Higher Lows Lower Highs

[Snow Dog 10]

Recap 22 Jan

 

EUR - 1hr doji then a shooting star at W M3 set up sell opportunities at the extremes of the upper range. On any given day the extremes of the immediate range are the places to trade, even more important when there isn't a trend. The first trade is the best trade.

 

GU - No bias yesterday could have gone either way. There was a London open sell from a 15 min shooting star, at the extreme of price action when W M2 1.5858 held for 4 hours.

 

EJ - Bias was down and there were 15 min lower high shooting star sells at London open and US session.

 

23 Jan

 

UK MPC minutes this morning, with the state of the UK economy would not expect surprises. Will most likely look for trades after the news.

 

On many days likely set ups are clearly seen, today isn't one of them for me at least.

 

EUR - D closed a doji that filled the recent range 1.3375 - 1.3265. RSI's ma's flat, no bias. Based on these charts there have to be better set ups elsewhere. The day might bring greater clarity.

 

GU - D closed a doji with the lows holding. No bias either way.

 

EJ - D closed lower with the lower support level, W S1 117.37 holding. Bias down.

[Snow Dog 10]

24 Jan

 

The sideways price action continues, in ranging markets its important to try and get in at the extremes. The first trade in the move is the best trade.

 

EUR - Another D doji. Still waiting for a good D close to give some direction.

 

GU - Similar to EUR. D, 4hr and 1hr all below RSI 50 level so bias down with possibility of bounce up from 1.5800 support area.

 

EJ - Asian session broke above yesterdays range from the 117.50 support level running 130 pips already this morning. Hopefully we will see some consolidation and continue up.

[Snow Dog 10]

Recap 24 Jan

 

EUR - There was movement yesterday either earlier than we trade or difficult to get into from either overly large candles or the upper wicks.

 

GU - The down bias played out with 15 min lower high engulfing closes pre/early US session.

 

EJ - The up bias played out with 15 min higher lows just after London open and pre/early US session.

 

25 Jan

 

EUR - D engulfing positive close at the recent highs, we are still within the 1.3400 resistance level. D still showing divergence. 4hr has closed an evening star pattern and 1 hr on lower high lower low. No bias can go either way.

 

GU - D engulfing negative close, 4hr and 1hr lower high lower low flow. Bias down.

 

EJ - D positive engulfing close at the recent highs. 1hr chart is showing divergence. Bias up but can reject the highs.

[Snow Dog 10]

25 Jan

 

EJ - D positive engulfing close at the recent highs. 1hr chart is showing divergence. Bias up but can reject the highs.

 

Mrs V has been sick all week. Just wanted to escape from the bedroom, trend is all too clear. Got in just after LO, got out switched computer off went back to bed. 15 min hl, little no upper wick in direction of trend +50.

 

Nice one.

[Snow Dog 10]

Recap 25 Jan

 

EUR - Had no bias for the day. When I posted early in the morning we had an evening star pattern on 4hr. This failed and the next candle closed positive above W M3 for a 4hr higher low. This failure to go lower left us above 1hr 50 ema (nicely sloped up) and so in short term uptrend. There were 15 min entries before Frankfurt open and then continuation moves just after London open when price held above 1.3400, pre US open and after US news. The last 3 our preferred times for trades.

 

EUR closed the week with an engulfing close on the Feb '12 highs. Bias up for next week but we can obviously react lower from this resistance level.

 

GU - Bias was down but there were no nice set ups for us to consider.

 

D closed a doji within the recent range. 4hr shows the move into the lows from 21-23 Jan rejected with a shooting star. The move lower is just about holding on. Nothing convincing though.

 

EJ - Nothing seems to hold EJ down at the moment. 15 min trades available at approx the same times as EUR.

 

D closed positive and whilst we should have some retracements bias remains up.

[Snow Dog 10]

28 Jan

 

EUR - After the positive D close Fri that stopped at the resistance level we have formed a base at 1.3450. We could get a push below this, still bias up.

 

GU - Gap down this morning at Asian open which may see some pressure to close today. Support at 1.5741. D is hinting at divergence, 4hr showed divergence on 25th but we did have a move up after that. At this stage looking for any push up to give a lower high and sells in trend hoping for 1.5745 to fail.

