Higher low, lower high system

There is no trend on EUR for a few days now. It will come down to which SR level gives/holds. There was a clear rejection of a move below 1.3050 on 12th and that seems to be holding now. We had a positive 1hr 3 bar reversal close for move up. With no movement during London morning session would expect something this afternoon, I have no idea which direction will win out.

GU has found support above 1.53 and the W pivot held for now. If we are to go lower would like to see a lower high form. Again its which SR level is going to hold/fail.

Neither set up leaving me with warm fuzzy feelings and apart from an EJ scalp (20 pip) sell no trades this am. Again Mon and Fri London morning sessions are often sloppy, if they are we just sit on the side.

If you don't like a set up/or its not clear there is nothing wrong with waiting, then if it does go in the direction you thought of and you missed out don't worry about it. Might be best to wait for breakout and retest of the break point to confirm direction.

EUR GU EJ 17 Apr

EUR - The previously identified support level above 1.3000/W M2 1.3038 held. D higher low engulfing close should follow through higher. We have stopped at the Sept highs 1.3070 area and there are two W pivots to contend with. Also the over sized D candles sometimes don't follow through, should 4hr signal lower with an engulfing negative close after 3 upper wicks would flip bias lower. Bias up with potential to go lower.

GU - The identified lower support level held. D positive close still constrained by the immediate resistance level and W M3 1.5374, higher high higher low flow still in tact. 4hr appears to close to completing 3 candles with upper wicks rejecting move up. Bias up, we can move lower from the upper resistance levels.

EJ - The evening star pattern followed through lower reaching the 125.60 support level. D then closed positive, 4hr flow up. Bias up.

We haven't traded much in the last couple of weeks, its terrible when life gets in the way of trading.

One of the few trades snatched for +40. Yes we know full well that it was an early exit as so little was done to the upside (after what 8 hours of trying) that a reversal was going to happen.

Recap 17 April

EUR - The previously identified support level above 1.3000/W M2 1.3038 held. D higher low engulfing close should follow through higher. We have stopped at the Sept highs and there are two W pivots to contend with. Also the over sized D candles sometimes don't follow through, should 4hr signal lower with an engulfing negative close would flip bias lower. Bias up with potential to go lower.
Result: The upper resistance level held out with a strong move down to the previous 1.3000 support area. The 4hr did signal a sell, there were 2 x 1hr reversals also (after London open and after US open).

GU - The identified lower support level held. D positive close still constrained by the immediate resistance level and W M3, higher high higher low flow still in tact. 4hr appears to close to completing 3 candles with upper wicks rejecting move up. Bias up, we can move lower from the upper resistance levels.
Result: The 3rd 4hr candle did close with an upper wick to set up move lower from the upper resistance levels.

EJ - The evening star pattern followed through lower reaching the 125.60 support level. D closed positive, 4hr flow up. Bias up.
Result: The up bias did not play out. 4hr closed a hanging man. See candlesticker link on blog, whilst they regard this as a low probability bearish reversal candle (in their pic they show the candle making a new high) this 4hr hanging man makes a double top and closes below previous close. So whilst we were still above our 4hr 8lwma the failure of the good candle before the hanging man to follow through higher was a first warning. Like EUR some 8 hours of failure to move higher, 1hr negative divergence. Two reversals after London open and US open.

EUR GU EJ 18 Apr

EUR - D closed negative at the 1.3000 support level (Feb-Apr '12). We have W S1 at 1.3000 also. The EUR can easily go sideways for a week before a good run. This range is bigger than EUR's typical sideways moves. 1hr did have a higher low after divergence move up during Asian session. We can go up further from 1.3000 but my bias down. The D candle should follow through lower and the move up through W M3 and the 1.3125 resistance level was strongly rejected yesterday. W pivot 1.3071 and resistance level/W M3 1.3123 could provide sell areas.

GU - D engulfing close, 4hr flow lower high lower low. Bias down.

EJ - Has me a little stumped at the moment. D closed a doji, its not clear if 4hr is on a higher low or a lower high. No bias.

Hello Dave, I was going through some other thread and found something what one of the members said.

Anything which is lower than a D TF is kind of hardwork these days due to the central bank intervention.

