Aug 30th Breakout of Asian Low
Attached is 5-min EUR/USD chart. We had 2 data releases.
1) 09:00 GMT = Euro Data
2) 12:30 GMT = U.S. Personal Income + misc.
A = 08:55 high 1.2739
B = 09:20 low 1.2712
C = 09:50 high 1.2725
Asian Low = 1.2714
FE 100 = 1.2697
FE 127 = 1.2689
FE 161.8 = 1.2680 (target - hit)
Entry SELL = Open price of 10:50 GMT 5-min candle 1.2708
- Reward (projected) = 28 gross pips. Minus 2 or 3 pips for spread = 25 net pips.
Stop -Loss Options:
- Just above Point B 1.2712 + spread and cushion = 1.2716. Risk = 8 pips
- Just above Asian Low 1.2714 + spread and cushion = 1.2718. Risk = 10 pips.
- Just above 5-min pivot 1.2721 + spread and cushion = 1.2725. Risk = 17 pips
- Just above Point C 1.2725 = spread and cushion = 1.2729. Risk = 21 pips
We were familiar with the Asian Low as we had made a bounce trade off that price, just before the European open. Pair probed below to 1.2712 but did not confirm with a close of a 5-min candle, until 10:25. That candle closed at 1.2713.
We did not use this example as the entry price, opting for the more conservative evidence of break.
Our rule dictates that we move our stop-loss once a 5-min candle closes past the FE 100 (when targeting beyond that). 1.2701 was stop-out for + 7 net pips.
THe 2nd data release at 12:30 took hold of pair after it reached the FE 127 and drove it back up to the Asian Low. After about one hour, the market resume its downward pressure and EUR/USD did eventually hit the FE 161.8 at the 14:15 candle.
After a minor U.S. data release at 14:30, which provided more choppiness, pair hit its FE 236.2.
Today's attached chart included the Ichimoku indicator, which had been left out as it can clutter the visual aspect for tutorial. You can keep it on your demo account chart(s) with your other indicators/tools and fib plots.
Price action above or below the "clouds" indicate trend.
The Ichimoku can provide support and resistance with its "cloud" edges. It also has 2 lines that cross, indicating trigger/trend, with red crossing blue (default colors). However, as with most crossovers, there can be lag time.
We find the Ichimoku cloud edges to be particularly effective during the Asian session, and when it is applied to a 15-min chart (for our technique's time interval).
If you trade Yen pairs, the adherence to the cloud edges for S&R is also evident. Just conduct an internet search for more info on this indicator.
Last edited by fxbaja; 08-30-2010 at 07:07 PM. Reason: should read "red crossing blue"
Aug 31st Asian Bounce Off 1.2633 Level
1) On our longer interval charts, as recently posted, we had 1.2666 as a significant fib area. EUR/USD established low of 1.2658 during U.S. session.
As pair shot back up past 1.2658, we knew a short on approach to 1.2666 was a play. Great bounce down to near Asian session low.
2) Attached is split chart of 5 and 15-min charts. On left is the 5-min with BUY just above session low of 1.2633.
We had to pull the trigger manually and was rejected as things moving fast. Reattempt filled at 1.2637.
Plotted retracement fibs to target profit. High = 1.2663 & Low = 1.2634.
23.6% = 1.2641
38.2% = 1.2645
We decided to exit at the 23.6 since the low was probed 3 times at start of the Asian session.
Net + 4 pips, with 5-pip stop-loss to leverage more lots.
Here's the same 2 charts a few minutes later. We plotted an ABC on the 5-min, resulting in a FE 61.8 of 1.2628, where it has bounced back up to 1.2634.
Herein lies the difficulty in assessing a breakout. However the new ABC plot does help. Generally, we need thrust. Asian is usually docile unless there is data, etc.
Opening of Asian saw EUR/USD get dragged down due to cross-pairs EUR/CHF and EUR/JPY.
We are also aware of next level of support, reached just a few days ago.
Breakout to upside stalling at FE 127. FE 161.8 = 1.2691
Edit: Thrust provided by better than expected European data at 07:55
Next high-impact data releases = 09:00 and 14:00
Last edited by fxbaja; 08-31-2010 at 08:33 AM.
We're going to break the recap of action down into 3 parts, with small injections of fundamentals for dinner conversation.
1) ABC end Asian and into start of Euro session:
A = 07:35 low 1.2644
B = 07:55 high 1.2666
C = 08:05 low 1.2654
Asian High = 1.2666 (also major fib 23.6 on Daily chart, off high of Aug 18th and low of Aug 24th)
FE 100 = 1.2677
FE 127 = 1.2683
FE 161.8 = 1.2691
Initial breakout driven by European data at 07:55. Pair hit the FE 161.8 before resetting ahead of 09:00 data (Euro Zone confidence reports).
2) After the market made its way through the 9:00 data, which resulted in a retreat back to the Asian High, ABC plot for next data 12:30 Canadian GDP:
A = 11:30 low 1.2665
B = 12:00 high 1.2690
C = 12:20 low 1.2670
FE 100 = 1.2695
FE 127 = 1.2702
FE 161.8 = 12710
FE 236.2 = 1.2729
Market was sent to upside on negative CAD GDP. Cross-pairs, such as EUR/CAD pulled this EUR/USD up. After hitting the 236.2 fib and bouncing, pair reached its peak price of 1.2742. This price is the 50% fib from move of July 29th low 1.2151 and Aug 6th high 1.3333 (considered a major fib).
3) Keeping with our recent highlight of bounce trading, a short off of 1.2742 was prudent. We measure retracement fibs from low of 12:20 1.2670 and high 14:15 1.2742.
23.6% fib = 1.2725
38.2% = 1.2714 (target)
50% = 1.2706
61.8 % = 1.2698
78.2% = 1.2685
Retracement fibs not on attached chart.
Pair retraced all the way back to Asian High area, with last thrust after release of FOMC Minutes at 18:00. Since data release on U.S. Consumer Confidence was at 14:00, getting in right after announcement would have involved a wide spread and fast market (slippage).
The high price was established at 14:15 and volume subsided enough to get a decent fill. Trading so close to data announcement should be reserved for intermediate/advanced traders. In this case "they" should have been confident in reading the market and an anticipated bounce off a major fib/resistance. Counter-trend trading, in general, is also not for beginners, in our opinion.
Last edited by fxbaja; 08-31-2010 at 08:21 PM.
Manually exited at 107.14 + spread = 107.17.
Net = 14 pips.
As you can see on attached 5-min chart, we had fib fans and retrace fib plot.
Entry after break of trend line (dotted line), filling at 107.28.
Retrace fib pull from:
Low = 23:55 106.58
High = 03:50 107.42
We targeted 38.2% 107.10 + spread = 107.13....bt we exited manually at 107.14 + spread = 107.17.
Last edited by fxbaja; 09-01-2010 at 04:47 AM.
Entered sell and filled at 107.41. We declind exit with first push to 107.30 and consequently had to wait for pair to fall back down.
Manual exit at 107.31 + spread = 107.34. Net + 7 pips
Chart shows fibo fan pointing up and pair respecting that, thus our conservative decision to exit.
Tight S/L enables trader to leverage more lots. We are very pleased with the last two trades. First was risk/projected reward of 18/18 and last trade was 10/15.
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