger exit is often done and should be learned/practiced.
Entry (2nd option on chart) = 84.00 (also at 360-degree of SQ9)
Stop-Loss (S/L) = 84.19 is top of T3 candle (Value 2 in data window) + cushion = 84.21.
Risk = 21 pips.
TP2 = 82.55 which is closing price of 19:00 candle (5th finger), + spread/cushion = 82.60.
Reward = 145 pips
Reward/Risk = 145/21 and ratio of 6.9:1.
Exiting at TP2 instead of TP1, gained additional 50 pips.
Trailing stop-loss uses top of T3 candles + spread/cushion.
Last edited by fxbaja; 03-25-2012 at 03:52 AM. Reason: math....
AUD/USD Mar 25th/26th
Attached is a split-screen of AUD-USD.
Left = 15-min with GAB HAMA_T3. Fib plot 1.04906/1.04445.
Right = 1-hour with Mars at 45-degree interval. Fib plot 1.03709/1.04906
On Friday 20:00, and Sun 22:00, price retested the Mar 22nd 01:00 high of 1.04810 (same as Mars 45-degree).
It did not hold and decline passed Mars 45-degree level en route down. If entry after breach of Mars 45, we saw thrust to pivot at the 1-hour 38.2% retrace level 1.04449.
That's a gain of about 35 pips. S/L risk = 15 pips (placed above 1.04906)
S/L = 1.04956
Entry = 1.04810
TP1 = 1/04469 (includes spread)
R/R = 35/15 and ratio of 2.3:1
The 15-min showed pullback to the 50% retrace fib, which had the T3 candles right there as trailing stop-loss (option), and resistance.
This can be used for those that look to stay in the SELL position.
Europe had daylight savings, and now session opens at 07:00 GMT.
The 08:00 positive EU data caused a quick pop up in EUR/USD. This was after price broke Asian Low. Therefore, being aware of data and waiting would have avoided possible stop-out.
Price now looks to resume decline.
Same split-screen charts, except we zoomed out on the 1-hour.
The fib plot on the 1-hour was High = 1.3284 Low = 1.3177.
We previously referred to the breakout of the Asian Low, after a tight Asian range, and which was briefly interrupted by 08:00 data.
The decline was a 200% extension of the Asian High/Low. It also was supported by the Mars 135-degree level of 1.3195, as seen on the 1-hour chart.
That trade gained about 40 pips net. As mentioned, entry would have been better if it was after the 08:00 data release, when price crossed back below the Asian Low (red horizontal line on 15-min).
The stop-loss options included placement just above 08:00 high of 1.3262. Risk = 25 pips. Net R/R = 40/25 and ratio of 1.6:1.
FED Chief Bernanke had a scheduled 12:00 speech, which was anticipated as and resulted in a DOVISH tone. This means USD trades weaker against other currencies.
EUR/USD made a sharp ascent after marking its Low. The 15-min has the HAMA_T3 indicator to act as intra-day support and trailing S/L guidance.
The 1-hour gave trader TP target fib extension levels to the upside. Not shown is the RSI(4-Period), which registered oversold 85 at close of the 12:00 candle period.
That level was the Mars 225-degree, 127.2, and 138.2 area of 1.3310-25. Gain from pivot low was about 100 pips.
Traders staying in during Bernanke's speech should be familiar with associated risk.
Updated split-screen of AUD/USD that was previously posted.
We pointed to the 50% pullback to the upside, which was contained by the 15-min T3 candles 03:15-04:00.
Pair proceeded to make its extension to the downside, to the 138.2% fib (on 15-min plot). That level was also the Mars 0-degree as seen on the 1-hour chart.
The 1-hour chart has the same previously posted fib plot. The low was a 50% pullback, prior to 138.2 extension to the upside.
One hint of the reversal from the low can be seen on the 15-min chart, as BAJA bullish divergence set in. The RSI indicator is set at 4-period for BAJA divergence.
Price stayed above the T3 on the 15-min, en route to its 200% extension level of 1.0537. This is generally the same area as the Mars 90-degree and aforementioned 138.2%, on the 1-hour. This is an example of a support or resistance "cluster".
Last edited by fxbaja; 03-26-2012 at 05:54 PM.
USD/CAD SQ9(Price) and Fibs
SQ9(Price) indicator that was adjusted to accommodate more levels, which was posted recently in Post #2905 and named SQ9(Price) 5760.
Or conduct a "Search This Thread" using key words "FOR DOWNLOAD" or "FOR DOWNLOAD SQ9(Price).