Do you agree with the above statement ? Has it really became hard to trade H1 these days compared to past or market has been like this since the start ? I couldn't understand

No I don't agree with the statement. JPY intervention whilst it can ruin 1 trade generally is good for decent runs, days, weeks or months. Ok CHF ruined EURCHF. Sooner or later they'll stop that game also.

The market is sometimes tougher. Trading off a D or 4hr for that matter would be tougher if a pair is trading a narrow range and its 1 day up 1 day down. Trend traders off higher TF's usually get nailed then.

Recap 18 Apr

EUR - D closed negative at the 1.3000 support level (Feb-Apr '12). We have W S1 at 1.3000 also. The EUR can easily go sideways for a week before a good run. This range is bigger than EUR's typical sideways moves. 1hr did have a higher low after divergence move up during Asian session. We can go up further from 1.3000 but my bias down. The D candle should follow through lower and the move up through W M3 and the 1.3125 resistance level was strongly rejected yesterday. W pivot 1.3071 and resistance level/W M3 1.3123 could provide sell areas.
Result: The 1.3000 support level held, the big engulfing 1hr close had no follow through higher.

GU - D engulfing close, 4hr flow lower high lower low. Bias down.
Result: The move down stopped at the previous days low and had a decent bounce.

EJ - Has me a little stumped at the moment. D closed a doji, its not clear if 4hr is on a higher low or a lower high. No bias.
Result: Lots of 1hr lower wicks at London open saw move up, then became quite choppy.

EUR GU EJ 19 Apr

EUR - D closed a shooting star off the 1.3000 support level which is proving a tough nut to crack. The bounce up was not significant enough to change my down bias with obvious chance of buyers at the support level.

GU - D closed positive but a weak close, still below 8lwma and RSI not crossed higher. 4hr just closed positive so strictly speaking not on lower higher lower low. We are above 50 RSI on all 3 time frames so bias up but a move lower would be no surprise.

EJ - D close still unconvincing. 4hr positive so would expect some move up. A reversal down again would be no surprise.

Thanks for the reply Dave. That was really helpful. problem is that we newbies tend to go in the direction of what people say. So even if the markets are alright and are providing good oppurtunities, When other's say market are whipped and it doesn't respect price action anymore, We tend to get confused and really believe in their words. As they say everything comes with experience.

Here's the trade that i took today
80+ pips

Though the bias was up as stated by Dave. Price made a LH during NY session around the 50 level. I've executed the sell position after low of the retest candle was taken off.

Hello Dave, This is my second post of another trade that i took on 18th.

I took a short position in GU, after it has hit the 1.5300 level and bearish IB formed at that level, i did execute the short position at the white mark and the SL was at 1.5305. Price shot up later and i was stopped out.

Could you please tell me what mistake did i commit here ? what should i correct or check before taking a trade next time ?

Don't take anything anyone says as fact, always check it out yourself to make sure that you clearly understand what they meant (when you write something down whats clear in your own head sometimes doesn't come through quite so clearly) and that you can apply it.

Bias up yes but also said move lower would be no surprise. We did get move up in line with bias to W M3/previously identified resistance area so when 4hr has a solid reversal or 1hr has a lower high you can look to sell.

These are both in line with the HL LH theme which has just evolved into flow. In trend just follow it, CT = at W pivots/proven SR areas need confirmed change in flow from multiple 1hr candles.

Nice trade.

Time of day, London has already closed. The 1hr upper wick earlier then an inside bar thats a lower high. Late US news (interest rate decisions/Fed announcements) sometimes move market but without that I wouldn't look at a trade at that time. You never know what Asian session will do on smaller volumes.

I have been asked why do I do recaps of previous days trading. The answer is very simple.

 

1. It absolutely tells me if my take on trading is working for me or if it needs tweaking. In a nutshell, trade with the trend until counter trend rules apply.
2. Hopefully its showing that you actually can get a good idea of the market before it happens (daily view done a couple of hours before London open) and that (news spikes excluded) trades can be expected or taken with more confidence.
3. Helps with understanding the subtleties that different pairs have, size of candles to avoid, times to trade etc etc.

