Hi, I wrote about my
expectations regarding eur/usd pair and gave you the entrance point on the
pair. It was a breakout trade that started at 1.3188 level with a stop loss
order at 1.3144. I took partial profits at around 1.3240 and then 1.3290 level.
As you saw the pair collapsed yesterday. Some analysts started screaming about
the end of a trend. I already mentioned in my previous post that I do not
expect the pair to reverse before New Year and I intend to search for
opportunities to jump into the market by going long the Euro against the US dollar.
And I haven’t changed my opinion on the matter. I am still watching the market
closely to see for extra day trading opportunities. One of the kind presented
itself today and I want to talk a little about it in the post.
When I search for
opportunities to day trade I always want to do one important thing – to enter
my day trades in the direction of a prevailing tendency. If the market is not
in a range, but trending or in a short term swing (as eur/usd is at the moment)
I will never make counter trend trades, but only implement those in the
direction of a tendency. If you look at eur/usd chart you (with no doubt) see
that the pair is in an upward swing. It means I am only willing to go long Euro
and sell short US dollar.
Now, how do I choose a spot
where I get into the market? Firstly, I wait for a retracement or a counter
trend move. Secondly, I find some nearest support level and wait for the
security to get there. Thirdly, I wait for reversal patterns at the level to
see whether counter trend move is over or not. Those usually are 123 patterns
and candle reversal patterns. If everything happens according to the described
scenario I go long when the security leaves 123 pattern or I place a buy stop
order above the bullish candle (1 hour or 4 hour chart).
So, I saw eur/usd collapsing
yesterday. Pretty sharp! It means a counter trend move started. I started
searching for a possible place of support. And guess what, it wasn’t really difficult
to find. You most probably know this sampler saying of classical technical analysis that
resistance becomes support and support becomes resistance. I have mentioned
that I took a breakout trade at 1.3188 level a few days ago. The area was
resistance at the time. Guess what has it become now? Support!
So, what happened later? The
pair came to this level, formed 123 pattern and bang! Went up again. If you
look at the chart below you will see the 123 pattern on 1 hour chart around the
level. When I saw the pattern I placed my buy stop order above it and the
market took care of it by breaking the level and going up.
Oh! I forgot to tell you how
I get out of my day trades. I watch for obvious resistance and support levels,
but most often I close my positions at an even number. Today the pair managed
to reach 1.3294 level before going back to today’s breakout point of 1.3215 (well, a bit lower) and is
consolidating now.
I would not be surprised if
the pair took off upwards again tomorrow. Looks like another 123 pattern is
formed at the level! I seldom trade Asian session (only about 5 percent of my day
trades are implemented during that time), so I will wait for early European
session to see how everything looks at the time. I might take another long in
eur/usd tomorrow.
I do not think I will keep
it open longer than 8 hours as quite a few brokers will not be working during
holiday season and mine seems not to be working at the time too. So, I do not
want to take risks trading during this time.
Ok, I think it is time for
me to finish now. I promised to give you some thoughts of mine on Japanese Yen
and I did not forget my promise. However, I will not do it today. Maybe
tomorrow, but most probably some day during the weekend.
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I hope you understood the
way I day trade and it will help you in your trades. See you soon.
Ok. I hope you benefited from the post. If you liked the post I would
also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and
other social platforms. Have a nice day.
Vytas.
Disclaimer
Trading financial markets carries a high level
of risk, and may not be suitable for all investors. All information on the blog
http://trend0.blogspot.com/ is of educational nature and cannot be considered
as advice, recommendation or signals to trade in any financial markets.