Waiting for PA confirmation

Tuesday morning has been interesting so far. I was looking at shorting G/J because its advance was very weak and it was approaching previous high that was also coinciding with a trenline. I didn't short it right away, but rather waited for a price reaction. The reaction came in the form of a very strong bounce. I got in short and exited at previous support:



A similar thing happened on E/J but the reaction a more subdued, because E/G was trying to go higher. I again waited to a reaction, I saw U/J selling off, E/U breaking down and got in short. Exit simultaneously with G/J.



During the day, U/CAD broke the ascending trendline, but 1) I missed this because I was at work and 2) I probably wouldn't have taken it anyway, because the move was rather unconvincing in strength.



-Tyler

Sunday night/Monday morning

We had an unusually active Sunday night and Monday morning this week. Not really sure why, but we already know that we don't trade dead markets, so activity is good. Let's look at some nice trades.

First, last night E/U faked a breakout to the downside and bounced off at 1.2736, I went long around there, because it was a previous important level, and we had a divergence on the RSI. There was also a possible short as it reached the upper trendline of the channel, but I was at work then.



U/J broke the trendline and went down without ever looking back. I didn't trade U/J but instead shorted E/J and G/J.



There were also multiple bounces above 133.00 on G/J. The first bounce was also a trendline bounce and the second was a previous support bounce.



Here's a textbook U/CAD bounce:



And a textbook E/J bounce:



Finally, this E/G bounce was good for 20 pips, but I closed it for -7, because I had to go to bed:



-Tyler

Weekly recap

I haven't posted anything in a while, but that doesn't mean I haven't been trading. It just so happened that 11 hour work days don't leave me much time. Anyways, let's look at some good opportunities from last week.

First, G/U. G/U is difficult to trade, but there are always nice possibilities to take advantage of. Quick glance at the daily chart showed a strong move to the upside, approaching the 1.6000 level.



Looking at H1, the price failed to break above, created a triple top and sold off heaving from there.



The first two shorts were a bet on the bounce off 1.6000. The following long (blue arrow) was a bet on a bounce at the low at 1.5824. Notice that in the image you see it broken, but it had bounced for 20+ pips before the break. Then a short at 1.5900 on a heavy retracement and another short. Finally longs after the valley was created and 1.5560 supported 5 attempts to break it.

E/U - I have only one trade to show - a trendline break on H4.



The trendline was broken heavily by 130 pips on H4, then the price rallied back to it and sold off from there. This is almost textbook, however the execution was a bit difficult here. If I remember correctly, the retracement to the trendline was a reaction to terrible NFP numbers and I don't know many people who're willing to fade that. Anyways, I like fading news...

Moving on, E/G:



The first short is at the previous high, then a long at the trendline. Once the trendline is broken, we buy at a low at 0.8260 and sell it when it retraces to the trendline. An insane fall to 0.8200 where it folds for 15+ hours. Bounce back up to previous support (which now becomes a resistance) where we go short. Cover the short at the low again. Simple? Very simple if you look at it one week later, but the execution is always more difficult.

-Tyler

A slow week

This past week was very slow. Not many crazy moves, many bounces.

Let's start with E/J, which established a range.



E/U had an up week. It has formed a channel, which is still holding. Due to low volumes, the moves were quite predictable.



I don't trade U/J by itself, because it doesn't move enough. However, it needs to be watched when one is trading E/J and G/J because of the correlations.



We also had interesting developments on G/J. First a double top, then a trendline break, which stopped at 134.00 and retraced exactly to the broken trendline. This established a new downward trend, which was retested on the third touch of the new trendline.



U/CAD is in a strong downtrend now. And even despite that, it created a triple bottom, where two longs would have made 50+ pips each. Also two shorts from the trendline and finally the support gave away. What they will do now, no one knows.



And finally, E/G in an uptrend supported by a rising trendline. Two nice longs and one short off the massive resistance. The trendline will be broken, most likely, so look for shorts as that happens.



I took this week easy. The World Cup is taking place in South Africa and I'm rooting for Slovakia/USA of course :) I think I learned one important thing though.

Trading is a like workout. There are days when everything is too heavy to even look at in the gym and there are days when I break my personal records easily. In trading, there are days when I make trading decisions very quickly and am spot on. Then there are days when I open a trade, watch it without reacting and eventually stop out. You can imagine how the "passive" days go. It seems to me that it is necessary to watch trades like a hawk and be flexible.

For example, if I am in trade and am at -7 pips, I start paying more attention to correlated instruments. If those with positive correlations keep going my way, I keep holding. However, if they stall and start reversing, I start consider closing my position for a small loss. Vice versa for inverse correlations. An example would be G/U and E/G. Let's say USD is weak and I go long on the pound. Now let's say the price stalls, E/G starts going higher and U/CAD starts going higher. Since G/U and E/G are inversely correlated, an upmove in E/G suggests a weak pound and a drop in G/U. Same thing for U/CAD. G/U and U/CAD are also inversely correlated and a rally in the latter suggests a strong greenback, hence a selloff in G/U.

It is important to be able to react to such developments. It is easy to see them, but to close at a loss is something what us, as human beings, do not like doing. Closing at a loss hurts when the trader is someone who is used to be right and to whom people listen when he speaks. However, being always right in trading is statistically close to impossible.

I will not be trading until the second week of July, since I am traveling to Germany tomorrow.

Tyler

PS. Here's my trading setup:

Two good days

I didn't post anything yesterday so today's post will contain trades from both days.

First, U/CAD bouncing a lot:



G/U perfect bounce at previous support which became resistance, then two bounces in the channel.



After the massive selloff on Friday, E/U established a range and had a nice bounce.



E/G broke out of the channel today, then bounced after being overbought on RSI and touching the 0.8333 level.



I want to point out one more thing I wrote about last week. I said that the best trades look scary and here's an example. On Sunday night, I shorted U/CAD, which at the moment looked like this:



Holding until today would have yielded 188 pips (see the first image in this post for current U/CAD chart).

Quick pips

U/CAD still in range for +20:



E/G is retracing yesterday's break. I'm planning on shorting when it touches the channel/resistance line.

Where is the trend?

Today's volatility was ridiculous. Yesterday was a holiday in the US, so the big boys decided to go nuts today. First, let's look at E/U.



Support broken, stops triggered, then a bounce. No continuation whatsoever. On the upside, stops taken out above the highs, then a fall.

U/CAD was the only pair that traded well today. Multiple bounces and tons of pips.



G/J pretty good too, if you got into the first long around 4am EST, congratulations!



E/J was very difficult. First a violent break of the support, then retracement to it. Shorting would have been stopped out. Second short at highs pretty solid though.



And finally, E/G broke the flag (channel) to the downside very violently. Pound was very strong today (some huge short covering as reported by forexlive.com). I bought it at the low where it stalled around 8am.