Please see the GU recap below. I don't have know what GU is going to do. IF it is going to fall I know from my D charts that we have struggled to break above 1.5400 for 2 weeks. I have no clue if its turning where but the W pivot, W M3 or in this case R2 just below W M3 are good places.

So when you get this kind of lower high over 4hrs a sell would not be a complete surprise.

Recap 19 Apr

EUR - D closed a shooting star off the 1.3000 support level which is proving a tough nut to crack. The bounce up was not significant enough to change my down bias with obvious chance of buyers at the support level.
Result: Up and down day with little follow through.

GU - D closed positive but a weak close, still below 8lwma and RSI not crossed higher. 4hr just closed positive so strictly speaking not on lower higher lower low. We are above 50 RSI on all 3 time frames so bias up but a move lower would be no surprise.
Result: Up and down day but much cleaner that EUR's 1hr chart. Move up in line with 4hr higher low 3 bar reversal. Move down from the W M3 pivot/general resistance area identified on D charts.

EJ - D close still unconvincing. 4hr positive so would expect some move up. A reversal down again would be no surprise.
Result: Move up as per bias but after London open no follow through.

Out of time this morning, 4hr charts with pivots and weekly charts on the blog. Some interesting things brewing on those weekly charts.

Even if a trader would have the best system in the world, there would be times when the system fails for no apparent reason. Take it in stride and continue.

Exactly thats why I look at my/Mrs V's trading day, did we trade system, stray from it, have a system losing trade or just simply mis-read the market/candles/support and resistance levels.

Have not seen anything that fails to convince me that trading trend and reaction to support and resistance levels are the 2 most important factors.

Clarification trading against direction of ma's

I was asked to clarify when I will trade against the direction of the charts moving averages, i.e. against the trend. So that would be selling when price is above the ma's and buying when price is below the ma's.

First of all an exception. Sometimes it does happen that the trend is so strong that I would ignore all counter trend signals. Counter trend candles are so weak they inspire no confidence at all. I can recall instances that lasted for weeks/months with EUR, EJ, EURCHF when I had absolutely no interest in any counter trend trades.

Please see the link http://vantagefx.blogspot.com/2013/02/trade-rules.html for the counter trend rules:

Trade counter trend from proven support and resistance levels and W pivots. Only when price has proven over a period of several hours that it does not want to continue in trend (specifically not 1 x 1hr candle). I will look to assess divergences and candle engulfing closes for patterns (higher low/lower high, double top/double bottom, morning/evening star) on 1hr that by their very definition require several hours to complete.

A few words of clarification:

Proven support and resistance. No hard and fast rules but visually price should have historically struggled with that level. I am looking to trade the reaction. Has price visibly reacted differently than before. See the 4hr chart for GU. 1.5400 was a proven level. On 17 April we had upper wicks and dojis in the Asian session. That can explain the muted reaction but when London open price fell. When price challenged that level again on 19th the reaction lower was immediate. On the 1hr, if the green doji was followed by an engulfing positive close the focus would have been on trend continuation higher. Instead we had an intra day lower high 3 bar reversal negative close. Price has proven over multiple candles that it does not want to continue higher.

Divergence. I don't trade higher time divergence, 1hr and higher, as a standalone occurrence. So it needs to be at a level that logically should support the change of direction. Proven support/resistance, pivots, fib levels, trend lines/channels. Price action must confirm the divergence. For me thats the candle patterns I specifically look for being double tops/bottoms, higher lows/lower highs, morning/evening star patterns, 3 bar reversals. I have done several posts on higher lows following divergence and lower highs following divergence.
http://vantagefx.blogspot.com/2013/0...ghshigher.html
http://vantagefx.blogspot.com/2013/0...following.html for the EUR trade
http://vantagefx.blogspot.com/2013/0...hen-lower.html

There are many more hl/lh following divergence examples, use search function on blog.

EUR GU EJ 22 Apr


EUR - The support/resistance levels 1.3000-1.3120 are still containing price. 1hr 50 ema flat signaling a general sideways range.

GU - Lower high lower low flow 1hr, bias down.

EJ - Higher high higher low flow 1hr, bias up.