ON the mean Renko 12 tick chart we see a Four Brother's pattern starting around 5am and lasting until the move up around 6:30 Am EST or so. Nice Resistance area from a previous swing plus the previous day's open and R1. Take break of 12915, take ten and hold. Nice!
Price found another range quickly thereafter and lasted from 7am to 8:30 am. Price headed further North but ultimately retraced to the top of the most recent range, really making an nice and clear flagging pattern. I like those as entries because price give you a clear stop - below the range, a clear entry at the top of the range and a 1st target being where the retracement started. The drawback of this trade is the sizable stop, so one tactic we can do is measure the range 12950 to 12919 or roughly 31 ticks, lets say 30 - add 15 to the bottom of the range and we have 12935. Our Entry is 50 our stop is 35, much more comfortable for me. Trading only retracements to the previous CLEAR consolidation/range areas has kept me in trading. I still consider it my best tool/ because the trade set up inherently forces patience. If you are new to trading print or save this chart (not because I made it) but because on this chart is all you have to know to have a consistent profit in trading, I really believe that.
I should clarify the logic in where I placed my stop on the second trade - I figure if i have identified a range properly, that if price travels below what I perceive as the midpoint of that range, then I want to get out. Why hold on. If price is mean and zips thru my stop then reverses up to where I entered then I have the option to re- enter. But Im only down 15 ticks not 30. Trade to trade tomorrow -
There is another way to trade this scenario. BTW I am spending alot of time on this chart because this scenario is such a fine example of how I really like to trade, clean and simple. The other way to trade this is if you missed the initial break of the FB pattern because you got distracted or weren't at your chart, because there were two levels of s/r there, the previous day's open and the R1 you would have been taken a good set up with the retest of the FB pattern. In a sense its the same trade as the second trade we explored on this chart right. Break out, retract to top of range, enter. Target, top of where price started to retrace, stop below the FB pattern, or even half of the FB pattern, and boom you gotta nice winner. If you are really new take that trade and quit for the day. Or maybe your in a draw down, a losing streak. Take it and quit. You just finished the day ahead with a well defined, well executed trade that you know darn well will probably happen again tomorrow. Kiss the wife, light a candle and watch the sunset. (if 15 ticks is still to big of a stop, you can trade smaller sized charts, like look at 6 range or minute charts, i can go over one if you tell me what you trade.)
I hope this helps and please if you are new this is a wonderful way to trade. Notice no histogram, not wavy lines just common sense, s/r with the market telling you where to place your stop where to take profit etc.
I hope this helps at least one person, hope all is well and thank you if you have read this far.
(PS - another way and very clever way to enter the second trade we discussed was at the completion of the bull candle that pierced the trend line topping the retracement - thats the cheesecake baby.
The following 2 users say Thank You to pdhuey2000 for this post:
I like to pick a Random chart to analyze on Saturdays and I typically will look at a pair / instrument I may overlook during the hectic week. Often times, I can find some levels or some ideas for longer term trades during these reviews. I hope this makes sens.
I looked at the aud/usd today going back to 7/25/2012 - I found a really good example of a reversal with good obvious clues and would like to share with the followers of this thread.. BTW Thanks all who have offered kind words to my progress and thanks.
On 7/24 we have a failure to cleanly break a swing high demarked but the first "superman" sheild triangle. A trade here could be the first poke thru the crossing ma's. Why? Well first sign is the failure to move higher. Secondly because the failure happened around the 1.0300 level we can add confluence. Lastly, It makes sense that if the market fails a key level, breaks dynamic resistance like the ma's then its likely to travel to the next "event point" in the market, for me this would be the previous swing point, which is the tip of the superman sheild triangle. I would consider this a scalp - with little patience for any drawdown- I want to see this happen right away or I flee. This trade did travel nearly straight down to the 60 level before starting to pullback. The next potential trade in this series is the actual break of the triangle tip - or swing low, whatever you want to call it, What's really pretty about this move is the nice guiding ma study looks like a waterslide - great visible comfort. This trade was good for 50+ points if you had the nutsack to stay in. Now the stop placement on this trade can be scary/tricky, so here are my thoughts. One obvious place is at a previous swing high, ever hear that before? lol. In this case we are looking at 56 points. Yikes. Okay so what can we do. An option I use alot is cutting my normal postion size to half and using the stop. If I make this trade, I will need 100 pips to satisfy my RR, well that can be a tall order. Another way to do it is go in normal size and use the decending MAs as stop mechanisms. Since I don't always have these on my charts, I may not do this either. I would use the last psychological level as my stop which in this case is 1.0300 entry at 1.0258ish. And then hold my breath. I'm taking half at ten. And Follwing the hooks down, most likely i'm bailing if I got towards the 1.0200 level. This price action pulled back to the 50 level after it shredded it - that for a healthy minded trader is a wonderful add position, even the shaping of the pull back is picture perfect IMO> if we consult our old friend Fibonnaci we'd be looking at the 38.20 level and the 50 level - good confluence. Another way to enter at the pullback would be to place your entry at the bottom of the green candles and follow them up - otherwise known as the traders trick (a time honored tradtion, lol)
The first significant sign of the reversal is the bullish engulfing pattern. I wont trade this pattern alone unless it concides with 2 or 3 levels Im looking at. but you can trade this pattern by itself - but there will be alot these forming all over the place. The second sign of a reversal is the trendline break of the down move. I will and do trade these especially because priced has produced 1. a bullish reversal candle pattern and two has "held" the 00 level. In this case its a high risk trade because of the close and signifcant resistance (the two thick red dotted lines) which in this case are prior day's low and prior day's close. A nice "heavy" trade would be for me to enter at the poke thru of the MA study, if it was on my charts at that time, because the odd are after we see the reversal signs price will travel to the next "event point" in the market for my money its the tip of the triangle at our old friend the 50 level. its going after the orders short placed at the obvious pullback area we previously discussed. Its even a nice number 1.0225 target 1.0250 stop 1.0210 it can be a comforting thing when your trade paramaters are outlined by the half and whole numbers.
Last but not lease we have an nice Four Brothers Pattern forming on the Prior Day's open, with the 50 level dividing the bars, in a nice up moving market, the breakout of the pattern happens shortly after the London open and represents an Asian Consolidation after some good movement. I like having price in a nice contained box at the London Open, because it will typically leave the box with some spunk. I this case it does and travels fairly paced to the next 00 level. Interestingly price finds sellers at the 00 level and retraces back down to where the FB pattern brokeout, thats 1.0260 if you are keeping score. Interestingly thats also the same level the tip of the triangle (swing low) from the failure reversal pattern we began this discussion talking about. nice confuluence for sure, referencing our old friend Fibonnacci we are also at the 38.20 level. Lots of great lessons for traders of all ilk in reviewing price action, I think. I hope this has helped and if you have any questions please don't hesitate to ask.
I really like the way you have your charts set up, pretty darn clean... One question, on the bottom of your first post on the lowest panel there is an indicator I can't make it out on my computer screen, can you go explain what it is and how it helps?
p.s. I am digging the mean renko's also. 20 range with 200% reverse for pivots... good stuff
The histogram indicator in my first post is a TRIX indicator I downloaded from the elite section. Trix is one of the first indicators I used so I like to reference it for info. but its not primary in my trading.
I utilize the trix when I am in a position to help me decide when it maybe time to get out. When the histogram is heading back to zero for me its probably past the time I should've exited.
I click it on and off my charts I like to focus more on the bars. I literally might pull up three or four histograms just to check what they are saying.
I hope this helps.
I posted a chart hopefully to help clarify what I mean -