Pullback Strategy

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First trade of the month NZDJPY - The NZD showing weakness across the board.
Price moving away from 50 EMA - 14 and 8 in a nice down channel
Bearish Engulfing candle on 15M TF
RSI period 3 pointing sharply south well below 25 line and with good volume
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Entered below signal candle for 18 pips profit
 
Continuing weakness on NZD with some strength in GBP, which
also has High Impact News today which should aid movement.

RSI crossing through 75 on all TFs. Low volume however was noted

Fresh cross of 8 over 14 on D1 after Double Bottom.

On H1 TF entered after Bullish Inside Bar pattern
 

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NO VOLUME Yesterday and Trade Reversed immediately. There was almost no
Tick Volume on all TFs. There may be a reason I include a Volume histogram
and maybe its best not ignored.

However RSI got me out of the trade nicely for just -30 pips.:-
The very next candle after entry was a Doji and the next candle after that was
a Bearish Doji but what was significant was how RSI 3 sharply reversed down
through 75 AND through RSI 14. Two candles later RSI 3 had crossed 50
and well into negative territory with corresponding candle very bearish ( 30 pips down)
and EMAs predictably seriously converging and ready to cross. I did't wait for actual
cross of EMAs. If I had waited for a conclusive cross down of 8 over 14 it
could have cost me the size of that next candle ie an extra 150 pips!

So getting good at reading the RSI 3 and 14 interactions with the three levels -
75 50 25 - is a valuable skill to learn, both for entry and exit and invariably
gives advance notice ahead of moving averages. - but danger of making
premature entries or exits, so price action and angle of EMAs should
be confluent with any RSI signal.

Today I lookd at FPA's Currency Strength Indicator for first time. It indicated
EUR strongest and CHF weakest over the last week and chart seems to bear that out.

Last two candles were first a nice Bullish Momentum candle followed by an Inside
Doji.

I will wait for current candle to break the level of both those candles to the upside before
entering, but this time I need confluence on RSIs and Volume. at the moment volume is
low and, RSIs, whilst above 75 are literally horizontal and overlapping. I need to see Decisive
angle up with Volume. Otherwise it simply may not be prudent to trade end of week.
 
I didn't trade end of week!

Today some very compelling setups on both Daily and Weekly.

Of particular note are currencies where there are confluent setups on both.

Short on-
GBPJPY 144.097
GBPCHF 1.26861
XAGAUD 20.358
CHFJPY 113.386
XAGEUR 13.630

A beautiful sample here of engulfing pattern on GBPJPY

There are many conflicting schools of thought and I reject rules that just
plain don't make sense to me.

So currently here are my rules for EC patterns:-

Range of Signal candle must engulf range of preceding candle

The signal candle body does NOT need to engulf the body of the preceding candle however
the body (Close) must exceed the range ie High or Low, of preceding candle.

The Close of candle must be in the top or bottom 25% of range, the ideal close being
a 'Shaved head' where the close is equal to either the Low or High of candle. Some say
within 33% of top or bottom, - it may still be profitable but I'm looking for no ambiguity.
I use ammended Fib tool to check for below bottom 25% or above top 75% - makes life
much easier and eliminates error - This is an important rule, unless the Close is decisively
near top or bottom I cannot consider it unequivocally bullish or bearish

The Entry candle must exceed range of Signal Candle by at least 10 pips. If it is very much less
then I will hold back for another one or two candles and will be looking to enter as much as 30 pips
beyond the High or Low of Signal Candle. If nothing much has happened within three candles I
place the currency on my 'Watch List' but I would then need extra compelling reason to enter as
no Signal is relevant forever, - so ideally I want to see movement within the next one or two bars.

Exit - This is tentative but one Fund Manager managing at least $750 Million, backtested EC patterns
with NO S/R zones whatsover on Daily chart only and turned $10,000 into over $2 Million. His strategy
was to stay Long or Short until an Opposing EC pattern emerged and then simply Close and Reverse.
So an excellent example of letting winners run.

I believe he is genuine, and he wasn't even selling a service when relating this, but one thing didn't quite
ring true - Letting winners run on higher time frames is where the money is made, I already know that, but
he claimed backtesting over 11 years on EURUSD yielded 86% win rate. I have always associated very
high Win rates with only modestly winning systems and even losing systems that might win a little most
of the time but the rare massive drawdown all but wipes them out.

Usually, letting winners run in a trend following system relies on just a very few really big wins that just go
on and on, even though most trades might lose for a moderate loss. So even with a 30% win rate, with
most losers losing between 1% - 3% but some of the winners chalking up 10%, 20%, 30%+ you would
still do very well and $10,000 could be turned into $2 Million with compounding.

I would not expect this style of trading to return 86% winning trades or even anything like it. but I like the sound
of his approach and will proceed for the time being albeit a little skeptical regarding the stats.

It will be interesting to put this to the test - something profitable is likely to come of it

GBPJPY.JPG
 
I may be wrong but I can't see how to edit my posts. This is essential
for me in order to update results and to make post entry comments
in the same post relevant to that trade. Hopefully I am missing something
otherwise I will need to relocate.
----------------------------------------------

it seems you have a limited time to edit, delete or report abuse.

After that time has elapsed the only button remaining is for others to report abuse.

Its not looking good I'm afraid. I will check in later to check on this

You certainly have three minutes to make corrections etc, not sure how much
longer they give you
 
so many threads start off well and just get left wish admin would remove these old threads!

ADMIN NOTE: If people would stop digging up ancient threads and posting in them, then threads like this would sink. Instead, some people go and bump 10 or 20 very old threads.
 
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