A-B-C-D Trade - page 105
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Stopped out balance position. Total gain was slightly better than 1:1. So if you risked 2% on S/L, profit was 2%.
EUR/USD breakout of Asian Low in progress.
take partial profit 1.3677, which is regular 138.2 and FE 100. Pullback on ABC was 61.8%.
After EUR/USD finishes bouncing off FE 100, will make attempt to FE 161.8 1.3645, a key intra-day support level. Also just above 1- HR SQ_9 90-degree of 1.3640.
edit: referenced 161.8 is from 1-hour plot
[EUR/USD marking high and at the moment retrained by trend line, with is top part of flag formation. See 30-min and plot. If RSI(4) drops on this 10:00 candle, below 06:30 1st peak RSI(4) of 60, then it is a divergence signal for SELL (bearish divergence) - using 15-min trigger.
EUR/USD wide 4-hr plot.
High = Nov 4th 12:00 1.4281
Low = Jan 9th 18:00 1.2863
61.8% retrace fib = 1.3739 (current)
OK, nice EUR/USD bounce trade off top. Now exit for +20.
AUD/USD had losing Baja (divergence trade) with 2nd peak 10:00 for minus 10 pips + spread and cushion.
GBP/USD 07:00 2nd dip on 30-min. 1.5868 entry price had trend line ahead and as predicted, bounced after marking 1.5893 for + 15, if trade taken.
Otherwise, we narrated over 3 types of trades today, Baja, Breakout of Asian Low, and Bounce. Notice on bounce we exited near 50% retrace fib, that the RSI(4) also hit its mid-point on 30-min chart. Does that a lot in this setting
U.S. GDP ahead at 13:30 and UOM Confidence wrapping up week. Have a good weekend.
Cheers
While GBP/USD BAJA signal made slightly larger gain after pullback at trend line, the biggest story was GOLD.
The BAJA caught both swings without given us a lot of false signals in between, or big lag time, which is the problem with most systems (especially cross-over systems).
Attached is the 1-Hour GOLD chart (GMT+2).
BAJA SELL: Jan 27th 05:00 2nd Peak. Entry 06:15 $1347.00 +$38.00 (380 pips). Entry was just $2.10 (21 pips) from top. Signal same on 30-min and 1-hour charts. 12 to 1 reward to risk for total move.
BAJA BUY: Jan 28th 03:00 2nd Dip. Entry 04:30 $1311.90 +36.00 (360 pips) thus far. Entry was just $2.70 (27 pips) from bottom. About 10 to 1 reward to risk for total move, so far.
Other signals in between big swings:
Jan 27th BAJA BUY 22:00 2nd Peak. Entry 23:15 $1312.70 went for about $4.00 (40 pips).
Jan 27th BAJA BUY 30-Min. chart 12:00 2nd Dip. Entry 13:00 $1338.60. 1337.10 Stop-Loss + cushion. This was small loss of $1.50 + spread. Gold is about 6-10 pips spread. At 10-pip spread, this was $2.50 loss (25 pips).
Obviously Gold is volatile and prone to panic buying and selling. The Egyptian riots/political situation was on T.V. and in the news. Flight to safety environment can often prompt intra-day traders into holding onto positions a little longer (beyond 20-30 pips).
Protecting profits is still valid, however. We favor fibs, and you can see on a 30-min chart, how last up move respected each fib retrace level.
Now that we have had extensive examples of divergence, within the context of the BAJA system, let's merge our knowledge again.
Attached is EUR/USD 5-min chart for Jan 25th.
A = 14:05 low 1.3586
B = 14:55 high 1.3632
C = 15:05 low 1.3597
FE 161.8 = 1.3671
As this pair blasted up past Swing B, we can anticipate it making to a FE level.
It hit the FE 161.8 and stalled, even forming a Doji candle 15:35, the 3rd candle with the RSI(4) above 80. Some traders are experts at trading the bounce from the 161.8.
The initial bounce down was small (13 pips) and the market made another attempt to the upside. We are at the end of the European session.
Now, at 15:50, it probes above the 161.8 for 2 candles, closing 1 pip above the 161.8 with the 15:55 candle. This candle also resembles a Gravestone Doji. Which way is the market headed at this point?
We need to take a look at the RSI(4). It indeed shows divergence, in accordance with the BAJA rule. The 15:50 candle RSI is lower than the 15:35 candle RSI.
Because we are on the 5-min, dropping to a 1-min trigger may be asking a lot (consistency), although it worked for this example and provided 16:00 entry at 1.3671.
Alternatively,we can use a stochastic oscillator on default of 5,3,3 as displayed on the chart. This is fast enough for the job. It had already made a cross-over and thus was in sell mode.
Entry can be effected when price dropped below the 161.8 of 1.3671. Managing this trade base on fibs, with best plot was A to D, provided exit levels.
Based on 1.3670 entry and 3-pip spread, the 3 major exit levels produced:
38.2% = 1.3645 for +22 net pips Reward/Risk 2.2:1
50% = 1.3634 for +33 net pips R/R 3.3:1
61.8 = 1.3623 for +44 net pips R/R 4.4:1
Based on Stop-Loss of 10 pips (1.3680). The move made it to the 78.6. The added aspect of profit taking at the end of the European session is always considered.
When we pair up the BAJA with S&R, including 161.8 levels, it makes a powerful trading style with excellent R/R.
As we've preached here, possessing S&R skills and using it as the foundation, while using an optional small amount of "accessory indicators", allows us to take advantage of higher probability opportunities.
The simple math applies to R/R. If we average 2:1 and our win % is 55%, it is still a better net gain than a trading style that has 1:1 at 75%.
Be patient and wait for the better opportunities. With the BAJA divergence recognition, we have advanced notice that the turn is coming. We can measure the fib exit levels in advance.
Set up a R/R spreadsheet that you can input the exit levels onto. The entry price can be better estimated the closer it comes to trigger. When you are are about 10 minutes from a high probability of trigger, input your estimate of entry price.
This will give us the R/R estimate BEFORE the decision has to be made for entry. There's nothing wrong with being selective and cherry-picking your trades.
Here is a link to Google Templates for our risk/reward calculator for EUR/USD and AUD/USD ($10 per pip pairs).
It is comprehensive and comprise of 3 calculators. You must input data in colored boxes.
1) Quick calculator to determine number of lots to trade (scaling). It also projects monthly and annual profits, as well as a money manager's split.
2) SELL positions. Can calculate fib retracement trading or trading to fib extensions, with risk/reward for each exit level. ABCD scenarios require input of Swing C price.
3) BUY positions. Can calculate fib retracement trading or trading to fib extensions, with risk/reward for each exit level. ABCD scenarios require input of Swing C price.
https://docs.google.com/templates?q=risk+reward&sort=hottest&
view=public
Let us know if you have any problems, suggestions for improvement, or that you like it. Will try to find time to post calculators for other pairs that have fluctuating pip value.
Cheers