Live trades - by Forex Mind Games

Hi traders,

I thought i post something interesting for us to discuss.

What are your reactions on this chart?

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AUDCAD is currently within a rising channel. It is now holding at point 4. As long as point 4 holds, look to go long.

Long above 1.0200
Stop loss below 1.0170
1st target profit 1.0260
2nd target profit 1.0300

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There are 2 concepts to understand in trading. One, market is forward-looking. It always looks ahead. The pertinent question to ask in trading is not "What just happened?", The stock market usually looks ahead about 6 to 12 months. However, the forex market only looks ahead for the next 1 to 3 months. For example, the market has been looking ahead for ECB and FED to do 2 things since mid-July. EURUSD was expecting ECB to introduce some sort of bond buying for troubled countries like Spain. And for FED to unleash QE3 to help pull the US out of its doldrums. Both of these programs were unveiled in September, which gives the time lead of about 1.5 to 2 months. This explains why EURUSD formed an inverted head and shoulders and turn bullish on mid-July.

Two, because the market is forward-looking, the better question to ask is "What's happening next?" So what is happening next? What is the next BIG news that the market is anticipating for? The next BIG news is for Spain to request for an official bailout. So the ECB's OMT policy can be officially started. The market expectation for the bailout is a matter of when, not if. When is Spain going to ask for bailout? There is some news from the Obama Administration to delay the bailout request until after the US presidential election on 6th November. So it has to happen before or after the presidential election. From what i can gather, my best guess is either between 20-31st October or 12-16th November.

From the technicals point of view, EURUSD is in a possible ABC wave correction. The bailout request is consider to be bullish for euro. Watch for it to turn either at 1.2740-50 (38.2% retracement) or 1.2600-10 (50.0% retracement) BEFORE the bailout becomes front page news.

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Trade summary part 1 - AUDNZD

Waited for 4 days before the price reaches 1.2500 on Thursday. I went short at 1.2517. However, i felt uneasy about this trade. And i went in and out of this trade quickly. Reason being despite the recent rate cut for AUD, AUDUSD remained strong and trended up well. Looking at the AUDUSD chart, it trended up from Monday to Thursday. Only on Friday it went down after failing to break above 1.0300. With the price action for AUD being strongly bullish for this week, i decided not to fight against the trend. Always leave the trading account intact to trade another trade.

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Trade summary part 2 - AUDUSD

One of the reasons for the uneasiness on shorting AUDNZD was this. I attempted to short AUDUSD twice this week. First attempt show me a small loss. Second attempt was a breakeven trade. These 2 trades give me a strong hint that AUDUSD is trending up, and it is not ready to go down. Maybe AUDUSD will be ready to trend down for week 42?

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Cable has been kind to me for this week. I went short on monday's opening. And i have been holding my short position for 5 days from monday to friday.

I took partial profits along the way and shifted my stop loss to breakeven. Decided to hold the trade over the weekend. The best trades are the worry-free trades. As these type of trades move immediately in my favour without going near my initial stop losses.

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It is approaching 1.0050-70, which is a significant pivotal support-turn-resistance zone. From the 4hr chart, it is clearly visible that USDCAD turns at this critical S/R zone. Watch for it to re-test 1.0050-70. Go short if it fails to breaks above this zone.

Short 1.0050-70
Stop loss above 1.0100
First target profit 0.9900

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I have been posting recently on the 88.6% fibonacci retracement level. It is a less common number than the widely used retracement levels of 38.2%, 50.0% and 61.8%. Nonetheless, this 88.6% holds a better risk/reward ratio. For GBPUSD, last friday's downward move retraces near to the 88.6% of 1.6000.

If there are no significant gaps on monday opening, i am planning to go long. Stop loss is below the previous swing low of 1.5975.

Long near 1.6000-10
Stop loss below 1.5750-60
First target profit 1.6100
Second target profit 1.6180

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I have been turning my attention to FIBO recently. So i went searching for all things FIBO related to trading. Here is a short summary of FIBO summation series.

Start with 1, then add the previous number together to form the next number. Continue to combine the previous number with the new number to get the FIBO numbers. Therefore,

1 + 1 = 2
1 + 2 = 3
2 + 3 = 5
3 + 5 = 8
5 + 8 = 13
8 + 13 = 21

and so on and so forth.

