Tagged: EURUSD

Adaptive Moving Average = Counter Trend Opportunity

I have not had many trades in the past week so I leaned on my scientific background and started some experiments. Using my most favorite tool, higher highs and lower lows, I added an Adaptive Moving Average (AMA) to a 5 pip range bar chart. If you want to know the technical theory behind the AMA, google Perry Kaufman AMA.

The quick synopsis is that the AMA goes flat during periods of consolidation or congestion. The modified AMA that I have on the chart below also prints speed bumps to show momentum in either direction. If the AMA is flat and no speed bumps are printing then we have a ranging or chopping market. If you play HH/LL breakouts a ranging market will kill you with a thousand cuts. However, the flat AMA actually indicates that you can fade the HH/LL’s for nice scalp trades during a ranging market.

flat AMA means fade
fade a flat AMA

The first flat AMA occurred with price testing yesterdays lows,  the daily pivot as well as a lower low. Fading the 50 level was good for 50+ pips, far from a scalp, but I would have probably been happy with 10-12 pips.

The second flat AMA fade occurred around 90 and was only good for 18 pips, so again a 10 -12 pip scalp would have been good.

I will be watching this over the next few days and reporting my findings here (counter trend forum).

Simplify.

The more I trade, the more I realize that when it comes time to make a decision things must be as simple as possible. The more indicators you have on your chart, the more information you have to process before deciding weather or not to enter the fray.

So simply.

Simplified EURUSD trading

The chart has 2 indicators. Steve Kaufman’s AMA (adaptive moving average) and a Higher HighLowerLow indicator. The chart also shows 6 breaks of high/lows – only 1 of which should not have been traded. The reason the trade marked “pass” should not have been taken is because the speed bubbles on the AMA did not confirm that momentum was adequate to support the breakout. In hindsight, it looks like the indicator was lagging as indicators sometimes do. No biggie, just patiently wait for the next break with confirmation.

NOTE: If you are interested in learning more about this style of trading, please see this thread: EURO TRADING ROOM

Why Just 10 pips?

I have been told by many that I need to set bigger targets. I have learned, by churning my account, that I do not have the mental make-up or patience to allow for the bigger targets to develop.

So, I shoot for 10 pips per trade.

If I am trading for the entire London Session, there are generally about 5 – 6 opportunities per day. If I trade just the NY/London overlap then I get 2-3 good opportunities. (This is with just one pair – EURUSD)

The following chart are the three trades I took this morning. All breakouts of lower lows (LL). All three trades were very low risk and gave 10 pips.

Euro day trades

Now looking at this chart you might wonder why I didn’t just short once at 3340 and hold for 50 pips? To which I would answer, first – hindsight is for demo traders, there was no way to know that price was going to run; and secondly, read the first paragraph of this post – that’s just not my style.

CCI Divergence For The Patient

So it is a trend day and you were not awake when the trend started. Where do you jump in???

CCI to the rescue!

I have developed a simple system that utilizes CCI divergence, TMA bands and 13 pip range bars to trade pullbacks, allowing you to enter trades in the direction of the trend.

On the chart 1) is a bullish CCI divergence.

2) Confirmation of the trend/trade direction

3) Entry signal – piercing of TMA bands.

It is important to wait fot the the TMA bands to be pierced. If they are not pierced, then no trade.

To keep this a low risk trade – use a 6 pip stop and target at least 12 pips.

 

Anticipate

The open of US equities was met with some fierce selling in the Euro. If you missed the 100 or so pips that was offered, don’t fret… just patiently wait and anticipate where the pullback will be. I am guessing it will be somewhere around the 21 EMA – just a haunch.

EURUSD – Down, down, down

This morning saw the Euro pressured from the NY open. The following 3min chart shows that at 8:45am CST a market structure higher high was put in and price collapsed from that moment forward.

Today’s price action did not provide clear LH’s near the 21 EMA as it has in recent weeks, however, there were several “needles” into the cloud that were very tradable.

Although a lower high printed around 12 noon, I would like to see a higher low print before claiming the short sellers are done for the day.