EUR/USD finally did hit extension FE 161.8 price of 1.2627. Unless stop-loss was at least 3 pips above Asian High, would have stop-out. Our rules require moving S/L just behind FE 100.
Need to analyze next support level. Attached is 5-min chart. We plot the ABC:
A = 19:00 high 1.2683
B = 01:45 low 1.2619
C = 03:30 high 1.2644 (38.2% retrace of A-B)
FE 61.8 = 1.2604
This price corresponds with our larger interval chart analysis per 2nd chart. It is the 61.8% retrace fib of A-B June 29th low and Aug 6th high.
1.2605 is also the 50% retrace fib price of June 7th low and same Aug 6th high.
Traders that identify this kind of support can make a bounce trade, or also have a short off the 38.2% fib (Point C of 1st chart).
It is also good that it's near the round number of 1.2600, which upon 1st approach, should result in a good bounce. We'd measure a retrace set of fibs for exit levels. Take the most recent down move and plot the retrace off of that high to low.
Last edited by fxbaja; 08-24-2010 at 04:26 AM.
New Point C established, as market shifted through some medium-impact Euro data at 06:00 GMT. This required repositioning of Point A. Results are that the FE 127 is 1.2603, which is still in the area that we are pinpointing as support.
This is not the breakout of Asian ABC parameters.
We exited our short.
Small bounce off FE100 price 1.2612 from our adjusted ABC. We are still anticipating a bounce off support at the 1.2600/1.2605 area. I'm sure some waiting BUY orders there.
Last edited by fxbaja; 08-24-2010 at 07:24 AM.
Aug 24th Bounce Trade
Attached is 5-min chart with bounce trade. We did not trade the breakout of Asian Low as we knew the 1.2605 area was significant, as per recent posts herein.
We always pre-program entry a couple pips or more from bounce area. Draw retracement fibs for target exit.
High = 06:30 1.2658 and Low = 08:15 1.2607
38.2% = 1.2626
We always think it's a good idea to also add some cushion at exit too.
Although this bounce has hit the 61.8% retrace fib, we are satisfied with our trade to the 38.2.
This is good example of benefits of keeping our eyes on longer interval charts for significant support/resistance (S&R).
Not only did it keep us out of a false breakout to the downside, but also allowed us an opportunity to make a bounce trade, with a tight stop-loss and thus leveraging more lots.
European data at 09:00 GMT.
Last edited by fxbaja; 08-24-2010 at 09:01 AM.
Attached 5-min chart on EUR/USD covers the 3 occurrences on Aug 24th.
1) Bounce trade off support
2) Breakout to downside halting at FE 100 price of 1.2588.
- still felt same support level formidable.
3) Market reaction to U.S. Data (Home Sales) released at 14:00 GMT.
- Traders anticipated a negative number and it basically had been telegraphed leading up to data release. Actual number even worst than anticipated. Pair spiked up, which we had aligned with an ABC pull:
A = 12:25 low 1.2587
B = 13:55 high 1.2639
C = 14:00 low 1.2614
Asian High 1.2658
FE 100 = 1.2666
FE 127 = 1.2680
FE 161.8 = 1.2698 (hit)
Too fast and furious for us to trade since pivot and breakout occurred at 14:00 data release time. Certainly, wide spreads and slippage part of the scene during that point of entry.
Looking at the previously posted 1-Hour chart with the fib arcs, etc, we can see the pivot after spike caught by the 61.8% fib arc.
Edit: In an effort to locate resistance for spike, use fib fan and pull:
High = Aug 8th 1222
Low = Aug 24th 1.2587
The 38.2% diagonal fib would have the 1-hour candle resistance at about 1.2710
Take the same high/low and plot the retrace fib, and arrive at the 38.2% fib price of 1.2715.
Last edited by fxbaja; 08-24-2010 at 06:15 PM.
Attached 5-min chart includes activity after spike up due to disastrous U.s. Existing Homes Sales figures.
We had a 21:00 GMT data release on U.S. ABC Consumer Confidence. Altough rated as low-impact since there is another index more higher regarded, it seemed to have driven the pair back down.
We have following plotted:
Retracement fibs from Low =12:20 1.2587 and High = 14:25 1.271
- Pair initially retraced to 38.2 fib before data pushed it to 78.6 fib
- Now bounced from 78.6 to 61.8 fib
Fibo Fan: High = 14:25 1.2715 to Low = 21:20 1.2616
- We can see resistance aligning in upper area. Goal is to use it for potential retracement trading off resistance from fibs (bounce sell).
Fib Expansion (Extension):
A = 17:40 high 1.2690 (session high)
B = 20:40 low 1.2659 (also previous Asian high)
C = 20:55 high 1.2668
FE 100 = 1.2637
FE 127 = 1.2628
FE 161.8 = 1.2617 (hit)
- The FE 161.8 is near the 78.6 retrace fib of 1.2615
We are in on short from 61.8 fib. This is trading between the fibs.
We filled short @ 1.2635.
Profit target FE 161.8 1.2617......
with plan to take majority exit at FE 127 fib 1.2628, which we did (75% of lots).
We waited for 3rd atempt to break the FE 127 price and decided to exit our remaining lots.
We filled all at 1.2631 for net +4 pips.
We were able to load up on lots since stop-loss was only 5 pips.
If it breaks FE 127, no regrets.
We used manual exit and chart price was 1.2629 in both instance when exiting.
Last edited by fxbaja; 08-24-2010 at 11:25 PM. Reason: upoad chart
While last trade looked small, profiting 4 pips, it was not.
Let's say that a trader's normal stop-loss (risk) is 20 pips.
Trade with 5-pip stop-loss allows us to scale and increase number of lots. In this case, to maintain same risk (as a percentage of account), we end up trading 4 times the normal amount of lots.
In other words, if our risk for each trade is 1%, it can still be 1% on the last trade when properly scaled.
This means 5 pips stop-loss = 1% risk
4 pips net profit = 8/10th of 1% reward
There is a scaling/risk calculator on this thread. Just search with those key words.
SCALING/RISK CALC is on page 10 of this thread.
Last edited by fxbaja; 08-24-2010 at 11:58 PM.
Attached are 2 charts, a few candles in time difference. Each chart has both a 5-min and a 15-min chart of EUR/USD and various support and resistance.
Arrow down is entry for a sell position as it bounces off resistance.
There was 20 pips between FE levels, and it looks to be probing further down now as we speak.
These kind of trades allow for a tighter stop-loss and thus more leverage. We cannot regret staying out of data release periods. Instead, with our S&R skills, we can capture small gains between fibs that will equate to the same type of $ profit, with proper scaling.
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