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.
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.
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.
Ok, I went back to my beloved pivot points to find a good place to add onto my swing trade. In previous posts I have talked about how I like to use pivots as guides. In a downtrend, I like to short near R1. Well today R1 is approximately 1.5892. Even though it is after my normal trading hours, I am going to take a low risk entry short. I got in at 1.5887 with a 10 pip stop.
My absolute favorite candle formations are tweezers! When I see tweezers I get excited! As long as I am patient and wait for the second candle to close, I am almost always guaranteed to get a minimum of 21 pips and usually 50+.
I dont know how other people define a tweezer, but I define it as two adjacent candles with matching wicks that sorta resemble “tweezers”.
tweezers on the 30 min chart
On the example to the right I was actually watching the pair utilizing TEB’s MA system. I was only supposed to be looking for long entries, however, I saw the tweezers forming and decided to be a contrarian. The pound has been in a steady up-trend for the better part of a month so going with the theme “the trend is your friend” one should have been looking for pullbacks to get long. But, again tweezers make me change my mind about everything. So I went short (a little early to lower the risk) at 1.6007. I took half off around 1.5967 and moved my stop to break even + spread for a free trade on the second half. I am going to let the second half ride for a while….
Now if we take a look at the daily chart you will see why I am willing to hold this trade for a few days. At the beginning of August the pound hit some stiff resistance at 1.6000 and sold off for the next month until finding support around 1.5400.
the pound is going down!
It’s a trading range! Being lucky enough to get into the range at the top, I am going to hold on and see if I can ride her down to the bottom. So, setting take profit at 1.5407 – lets see what happens.
I’ll do a better job of keeping you up to date on this trade. If the trend does indeed turn down, I will be looking for places to add to my short position.
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
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.
Everybody has heard the cliche “the trend is your friend”. It is true, the trend is your friend until it ends. Once it ends, price will chop around and eventually a new trend will form and once again become your friend.
Well, since the trend is so friendly, how do you identify this sexy beast?
Easy.
Actually as easy as 1-2. No need for 3.
First pay attention. If your paying attention you really don’t even need a chart to determine the trend.
Secondly, just compare yesterdays pivot point with todays.
That’s it. Easy peasy lemon squeezy.
Ok, a little explanation. If todays pivot point is lower than yesterdays, guess what… the trend is down. Want even more confirmation? Look at the pivot for the day before yesterday. Get the picture?
No charts needed, no trend lines to draw. Just calculate the daily pivot points and you have a guide as to what price action is doing.
