A-B-C-D Trade - page 47
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
EUR/JPY – Preparing for Sept 20th European Sessio
Let’s look at the 5-min chart from Sept 17th European session through Sept 20th European session
1) Fib Retracement - Large
High = Sept 17th 112.99
Low = Sept 17th 111.59
2) ABC Asian Session
A = Sept 19th 22:35 low 111.72
B = Sept 20th 03:45 high 112.13 (same as pre-Asian high upon open of week)
C = Sept 20th 04:00 low 111.95
FE 100 = 112.37 (reached 112.36)
1-pip difference is not the end of the world, and reason to use cushion. These small differences can be attributed to difference in feed prices.
3) ABC From Top:
A = 07:40 high 112.36
B = 09:45 low 112.13 * (same price level as Point B from Asian session’s ABC
C = 11:25 low 112.20
FE 100 = 112.01
FE 127 = 111.95
FE 161.8 = 111.87
FE 236.2 = 111.70 (hit)
* Actual Swing B was slightly lower on some chart feeds, but market reacted to 112.13 for extension to FE 236.2. Obviously, this is hindsight. However, it is not a completely useless observation. After pair bounces off of bottom, it can often stall or reverse at these FE levels. Thus, it can be a little more precise to adjust whenever possible.
4) Fib Retracement – After Botto
High = 11:15 112.24
Low = 13:20 111.69
*****
We’ll leave fibo fan plots off the instructions in order to focus of the above
The ABC extension during Asian reached the FE 100, which was a probe above the 50% retracement fib from last Friday’s European session (#1 plot above)
Pair consolidated and tested Point B support from Asian ABC (#2 above). This level was also the 38.2% retrace fib (from #1 plot above). Resistance during this channeling was the FE 61.8 from Asian ABC. PLOT ABC pointing down (#3 above).
Break of Point B of Euro ABC from top occurred about mid way through Euro session. After hitting the FE 100 and bouncing, moved down to FE 161.8 with conviction and eventually to FE 236.2.
The bottom 111.69 was the bounce trade of the day. This was the pre-Asian low after market opened for the week.
Just below this price was last Friday’s (Sept 17th) European session low of 111.59.We can wait for possible bounce off of this or enter at 111.69 and place stop-loss just below 111.59, which is used in this example.
# 4 above is retrace fib levels for the bounce trade. The high was hardly an automatic decision. A couple of alternatives existed. When the market is choppy from A-B, and we are looking for the retrace (C), we can try to smooth it out. We flip chart to a 15-min interval and see almost all red (down) candles after Point C was formed.
Using Point C as the high for the plot, we have smaller fib levels/intervals. Since we are conservative most of the time, we target the 38.2%, 50%, or 61.8% fib for exit.
We also look for other hints for resistance. Sometimes, we also have fib fans plotted.
We select the 50% fib of 111.97. There were two important aspects going through our minds and helped reasoning.
1) Consolidation during Asian had support (floor) around this price level at 111.98, and we can see that quite easily on the chart.
2) Target price of 111.97 is just below psychological round number of 112.00.
Risk/reward = 15/24 net pips
EUR/JPY spike down during 06:45 15-min candle.
Pull retracement fibs:
Low = Sept 20th 13:15 111.69
to
High = Sept 20th 15:00 112.26
Pair bounced off its 138.2% fib price of 111.47, also referred to as extension. Next is 161.8 = 111.34.
ABC plot has FE 161.8 = 111.62 and FE 236.40 = 111.40 as further support levels.
Eur/GBP has been volatile last 2 trading days. This can and did pull up Euro cross-pairs.
Upon European session Euro spiked up ahead of 08:30 GBP data.
EUR/USD made its full extension to 161.8. Pull is from high of 06:15 1.3099 to low 07:15 1.3063.
EUR/JPY returned to its level prior to spike down.
USD/JPY retraced 61.8%.
All 3 pairs bounced off resistance, and we can see some profit taking from the upside move ahead of data.
EUR/USD channeled through the European session ahead of th U.S. FOMC interest rate decision at 18:15 GMT. Nobody exoected a change in interest rates.
The focus is on the Fed's verbiage. A softening was expected and many funds took to selling USD ahead of time. Fed statements that came out triggered USD selling.
EUR/USD spiked up to 1.3286.
EUR/JPY dragged up considerably.
USD/JPY's downside is capped due to recent intervention and backed off after probe just below 85.00.
Pair moved very fast during "breakout candle" for our rule for entry, which requires a 5-min candle to close above the Asian high of 1.3099. This was due to traders taking positions ahead of the 08:30 GBP data. Upon release of negative data, pair was driven further up.
It was difficult to see a good pivot to use for the ABC plot. If we look at the 1-min chart, we can see the pivot at 1.3090 for Point B, which would place the FE 161.8 profit target at 1.3121.
We spoke about being able to quickly assess the "worst-case entry price" that still leaves us with a 1:1 risk/reward ratio.
Estimate entry = 1.3107
Profit target = 1.3121
Reward = 14 pips
S/L just below Point C of 1.3087 + 3 pips = 1.3084. Risk = 23 pips
S/L to Profit Target = 38 pips
Divided by 2 = 19 pips
19 pips + S/L price = 1.3103 This is worst-case allowable entry price.
With a 3-pip spread & cushion on top of Asian High price = 1.3102 if filled immediately.
Therefore considering the calculation within the context of our targeting profit level, the market was moving too fast to get an acceptable entry price.
Note: Point A for this example was 1.3070, as can be seen better on 1-min chart.
