Tagged: strategies

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.

 

Looking At The Pound

Looking at a market profile view of the GBPUSD you will immediately notice that price has been trading in a range smaller than the single range of last Friday.

The double inside day usually means when we do break out of the existing range, we could be in for some pretty big moves.

GBPUSD OverviewIt is also of interest that today’s high was right at Friday’s VIRGIN POC and with 30 minute tweezers. That first time virgin bounce was good for about 50 pips, but never made it down to the virgin created yesterday at 1.5431. That with todays action created a virgin at 1.5479 creates a nice trading range between the two virgins

I think virgin POC’s are good complimentary indicators so look for whatever system you use to give entries around 1.5431 and 1.5479.

Trade well.

Quarter Levels On Steroids

First, if you don’t know what I’m talking about when I say “Quarter Levels” then you need to go over to my good buddy Mongolians thread on Forex  Factory. The thread is “Make Money Everyday: A Guide To Short Term Trading” – brilliant concept.

I have incorporated the quarter levels into my trading and am amazed at how price respects these psychological support and resistance levels. Mongolian advises in his thread to just use the levels to scalp 12 pips all day long, which I have done and I must report is very doable. However, I never being settled, have been tinkering with a way to stay in trades longer…so I have been toying with a few indicators to the pure price action method Mongolian uses.

I have been playing with a system called “Forex Gold H1″ on a 5 minute chart. I have not tested it out with cold hard cash so I cannot offer you anything other than my observations.

Thus far, it seems pretty promising.

Market Structure

The following is a 1 minute chart showing the concept of market structure.

I have become fond of 1 minute trends as I am very risk averse and with the short timeframe can enter trades with very low risk.

The white candles indicate a market structure high (MSH) and the blue candles indicate the opposite – market structure low (MSL).

A MSH is a three candle formation that starts with a new high, followed by a higher high and finishes with a third candles high being lower than the first candle. These formations almost always indicate a change in the trend.

Once a MSH or MSL has been identified you simply fade the prevailing trend placing your stop 1 pip above the MSH/L. Very low risk. I usually shoot for a minimum of 21 to 34 pips, however you could just ride the trade out until the opposite market structure formation.

For a more detailed explanation of market structure check out this link.

EURUSD – CONFLUENCE!!!

Merriam-Webster defines confluence as: a coming or flowing together, meeting, or gathering at one point <a happy confluence of weather and scenery>. Well, well, well… we have a confluence of resistance around the 1.2900 level. In my last post (just a few hours ago) I talked about naked resistance between 1.2900 – 1.2920. After calculating tomorrow’s pivot points guess where R1 is?

Okay, I can’t contain myself! Its 1.2901!

It is right at the same level that has served as strong resistance for at least 30 days. This is what I consider an area of confluence, and thus a place where I am more willing to load up.

So the plan for tomorrow is to short, short, short any failure between 1.2900 – 1.2920.

If price gets above 1.2930 I’ll accept defeat and live to trade another day.

USDCHF Hits Resistance

Since I missed the Euro trade, I have been keeping my eyes open for other opportunities and low and behold, the markets gave me one.

The Swissie has been in a down trend for a while and while I did not expect this pair to reach R1 today, it surprised me and raced to it in the last 45 minutes. So… short at 1.0150

Trading With The Trend: USDCHF

Yesterday I discussed trading with the trend. Today I will show you an example trade. All of the currency pairs I watch are in an overall down trend. I chose to trade USDCHF because it was the pair closest to R1.

The chart shows a down trend line that has been in play for a few days. Price briefly pierced the trend line, but could not close above it on any significant timeframe (5mins or higher). You might also note that the red dotted line is R1. Ideally I would have liked for the price to reach R1, but if you wait for perfect setups you won’t be very successful. You must learn to trade in the grey areas. In this situation the trend line with R1 in close proximity was enough to know that a low-risk short was in play.

Switching over to a lower timeframe allowed me to pinpoint an entry.

The small diamond on the chart shows an entry at 1.0133 just under the tred line of 1.0136. R1 is just 10 pips away at 1.0143, so placing my SL 3 pips above that means I am risking 13 pips on this trade. My first target is the yellow line which is the daily pivot point. I took half off at the pivot of 1.0112 and am looking to take the rest off just above the green dotted line which is S1 (1.0081).

The white line is a 21 period moving average. There is really no need for it and I probably should have taken it off of the charts before taking the screenshots. No need to complicate things. Just remain patient and trade with the trend.

EURUSD Trade Idea

The Pivot Points have been treating us right recently, so lets see if the trend continues.

Looking at the following chart we see that there is nice resistance at 1.2738.

EURUSD 9/1/2010

After calculating the daily pivot points I immediately notice that R1 is 1.2740. Hmmmm…. Digging a little deeper I see that yesterdays high was 1.2744. An area of confluence (1.2738 – 1.2744).

The overall trend is down and we have confluence at resistance. This very sophisticated analysis (hint of sarcasm) tells me I want to get short somewhere between 1.2738 and 1.2740.

The game plan is to patiently wait for price action to reach 1.2740 and SHORT with a 21 pip stop. First target is the pivot 1.2683 and the second target is Tuesdays low of 1.2663 (Break-even Stop). If everything goes according to plan this trade will give a minimum of 1:4 R:R.

Warning: Simple Trading Idea Using Pivot Points

Everybody has heard of pivot points (if you don’t know what pivot points are get in touch!) and there are a million different ways to use them. A lot of traders use pivot points in conjunction with indicators. But I have found a simple technique for exploiting the magnetic effect of pivot points.

Are you ready? This strategy is so simple it might scare off some people. Here goes…

  1. First determine the overall trend using a 240 minute chart.
  2. Switch to a lower timeframe of choice – for me 13 minute or 5 minute
  3. Plot daily Pivot Points
  4. In a down trend, enter short when price reaches R1 and expect price to drop to at least S1 and most likely S2
  5. In an up trend, enter long when price hits S1 and expect price to reach R1 and probably R2

That’s it! Simple as pie and when combined with your money management it should equal a low risk yet profitable trading strategy.

Below I’ve include a chart of NZDUSD from this morning to demonstrate. I know from looking at a 240 minute chart that the trend is down. All I have to do is patiently wait for the price action to drive the price up to R1.

NZDUSD August 26, 2010

For this particular trade I entered at .7083 with a 10 pip stop (.7093)