 

EJ - Consolidating above 122.20 after 2 strong days. Even if we retrace further bias up.

[Snow Dog 10]

Mrs V took 1 trade yesterday having left London open as its often a bit choppy. We had bad internet connection here and lost connection 3 times, exited just above BE when she had the chance. Price did not go lower for 4 hrs strongly suggesting the CT move lower ran out of steam. 15 min higher low, about a 6 pip upper wick about the limit for us on 15 min chart.

 

Pity trade hit her target. Next trade please.

[Snow Dog 10]

Recap 28 Jan

 

EUR - London open was very scrappy as it often is on a Mon morning. There were a couple of buy opportunities in line with bias. The best one in the US session but there was little follow through.

 

GU - There were 15 min sell opportunities in line with bias.

 

EJ - Bias up and the best opportunity came in the US session.

 

29 Jan

 

EUR - D closed a hammer that could not trade higher than yesterday. We are still above RSI 50 levels but failed to make any progress higher. No bias can go either way today.

 

GU - D engulfing negative close.4hr lower high lower low in tact. Bias down.

 

EJ - D chart very similar to EUR, hammer close no progress higher. D chart still showing divergence. We are above 50 RSI. We have seen on D chart that moves down can last for a few days. No bias can go either way but view is sells = scalps and looking for return to up trend.

[Snow Dog 10]

2 trades. Gu this morning 1hr doji, 15 min 2b we thought rejecting move up through the pivot 1.5716 and getting back into downtrend. It didn't -18.

 

EJ 1hr chopping with a hammer then shooting star. After a 120 pip CT run down 2 x 15 min dojis at 121.50. Waited for high of 1hr shooting star to get taken out. Mrs V waited to long to exit missing 2 opp's at the high, with her neck giving some stick she asked me to watch. Gave it a couple more chances to go higher and happy to exit +50.

[Snow Dog 10]

Recap 29 Jan

 

EUR - Had no specific bias yesterday. There was a 15 min sell after London open will little follow through lower. The buys in US session after price formed a low, then an engulfing 1hr positive close. 15 min higher low that took 3 hours to form to revert to trend.

 

GU - Bias was down, got it wrong.

 

EJ - I said "No bias can go either way but view is sells scalps and looking for return to trend." Price fell in the morning with a 1hr hammer rejecting the lows, pushed up on 15 min higher low to resume trend.

 

30 Jan

 

EUR - D closed positive, 4hr higher high higher low flow in tact. We are right on the highs from Feb '12. Bias up but we can react lower to the resistance level.

 

GU - D positive close RSI has crossed its signal line but below our lwma. We are at the resistance level from June/July '12. This can be start of move up or retrace in downtrend. A positive D close would be expected to follow through but the resistance level could hold. No bias can go either way.

 

EJ - We are approaching the April '11 highs. D positive close but we did not break last weeks high. Divergence on D and 4hr, price action yet to confirm. Would like entries to give sufficient scope to move stop or take partial profits before 122.80 and then the major April high. Bias up but can react to the levels mentioned.

[Snow Dog 10]

Recap 30 Jan

 

EUR - Sitting on the resistance level. An early move up at Frankfurt open, then a perfect 15 min higher low at 1.5700 in line with trend.

 

GU - No bias for either direction, it went up.

 

EJ - Frankfurt move up, then 2 further chances to enter in line with trend.

 

31 Jan

 

EUR - D positive close, 4hr flow higher high higher low. Bias up.

 

GU - No bias either way, can move up with positive D close or react lower to the approaching resistance level 15 Nov lows 1.5825.

 

EJ - 4hr hinting at scalp sells but I wouldn't like to bet against any resumptions of uptrend.

[Snow Dog 10]

Recap 31 Jan

 

EUR - Bias was up, London open was choppy didn't move up until US session. 15 min buys with stops below the last swing lows would have been safe.

 

GU - No bias either way D close positive.

 

EJ - Bias was up, as per EUR 15 min buys with stops below the last swing low would have been safe.