Besides using FIBO to find potential retracement levels, FIBO numbers could be used to time the possible dates for markets to turn. This means market could turn at either day 5, day 8, day 13 and etc. Although it is not precise and may not turn at the exact day, most often it turns close enough to the FIBO numbers. Making it hard to ignore this as a coincidence. This could be a useful strategy to time market turning points.

Look at the EURUSD daily chart. Note that price peaks at 1.3170 on 13th Sept, which is the week after the announcements of ECB OMT and FED QE3. It is used as the starting point for the calculations.

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Watch for day 34. This is the next FIBO number. Because it is not exactly precise but a good estimate, watch for it to possibly turn from day 33 to 35.

EURUSD is currently resisted by another super long term trendline on the daily. Point 3 of the falling channel was touched last week.

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Will EURUSD break above this down trendline? To answer that, lets take a closer look. Lets see the price action on the 4hr chart. There are 2 possible ways to analyze the 4hr chart.

For the bullish traders, EURUSD is in a symmetrical triangle. Symmetrical triangles are usually continuation patterns. Since the trend is up, the bullish traders will want to try bring EURUSD above and outside triangle. Thereby causing the bullish trend to continue.

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For the bearish traders, they will try to cause a double top pattern to invalidate the triangle pattern. Since double tops are key reversal patterns, EURUSD should drop like a rock.

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My personal preference is to trade the triangle continuation pattern. I am of the bullish side. I think the temptation is there for Spain to take the easy way out. Politicians are not known for their long-sightedness.

For this post, i am going to ask you to guess the timeframe for these 2 charts. The time and price has been removed from the charts. This post is to show the fractal geometric nature of the markets. Chart patterns that repeat itself on all time frames, from the largest to the smallest.

What timeframe is this?

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I am purely a currency trader now. I focus my time on trading forex. In beginning, like most other retail traders, i started with stocks. Stocks and currencies are 2 different things, both exhibiting very different behaviors. In the stock markets, 1 big player can dominate 1 particular stock. This big player can push prices up and push volume up so that the stock appears in the top 20 volume. This is like advertisements, except that it is free. The public notices this stock appearing in the top 20, and decides to buy thinking it is a bullish breakout. Then the big player sell into the rally. And the stock changes hands from the big fish to the small fish.


In currencies, it is not possible for any 1 player to dominate the market. For extremely short periods of time, when banks are front-running their customers' orders, i concede it is possible. Usually, front-running banks can manipulate prices by about 20-30pips, depending on the customer's order size. In the long run, it is not possible. Prime example. The bank of England tried to hold up the British pound by buying it up in 1992. Yet hundreds of traders, led prominently by George Soros, shorted the pound. The pound drop 1000+ pips in a few days and weeks. The lesson is this. Currencies are lead by global macro forces.

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So i want to become a currency trader? Lesson 101 of currency trader. If i give you a world map right now, can you show me on the map where is London? Can you do it 3 seconds? Can you show me where is Greece in 3 seconds? A currency trader must have the macro overview of the entire planet world. Only then i can zoom in onto the smaller details. Currency traders must do their homework. Find out and memorize where is London, Tokyo, New York, Greece, Spain, Italy, Switzerland, Canada. If you can do it under 3 seconds, you are one step closer to becoming a currency trader.

FALSE BREAKOUT? FADING THE BREAKOUT

There are some strong demand for EURUSD from 1.2830-40. I believe most of the bad news from Cyprus has already been priced into the euro. And for the most part of tuesday 26th March, EURUSD traded in a small range of 60 pips. With these scenarios mentioned, i am attempting to fade a possible false breakout below the previous low of 1.2830. I am going to place a limit buy order 5-10 pips below the previous low.

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GBPUSD looks likely to continue its bearish sentiment. There is a double top formation on the hourly chart.

Trading plan.

Short GBPUSD near 1.5090-1.5110
SL above 1.5140
TP1 1.4920 (objective of 170pips double top)
TP2 1.4870 (88.6% retracement and possible PRZ of harmonic bullish bat pattern)

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EURUSD is in dire straits. Worse than forecast numbers for German Manufacturing PMI today has seen EURUSD plunges -100pips in 30 minutes. Furthermore, expectations of another rate cut in either May or June is getting stronger. If ECB decides to cut interest rate to 0.50%, expect EURUSD to fall off a cliff. All these global macro-economic factors are fundamentally bearish for EURUSD.