If a newer trader cannot determine the ABC swing, use:
Pull fib retracement from Asian High to Asian Low. This would produce:
138.2% = 1.3114
161.8% = 1.3123
Practice the ABC plot for upward action after 08:30 data released. You should end up with the FE 100 = 1.3148, exactly where pair made its peak during the Euro session.
Edit: We do not mention the 15/15-pip strategy often, since it's quite simple. In this case, it was a successful trade as the pair did not re-enter the Asian range. The entry fill would have been higher than the break price. Plotting the ABC allows traders using this strategy to see resistance levels ahead. This assists in exit.
EUR/JPY 15-min chart:
A = Sept 21st 07:15 low 111.47
B = 09:30 high 112.56
C= 18:00 low 111.88
FE 100 = 112.37 (hit at 02:30 GMT)
FE 127 = 113.27
FE 161.8 = 113.65
EUR/USD bounce trade just before significant high of 1.3333.
Bounced at 1.3330.
Measure last move up with retracement fibs.
61.8% = 1.3300
The Euro experienced yet another spectacular rise. This time, it came after the Bank of England (BOE) Minutes. This is the release of the "Minutes of the Meeting" from England's central bank.
It have a similar "dovish" sentiment as yesterday's U.S. FOMC statements. Reaction in the Forex market was also similar, as the Euro gained across the board.
Both the U.S. and Great Britain did nothing in the way of laying out plans to stimulate their respective economies. They did, however, say that they "would" implement such stimulus in the future.
EUR/USD broke through key resistance of 1.3333, after bounce down ahead of BOE at 08:30. We should always be aware of S&R on longer interval charts. This particular resistance was the high of August 6th, and easily seen on the Daily chart. It was, without question, a key pivot high.
We highlighted that bounce trade on our last post, plotting retracement, and targeting the 61.8% of 1.3300 (add spread and cushion). About a 20-25 net pip profit trade. This is as easy as it gets, provided we understand the logic.
Attached is the EUR/USD 5-min chart. We did not show the small breakout of Asian low that hit its FE 100 for small pip gain. It was a counter-trend trade during just ahead of BOE and in an environment of strong Euro spikes. This may be describes as having a "feel for the market". This is similar to shorting Yen cross-pairs right now.
Once again, the breakout candle was furious. It was a move-in-progress, and we could not implement our rule of requiring a 5-min candle to close prior to entry.
As mentioned, a quick way to ascertain extension levels when the ABC swings are hard to see, or during a MIP, simply use the
retracement fib tool and pull:
Asian High 1.3330 (label 1)
to Asian Low 1.3281 (label 2)
Blue fibs on chart:
138.2% = 1.3354
161.8% = 1.3369
261.8% = 1.3432 (hit at 13:35 GMT)
Upon first discernible pivot, we plot following.
Shown as black fibs on chart:
A = 08:50 low 1.3293
B = 09:15 high 1.3380
C = 09:25 low 1.3350
FE 100 = 1.3439 (exact hit at 13:35 GMT)
***
If you switch to the 1-min chart, the small swings prior to breakout are visible. We can also see how fast the initial candles were. Probably a 20-pip variable (for entry price) after breakout.
Pair went straight to the 138.2% in less than 2 minutes after breakout.
Canadian data pushed pair further up after 12:30 release. After reaching its peak of 1.3439, pair retraced due to weak EURO Zone Consumer Confidence.
We can see the CAD lose against both the USD and EUR after 12:30 data. In this case, EUR/CAD pulled EUR/USD up. We were in the European session.
We left off the retracement fibs in the attached chart for better viewing of the ascent. Plot from Euro session low to high. You'll see pair respect each level of 23.6, 38.2, and 50. The 50% is the same price as the 138.2 on the way up.
When plotting EUR/USD ABC on the 1-Hour chart:
A = 08:00 low 1.3267
B = 10:00 high 1.3395
C = 12:00 low 1.3359
FE 61.8 = 1.3438 (hit)
This is where pair's ascent halted and bounced. As mentioned, it went on to retrace 50% from session high/low.
Bounced of that 50% fib and rose to the 23.6% fib.
Observations During Sept 23rd Asian Session
EUR/USD
Current swings on 15-min chart:
ABC
A = 17:15 low 1.3352
B = 21:00 high 1.3414
C= 23:45 low 1.3382
FE 100 = 1.3444
Regular Extension
Low = 17:15 low 1.3352
High = 21:00 high 1.3414
138.2% = 1.3438 (this is also previous European High)
USD/JPY
The 1-Hour chart shows retrace to the 50% fib after spike due to Japan’s intervention
Low = Sept 15th 01:00 82.87
High = Sept 17th 07:00 85.92
50% retrace fib = 84.40
Pair probe below to 84.27, but 15:00 GMT candle closed right at 84.40. Jitters only increase the further down pair descends.
EUR/JPY
1-Hour chart
1) After a day of bouncing around, pair made new high to 113.53. This is the 138.2% regular extension of:
High = Sept 17th 07:00 112.99
Low = Sept 17th 14:00 111.59
2) It then made a 38.2% retrace from:
Low = Sept 21st 111.47
High = Sept 22nd 113.53
3) Pair retraced back up to 78.6% fib from:
High = Sept 22nd 13:00 113.53
Low = Sept 22nd 17:00 112.73
Switch to 15-min or 5-min and plot retracement fibs from last 2 retracements (start with Euro session). This is how to set-up ahead of the upcoming Sept 23rd European session.
Mark high-impact data times after checking full economics calendar, and avoid. Note that Thurs Sept 23rd is another holiday in Asia. Additionally, there is a meeting between Japan and the U.S., which the market is watching carefully.
All 3 pairs range-bound during the Asian session.