 

1 Feb

 

EUR, GU, EJ 4hr flows clearly up. Bias up.

[Snow Dog 10]

Had a couple of BE buys ej and gu earlier when there was no follow through.

 

EJ 4 hr lower wicks the whole day yesterday certainly suggesting that we were going up sometime. D up, 4hr lower wicks, 1hr engulfing close, 15 min engulfing close back into trend. Mrs V insisted we leave this one as we have missed out on too many pips in moves up on EJ in Asian session.

 

Stop at the moment just below 124.50 for +90.

[Snow Dog 10]

Mrs V up and making tea. Stop now just below the RN for +136.

 

The 20 Pips Bank Hall of Fame, after years of faithful service, have requested Mrs V return her Membership Card. They site recent 50-70 pip trades and now a trade left overnight.

 

Anyway Mrs V now must manage her trade and decide if ultimate target is the Mar/Apr '10 highs, if yes then when to move stop and when to re-enter will be interesting. This is by far her biggest single trade.

[Snow Dog 10]

Had a couple of BE buys ej and gu earlier when there was no follow through.

 

EJ 4 hr lower wicks the whole day yesterday certainly suggesting that we were going up sometime. D up, 4hr lower wicks, 1hr engulfing close, 15 min engulfing close back into trend. Mrs V insisted we leave this one as we have missed out on too many pips in moves up on EJ in Asian session.

 

Stop at the moment just below 124.50 for +90.

 

Charts for this trade.

[Snow Dog 10]

Charts for this trade.

 

The final chart for the last ej trade with entry/exit, +200.

[Snow Dog 10]

4hr chart W pivots EUR GU

 

Just putting up to show yet again how the W pivots seem to attract price.

 

In addition to support and resistance levels i consider W pivots important.

[Snow Dog 10]

GU W Pivot, divergence, failed to follow bias up

On the morning of 31 Jan I had an up bias for all currencies due to the 4hr flow. The 4hr candle that was open at the time I posted subsequently closed below the W R1 pivot, see arrow up.

 

Now the question must be asked if you consider the 3 day move up a rally in downtrend that you want to sell or the start of a significant move up. So a sell is either counter trend or resumption of D trend down. Either way you are going against the immediate flow up.

 

As posted previously on my blog, if we are considering counter trend trades we want over whelming additional information to consider, such as:

 

- Proven support/resistance levels.

- W pivots.

- Divergence on higher time frames.

- Price action proving it does not want to progress for hours, double tops/bottoms , higher lows/lower highs, evening/morning star patterns, engulfing closes.

- Psych levels eg round numbers

 

In addition to the right kind of price action on 15 min, double tops/bottoms , higher lows/lower highs, evening/morning star patterns, engulfing closes.

 

In this case we have

 

- W R1 at 1.5877

- 4hr and 1hr divergence

- Price action stalled for some 16 hours failing to break higher

- On the 15 min chart the multiple tops are evident, we have divergence, then a lower high following divergence with evening star pattern. The right kind of price action to follow on 15 min with the higher time frame set up.

[Snow Dog 10]

Lower high following divergence

GU 1 Feb. A lower high or higher low following divergence is often a good trade and indication the flow has reversed.

 

In this case its a lower high.

[Snow Dog 10]

I've always been of the view that you make your profit when you buy. In that (even in trend) a poor entry will inevitably end in tears.

 

I saw this trade posted elsewhere so will use as an example. Entry (buying) was taken after the close of the candle marked x, so will be around 1.3670 or some 70 pips from the LO low. That has to be is a very high risk entry based on a 15 min chart and likely small-ish stop.

 

So I'll stick with your profit is made on entry, but obviously MM and an exit that is appropriate to your winning % and size of stop is vital.

[Snow Dog 10]

Counter trend - building a set of trade rules

 

I view trend and support and resistance levels as the two most important concepts in trading. Trend is time frame dependent so what doesn't work on 4hr counter trend might give a scalp trade on 1 min.

 

For the idea of developing a set of counter trend rules I'm going to discuss the 4hr chart. Trying to get a set of rules that assumes the D chart has not yet signaled a turn but will give trades in terms of 1hr set up and 15 min entry. Trades that should give some follow through on 4hr.

