Forex FOREX PRO WEEKLY, November 05 - 09, 2018

[Sive Morten]

Morning guys,

There is one technical problem less on EUR, as Dollar index has dropped below grabbers lows and erase the pattern. Still, EUR denifinetly has problems with upside continuation, any action stands heavy, volatility has increased significantly, because political events and coming Fed meeting impact the market right now. We still keep our view the same - although short-term bullish setup is giving positive result, overall context is not very good for taking long position.

On daily chart price action takes clear shapes of retracement and it mostly has completed harmonic swing that EUR holds pretty nice. It means that our 3-Drive "Buy" setup with drop to 1.12 area is still possible. Market could turn down somewhere around or, at best, proceed slightly higher as you can see on 4H chart:

On 4H chart we have AB-CD OP target right at major Fib level. If you have long positions, it is possible to hold them with hope that market still will complete OP target. It is better to move stops to b/e. Trying to take long position right here is not very attractive, because of far stop that you will have to place, so risk/reward ratio will be close to 1.

On 1H chart we have the wedge pattern with clear signs of MACD divergence and this is not the fact that market indeed will move higher. The major area to watch here is lower border of the wedge and K-support area. If market will break it down - then our 3-Drive setup could become a reality. Don't take shorts until this area holds.

 

[Stag]

Hey Stag, in my opinion most important thing in trading is managing position properly, by that I mean to manage risk properly and to manage stop loss properly...I put TP, but not SL, I put full hedge stop orders against my position. That way I allow myself to be right with my first position in some later point in time, tomorrow, in 1 week, 1 month, maybe even a year, and also to earn something with opposite position. I avoid to close losing trades...

Conclusion: Trading is time game, do not be afraid to be wrong in the beginning, sometimes that is good thing. ...Time works for you, price movements work for you. All this has sense because of true nature of price action and waves - what goes up, must come down. ...why should I close my EUR long positions if it comes to levels lower then my entry, I would buy it more, I just need to manage my risk properly. That is the point...

Thank you for giving us a more detailed insight on your approach to the markets. Being on the market long enough - if 10+ years can be considered to be long enough - I can say you're a brave man, mate.

 

[Deltoid88]

if 10+ years can be considered to be long enough - I can say you're a brave man, mate.

I am not sure how good is it to be brave on markets but yes, that is my style, and I am not going to change it.

 

[Deltoid88]

EUR - expecting expended flat in blue wave 2, red wave C probably has started, very nice scalp short entry against the high in red wave B. Expecting 5 waves to downside in red wave C to end just above 1.13 level. SL=1.1480

Scalp short trade proved to be wrong. This is what I currently see on EUR. I believe that blue wave 2 is completed and that we started blue wave 3, or wave C. Still keeping my longs for higher targets. SL=1.1390. If price comes down to 1.1390, I will close my longs on 1.1360 and look for sell opportunities.

 

[Stag]

When it comes to analysing and trading, there is no right way or wrong way guys, only your way. Mine is built on the Wave Priniple, because it extends the scope of my understanding of current price action and how it relates to the overall picture of a market. The list below summarises how it can help imporving your success:..

We are lucky enough to have trading oriented discussions here so let me show you, guys, how a real Wawe Principle based trading plan looks like.

1.: Analyzing the price chart: do we see a pattern we recognise?

The Wave Principle provides context for the price action, allowing us to identify the move up from the 1.1302 low. Our best guess is an ABC corrective rally. Its third section, the advance from 1.1353 seems to be a diagonal as the (c) wave of an (a)(b)(c) structure. It has many overlapping waves - corrective wave patterns - indicating we may see the last wave of a countertrend ABC rally within the larger downtrend (or the first wave of a larger advance forming a huge diagonal later, who knows). Beyond that we have serious divergences in momentum, so looks worth to start evaluating a trading plan.

2.: What to look for if it is an ABC ZigZag correction?

The slope of wave C in an ABC rally always shallower than the slope of wave A. Do we see a shallower wave C slope? Yes, we do. It demonstrates a decrease in momentum. This behaviour is so common that they are almost a qualifying characteristic of this pattern.

Furthermore, wave C in an ABC correction usually travels the distance of A. In our case both ABCs' poject the same price target around 1.1507.