StartPrice = 1.3063 (Significant high Mar 8th, 2009)
Direction_Up = false
On the 1-hour chart, we can see several days of S&R levels produced by the SQ9 that still works.
We labeled previous peaks near the 2643-degree level on Mar 6th/7th, with white check marks.
The green rectangle magnifies a price range between the 2633 and 2678-degree levels from Mar 9th to Mar 22nd.
Friday Mar 23rd saw a revisit to the peaks of Mar 6th/7th, and a bounce off the 2543-degree down to the 2588-degree as the week closed.
As we started the new week, we would monitor price action as it relates to the tools applied thus far.
Price continued the down move from Friday, but pivoted 23:00/00:00. We should always look for the pivot.
We then measure the pullback. In this case, it was 50% (.9998 and near round number 1.000), achieved during the 08:00 period. This is the set-up.
Experienced traders can trade from the pullback (SELL), with a small stop-loss just above the 61.8% fib and 2565-degree 1.0009. Risk = 15 pips with cushion.
TP1 would be the pivot low .9963
TP2 would be one of the extension levels.
When we make this plot (not shown), we can see the 138.2 (.9937) is just above the top of the green zone.
R/R for each target, based on entry at pullback :
TP1 = 35/15 Ratio =2.3:1
TP2 = 57/15 Ratio = 3.8:1
The 08:00 1-hour candle was colorless with long wicks on both ends. It is a type of doji candle and denotes uncertainty by the market. Usually, this is a reversal signal.
If trader waited for that candle to close and entered at the opening price of the next 09:00 candle, the R/R would still be close to the above numbers.
TP = take-profit
The first chart pic was taken right after our last post and right after the Mar 26th U.S. session ended (after 19:29 GMT*).
The split-screen has a 15-min chart on the left, with session colors, GAB HAMA_T3 and fibs.
We previously pointed out that the market often uses an EVENT to mark and measure the start of a move.
In this case Monday Mar 26th 12:00 was the event - the FED Chief Bernanke speech. It was DOVISH and sent EUR/USD upward.
We used that 1.3243 as the LOW for our fib plot. The HIGH = Mar 26th 14:15 price 1.3338.
The blue fibs show that price made a 127.2 extension during the 19:30 period, which was right at the end of the U.S. session. The 6/8th MML (red dotted line) is also right there.
The 1-hour chart on the right has Mars lines at 45-degree intervals, and a wider fib plot (yellow) using:
High = Mar 21st 08:00 1.3284
Low = Mar 21st 15:00 1.3177
When we zoom out on this chart, we can see that pair made
- a 138.2extension to downside on Mar 22nd. Mars 90-degree also supported.
- revisited High on Friday Mar 23rd, but could not break.
- Mon Mar 26th, after pivoting at the Mars 135-degree early European session, broke HIGH resistance level during Bernanke speech.
- after very brief pause at the 127.2 (upside) fib, which is same as Mars 225-degree, climbed to the 178.6 extension fib during the 19:00 period. This is also the Mars 270.
We had a fib cluster at point of SHORT.
2 on the 15-min chart, and 2 on the 1-hour chart, as highlighted in red above.
Let's say entry = 1.3362
Next step was to assess take-profit (TP) options, while using a tight S/L just above 19:30 peak of 1.3367 + 5 = 1.3372. Risk = 10 pips including cushion.
TP1 = when price hit the HAM_T3 candles. This happened during the 22:15 low, and shaved about 10 net pips. Price 1.3349 + spread/cushion = 1.3352. R/R = 1:1
TP2 = is the HIGH of fib plot 1.3338 + spread/cushion = 1.3342 (hit 06:30). R/R = 2:1
2nd chart provides pic after TP hit, etc.
*U.S. session is 13:30 through 19:29 and is the same hours as the New York Stock Exchange. Forex is a virtual market without a trading floor and only takes session periods from stock market hours.
Here's link again, for world stock market hours:
Worldwide stock markets map shows the current open closed holiday status and current time for stock exchange- 24 hour format or cut and paste
EUR/USD Andrew'd Pitchfork (APF)
Here's a pic of the continuing price action as it relates to our original plot which was posted. Plot was:
Handle = Nov 4, 2010 high 1.42811
Upper corner = May 4th, 2011 high 1.49389
Lower corner = Jan 10, 2011 low 1.28723
As usual, we also added the indicator AML_v1-1 to get interior fibs.
Arrows point to turning points at interior fib levels, including today's hit to the Upper_ML2, as can be seen on chart 2 zoom-in.
Last edited by fxbaja; 03-27-2012 at 06:58 PM.
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