 

The best advice I can give is stick with the trend, use support and resistance levels and especially for GU and EUR the W pivots. Stick with the trend until you have very good reasons not to i.e. support/resistance level or W pivot, higher time frame divergences, price action sticking for hours proving it wants to reverse, engulfing closes that break the immediate range.

 

If in doubt leave the trade. Then don't worry if it goes in the direction that you thought it would. There is a good chance the trend will resume.

 

As an exercise put up EUR or GU 4hr chart, put on RSI (I use 8 rsi 8 sma) with a 21 ema and a tight price following ma, I use 8 lwma.

 

Have a look at how long the moves are when RSI is either above or below the 50 RSI level. Then have a good look at the moves against this that work or fail? So have a look at counter trend sells above RSI 50 level and buys below RSI 50.

 

Possible counter trend factors:

 

- A support/resistance level or W pivot

- Angle of 21 ema

- Time of day (London open, pre/early US open, London Close)

- Change in candle colour

- Close on the other side of 8 lwma

- RSI crosses

- Divergence

- Lower high/higher low engulfing close, morning/evening star pattern i.e. a multi candles pattern, change in flow

- RSI move through 50 level

 

You might notice that candles that change colour are poor signals even if at a support/resistance area or W pivot. You might see a cross of RSI at a support/resistance area, with a lower high/higher low engulfing close that follows divergence has a high chance of success.

 

I don't know what will jump out that you will see. What I do know is you should be able to put together a check list that will help avoid many failed counter trend trades. Always realising that until D has signaled a turn you are counter trend and need to change profit targets and always be looking for trend to resume.

[Snow Dog 10]

Recap 1 Feb

 

EUR bias was up, initial moves followed that. Post US news was very erratic.

 

GU - Bias was up, GU stalled for 16 hours in total at the W pivot and previous weeks high. The 4hr higher low did not close higher. 4hr and 1hr divergence. The lower high following divergence gave a good trade opportunity.

 

EJ - Bias was up and we went up.

 

4 Feb

 

EUR - D is above our lwma and RSI 50 level, large upper wick. 4hr signaled sell with an evening star but now in the middle of a triangle. Triangles normally break in direction of trend which is up. D is inconclusive, no bias.

 

GU - Oversize engulfing close, it remains to be seen if this is a blow out last push down from sellers. Asia had no real move up. Bias down but can bounce from last weeks lows/W M2 1.5670-5680.

 

EJ - D positive close. 4hr double top with divergence but higher low flow in tact. 1hr divergence. There is potential for counter trend move lower. Bias remains up.

[Snow Dog 10]

EJ - D positive close. 4hr double top with divergence but higher low flow in tact. 1hr divergence. There is potential for counter trend move lower. Bias remains up.

 

EJ CT trade. 4hr divergence at the Fri highs, this weeks W M3 at 126.75. 1hr lower high engulfing negative close. 15 min lh engulfing close little/no lower wick. CT so happy to exit at 50 psych level/M2 combo for just shy of +30.

 

Looks like its going lower now but no problem happy with that as a CT trade.

[Snow Dog 10]

Recap 4 Feb

 

EUR - D is inconclusive, no bias. Price fell, the evening star pattern played out.

 

GU - Bias down but can bounce from last weeks lows/W M2 1.5670-5680. We bounced from lows.

 

EJ - There is potential for counter trend move lower. Bias remains up. The counter trend move lower played out.

 

5 Feb

 

EUR - Negative engulfing close, 1hr flow lower high lower low bias down.

 

GU - Positive D close at the resistance level. 4hr is still on lower high, 1hr can go either way its on a higher low and lower high. Bias up but if 1hr falls it will shift short term flow down again.

 

EUR - Negative D close, 4hr hammer, 1hr lower high flow. The 1hr can easily flip to a higher low here to revert to trend. No bias can go either way, we'll see what London open brings.

[Snow Dog 10]

Felt that GU could go either way today. 1hr morning star pattern, 15 min higher low little/no upper wick that co-incided with the close of 1hr candle. Out at RN for +43.