On the technical analysis side, there are more signs of bearishness. The 1hr chart shows a head and shoulders, with the neckline broken today after the German manufacturing PMI. There is a good opportunity to short EURUSD, if it retraces to the support turned resistance neckline.

SHORT EURUSD 1.3020-30
SL 30-40pips
TP 1.2840-50

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Potential trading opportunity to go short USDCAD. With the markets focusing very much on JPY pairs, USDCAD has been under the radar. Be forewarned. USDCAD is traditionally a slow moving currency pair. Move likes a tortoise almost. Got to have patience on this trade.

Short USDCAD 1.0330-40
SL 30pips
TP1 1.0220-30
TP2 1.010-10

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The market is liken to a fashion show. Every month, the fashion industry focuses on a particular colour, certain dress designs, hair styles and etc. Likewise for the markets, every so often, the market gets bored of old themes and goes looking for new themes. So what is the current forex fashion for the month? It is the FED hinting of tapering or reducing the bond purchases. This implies a bullish USD biasness. As we can see for the last week, all major pairs trending lower against the USD. EUR GBP AUD NZD CHF CAD JPY. You name it.

The fundamental direction of EURUSD is still to the downside. Euro as a whole is in recession, Greece is not out of the woods yet, ECB just cut interest rate to historic low of 0.50%. So the recent uptrend got many novice traders puzzled. Why is EURUSD trending up when Europe is still in such a mess? The answer? There are several main reasons, I shall list one. In the absence of negative news, currency pairs tend to trend up. You see.

When there is no negative news, there are no macro fundamental factors for big players to sell and push the currency down. EURUSD cannot be push down by 1 or 2 players. It requires the concerted efforts of many large players coming together at the same time to push EURUSD down. It is easier to get 2 large banks to conspire together and push a currency down for 50pips. However, how on earth do you get 10, 20 or 50 large banks and hedge funds to short EURUSD together for 500pips? Simple. When there are bad news and really really bad news. Such as the possibility and rumors of a Greece default. That is like a smoke signal for the large players to join hands and sell EURUSD simultaneously. With ECB lowering interest rate to 0.50%, that again, has become the smoke signal for the market players to continue their selling of EURUSD.

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SHORT EURUSD 1.3030-50
SL 30-40pips
TP1 1.2870
TP2 1.2750

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There is a head and shoulders formation forming on the USDCHF. Conditions for a short entry:

Neckline support is broken
Price action rallies upwards to re-test neckline
Neckline support-turns-resistance holds
Then i would place a sell position at the neckline.

SHORT USDCHF 0.9850-0.9600
SL 30-40pips
TP 250pips (the price objective from the neckline)

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When I see the potential risk/reward of this trade, I see that this trade could be one of the most profitable trade of the year. This kind of trade does not happen often. In every year, there are only a handful of such trades. One such earlier trade was to long USDJPY on 4th April 2013. This trade to short AUDCAD could be another one of those mega trades.

Look at the AUDCAD chart. No major support levels, except 0.9600, at all to the left of the chart. There is so much empty space between 0.8600-0.9900. This means a potential total freefall of about 1300pips! This trade requires patience. This trade is based on the daily chart. It requires the trader to hold the trade for weeks and maybe months.

For AUDCAD to go to 0.8600, it requires USDCAD at 0.9xxx and AUDUSD at 0.8xxx. This is entirely possible looking at the price action.

SHORT AUDCAD 0.9920-50
SL above 1.0000
TP (final) 0.8600

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A bullish cypher harmonic pattern is possibly forming on the hourly chart.

LONG AUDUSD 0.9390-0.9400
SL 40pips
TP1 100pips
TP2 200pips

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From the 4hr chart, I see a potential bearish gartley harmonic pattern forming. This is not a really perfect gartley pattern, as the 61.8% is exceeded. If you are particular about preciseness, then probably this trade may not be suitable for you. However from my view, the markets are never perfect. It always overshoots and undershoots. I will take what the market shows and gives to me.

SHORT GBPUSD 1.5550-60
SL 30-40pips
TP1 1.5450
TP2 1.5250

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