EURUSD 62 bounce trade 1HR

This is my first post of 2010.  As I had said in my last post in December, this year I am focusing on money dicipline and high probability low risk trades this year.  In that goal, I will be posting explanations to the trade setups I post, not just the setup and result.  I have come to firmly believe and embrace that a good trader is a consistently consistent trader, which infers that there is a pattern to a good traders results.  Following that through, one needs to have an arsenal of singles and doubles that work more times that not, and if not, are not game ending.  This is key, being able to survive a series of bad trades without being tempted to go for the home run trade on a weak setup and ending the game (margin calling or worse).  Sometimes standing aside is the best course of action.  There is no stat that matters more than keeping your trading capital. 

EURUSD 62 bounce 13Jan10 (click to see chart)…

This is one of my favorite trades and is easy to spot, stops are clear cut, and target goals are easy to set up.  I call it the 62 bounce, and I trade this on the 1 hour time-frame chart.

 Here is the trade (the pivots on the chart are the next days, but look at the notations to understand the original trade).  There are two conditions that have to be met for this trade to be a valid setup.  First, at a minimum there has to be a trend that was in place recently and second, that trend is confirmed by the 62 EMA and 200 SMA in phase with the trend.  I also use the 144 EMA on my charts as well as the 800 SMA.  For a longer term trend, the 800 SMA will also be in phase with the dominant trend, but for a shorter trade, I am o.k. with just the 62 and 200 trending together in phase.

The trade sets up when price falls to the 62 and bounces off it.  That is it.  The basic trade.  Take the trade in the direction of the original trend.  If a wick penetrates and the next candle moves back that is still a valid setup.  They key is to confirm that the 62 is acting as strong resistance to price.  If you look at the chart, you will see several 62 bounces that set up.  All but the last one would have been able to be closed at a profit. 

I also look for confirming signals as well as some basic support and resistance setups to target stops and profit targets.  This is a 30 to 50 pip trade for me on this pair.  If you look at the entry I chose you will see the gradual decline from a 2 bar reactionary move.  Then the smaller less convicted bars just retracing the earlier movement.  If you analyze the time of day you’ll also notice that the retracement happened during low volume time periods and the start and follow trough of the bounce happened at the Asian session, then took off during the Eurpoean session, and retraced in the U.S. morning session and followed through.  That is another key thing I watch for, inter session give and take.

 I hope this gives you a bit of insight into one of my favorite trades, but be very aware that this is a short term trade setup.  Take it, get your 30-50 pips and get out.  Look for reversals and test riding back to the 62 as well (I also took some pips as it reversed in the US session). 

Safe trading,


EURUSD Short to Daily Trendline – HIT THE TARGET!

EURUSD Short to daily TL 19JAN09  (click to see chart)-  After the EURUSD bounced off the 200 SMA on the 1 hour it has been on a tear downward.  Where will it stop?  I think it if makes it beyond the S1 pivot at 1.2950 area it will try to go for the long term trendline that is crossing around 1.2800 area.  There is the risk of a reversal to the 62, but innaugauration mania may give us a push down.  What is interesting is that the TL is now between S2 and S3 so it is well with statistical probabilities to hit this area in the European session if current sentiment holds. This pair does not usually go down to S3 or below. 

Take a look at the 60M chart here:

EURUSD 60M trendline view 19JAN09

UPDATE as of Wednesday 21JAN09 – the pair hit the long term base trend line dead on and then retraced.  I did not take all of this as I was afraid of a reversal  but did collect a nice amount of pips on the bottom part of this trade.  I still think we may go lower on fundamentals but this pair has been tough for me to trade as its volatility range has increased significantly from what I am used to.  I am watching, but just taking a few short range trades in the direction of the current trend.  If it breaks the long term base line I would consider a testing possition, I would also be willing to go long if it broke strongly above the 62 on the 1 hour.

Chart as of Wednesday 21JAN09 20:00

EURUSD Daily 21JAN09

GBPCHF 1500 edt market closing trade

I have been watching the movement of several currency pairs over the past few months to determine the most statistically reliable intraday price movements.  One movement I have been very interested in is the pre-Chicago closing (usually starts around 1430 +/-) and then the post Chicago close after 1500.   I have observed that prior to the close, a reliable movement takes place opposite the dominant session trend, and many times reverses quickly and hard after 1500.  The trade below is a trade using that idea that netted 94 PIPS with two quick trades.  I had a bad entry on the first trade and got out a bit early otherwise the PIPS would have been considerably more.  The same patterns were also observable on the GBPUSD and GBPJPY during the same times as well as on the EURUSD.

I am currently backtesting this trade idea extensively as well as studying the time of day per currency pair that show the most movement (best times to trade) and the average range of this movement as far down as 5 minute to 5 minute timelines to find correlations.

Below is the trade as shown on the 5 min chart:

GBPCHF 1500 market close trade 22Oct08 5M

GBPCHF 14:30 and 15:00 Market Imbalance trade

 GBP Crosses 1500 closing behavior 22Oct08

GBP Crosses showing same closing patterns