3. Can we draw a price channel that serves as a highway for trending prices?

Yes, we can draw price channels for both the larger pink (a)(b)(c) and a smaller for the small impulse wave forming red circle C. We know that corrective price move tends to stay between the parallel boundaries of the channel reaching its peak around the upper boundary of that channel.

What if it breaks the upper boundary of either channels? It's OK, that would indicate that prices may advancing higher - or much higher. Remeber what I said yesterday: the only thing that can confirm an idea is price action. Until it occurs, even the best looking scenario, no matter how probable, may not turn out to be the correct one.

So, sounds good enough to start formulating a trading plan? Since we have enough information, yes, we can start seriously considering a trade.

The plan

The trading technique for a zigZag is to enter on a break below the extreme of wave (iv) of 5. This conservative approach prevents picking tops or bottoms without sufficient evidence and requires the market to take out a prior swing low to act as initial evidence that the impulse wave is finished. Set the initial protective stop at the extreme of the price move - two pips above the extreme of (c).

A move below 1.1431 would confirm the termination of red circle C and would be a strong evidence that the green impulse wave that began at 1.1431 most likely had ended at 1.1507 (or nearby levels, may have topped already).

If the next wave down proved to be an impulsive decline, then I would see prices fall below 1.1353 in a short period of time. However, if the upcoming decline still proved to be a correction, then it would most likely be shallower and take more time finding its bottom possibly above 1.1354. Both would result in a profitable trade.

Hope this helps for those who tries to apply the WP on real life trading.Thats how it is different to gambling.

 

[Deltoid88]

Beautiful short opportunity on GBP. Think that finally blue wave A is completed, and that ABC correction can start. Think that we are at wave 3 of wave 3 of red wave A to the downside. TP rectangle zone, SL=1.3180, just above blue wave A.

 

[gwynfor]

We are lucky enough to have trading oriented discussions here

We are luck to have your analysis and both Deltoids charts and yours. I will study them carefully and hopefully improve my wave counting skills. Thanks to both of you

 

[Sive Morten]

We are luck to have your analysis and both Deltoids charts and yours. I will study them carefully and hopefully improve my wave counting skills. Thanks to both of you

Yes, indeed.
Great insight with step-by-step explanation of trade planning framework via EW, Stag. I think everybody should save it for day-by-day use.

 

[Sive Morten]

Morning guys,

Stag, Deltoid you're giving so great insight on the market, so I'm start thinking about pension retirement

Anyway, here is my humble inside on EUR...

Despite my worryings and difficulties on upside way - EUR was possible to hit our major AB=CD target @1.15.
By this action EUR has completed daily harmonic swing. And here we either will get our 3-Drive and downside tendency continuation, to daily OP target first.
Or, conversely, if EUR will break 1.15 area we should get second harmonic swing to upside right to 1.16-1.1620 area. Mostly it will depend on how market will response on intraday support levels.

On 4H chart we've got perfect "222" Sell pattern right at K-resistance area. As we've mentioned yesterday this is an area where first attempt to go short could be taken. Now market shows reasonable pullback out from the top. If upward action will continue, we will turn to XOP that also equals to 2x daily Harmonic swing and creates at Agreement with 1.16 Fib resistance:

Now we have to split trading plan for bulls and bears. If you want to go long, right now is good area to think about it, because EUR stands at K-support and something like puny DRPO "Buy" has been formed. Anyway, chances on technical respect of this area are significant. And pullback will give you chance to move stop to breakeven, if even later market will turn down again - there will be no risk. Stops should be below K-support area.

Oppositely, if you have a bearish view - here you need to wait upside retracement. It should be not less that 50% I suppose, or even to 5/8 Fib level. It would be great if we will get "222" Sell pattern here. Stops should be placed above 4H K-resistance area and OP.

Since today we will get Fed rate decision and comments - it is difficult to predict what will happen. Somehow I gravitate to downside continuation, but this is mostly gut feeling, do not rely on it, follow the trading plan.

 

[Stag]

Yes, indeed.
Great insight with step-by-step explanation of trade planning framework via EW, Stag. I think everybody should save it for day-by-day use.

Yeah, actually it is a good idea, indeed. You will hardly find a similar trading oriented practical guide for the Wave Principle.

Curiously enough now we can say that your service here, Sive, provides one of the best sources for the application of the Wave Principle as well