Market Recap for 12th Dec 2012

Took 2 trades yesterday. Both entry bars boxed in green.
The earlier one was not really a good trade because i was entering in the middle of a range. The distance to the bar 2 high was less than 1 X  my risk. I could instead enter a buy limit order below the low of bar 3 since market has reversed 2 times earlier at the same area.

2nd trade was a buy limit order near the same area of support in the range.
I think the premise for the trade was quite valid but i could have decided to close my trade after the market went to make 2 attempts at the EMA and formed a bear bar. At this point the market might try to make one more push down especially after the 3 push Double top pullback (Bar 5, 6) that led to the sell off to support.
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Bar1 set up a H4 long in a tight bear channel ( bear channels often end with a H4)

Bar2 was the 3rd push up to resistance and also formed a Double top with the last swing high.A sell limit
or even a sell stop would be Ok since I stand to make more than 1 X risk to the bottom of the range.

Bar3 was big. No stop order should be used in this case since that would mean buying in the middle of a range. A buy limit at support or the last low would be a reasonable decision.

Bar4 was an Outside down bar at resistance. Bulls who were long from support should seriously consider closing here.

Bar5 was a Low2 short at resistance. It acted as a pullback and 2nd entry short from the earlier 3 push pattern.

Bar6 was a lower high pullback from the bar 5 entry.

Bar 7 was a second push up to the Ema. The first push was 2 bars earlier, the bar went up to the Ema then down on the next bar. The bear bar after bar 7 was a short entry after 2 failed attempts up however it was not an easy short because it was so near to support. Bears who shorted here were aware of the possibility of the market forming the 3rd push to complete a wedge buy setup.


Bar8 broke above the bear channel but the move up to bar 9 seemed more like a leg in a trading range then a trend. The bar before bar 8 was a small bull flag, 3 bars before bar 8 was a doji and 2 bars after bar 8 was another flag with a bear body. All this justified shorting bar 9 without actually waiting for a second entry despite the steep rally that preceded bar 9.

There was a gap between the close of bar 10 and the open of the bar following it. This gap was tested by bar 11. Smart traders probably anticipated this and placed buy limit orders at the gap.

Bar12 was a H2 long at the Ema. The bear bar before it set up the entry at 1 pip above its high.

Range Study_01

EURUSD 27th and 28th Nov 2012 

Bar 1 defined the upper boundary of the range. It was also an L2 short the bear bar 3 bars earlier was the L1. It also came after 3 pushes up and so gave sufficient reasons for a short.

Bar 2 was a second entry pullback from the Bar 1 signal and it was a L2 and an Outside down bar.

Bar 3 was a 2 bar reversal that overshot the bottom of the earlier range (blue line). Ranges are rarely perfect so i should not be overly dependent on a perfect Double bottom in reaching a consensus for taking up a position.

Bar 4 set up a L2 short at 1 pip below its low. The last 25 bars or so all traded  below the EMA and bar 4 formed the first Double top that broke beyond the EMA so there is bound to be more bears than bulls below bar 4. Since market is clearly in a range (Buy low sell high scalp), Bulls who entered at bar 3 should consider taking profits.

Bar 5 follows a 2 legged test of the last swing low and set up a H2 long at 1 pip above its high. Nearest target would be the bar 4 high.

Bar 6 was a 2 legged move up to the bar 4 high and set up a L2 short at 1 pip below its low.

Bar 7 was an outside down bar following a 5 bar bear spike selloff from bar 6. The market made 2 attempts up on the previous 2 bars. I could make a decision to hold a portion of the position to see if market would break the bottom for another leg down based on the strength of the selloff and the 2 failed attempts up. However if Im flat i dont think i would be entering a short at the bottom of a trading range.

Here is the same chart with a trend channel line drawn across. Its clear that the institutions were paying attention to them and trading off them.

Trade 13_191112 Profit

 Setup : IDB 3 push DT L2 Short at the top of a range

Some good setups that happened near my entry:

Bar 1 was an outside up bar and the first double bottom following a market that was mainly trending above the EMA.

Bar 2 was a micro DB, H2 and a 2 bar reversal . The 2 tails (circled) showed that the market has made 2 attempts down at that level and failed.

Trade 12_191112 Scratched

The context and the signal bar were both good for this trade.Signal bar setup a H2 long at the EMA and it was also a test of the bull TL.

Despite that, i started to get nervous when I saw the DT forming at the resistance level (refer to below chart) and closed my trade. The selloff from the previous swing high also seem to have alot of strength but i should have trusted my initial entry and held long based on the reason that there was no prior significant bull TL break in the move up to resistance.

Got out with a few pips profit.

Trade 11_161112 Stopped out

This trade was even worse than the previous trade because it was a "revenge trade". I was not psychologically ready after the large loss sustained from the previous trade and was not being objective. I didn't know what i was doing and i just reversed to Long at market shortly after getting stopped out of my previous short.

My entry bar turned into an outside down bar, a great signal for the bears given the reasons stated in the previous post.

This trade made me lose my psyche and disrupted my "trading bearings". I will not put myself in such a situation again by clearly defining my risk before i commit to take up a position.
I will only proceed if I have 2 reasonably sound reasons for entering a trade. 

Trade 10_161112 Stopped out

This was just a really bad trade. I thought i was shorting a Gap 2 above the EMA, which was a valid reason, but i failed to realize despite having my trend channel line drawn, that there was a break of the bear trend channel line. Usually this should alert me of a possible test (or perhaps even break) of the opposite side of the channel (bear TL). Even worse, i calculated my risk wrongly and ended up risking more than i was comfortable with.. This led to further mismanagement and a lot of hoping. I could have closed the trade when the market formed a DB and a H2 long signal, but i was no longer objective and continued to hold on only to watch my stop get hit.

Here are a few setups that were reasonably good.

Bar 1 was a L2 short (2 bars earlier was the L1), an EMA test, trend channel line test ( a parallel could be drawn mirroring the line drawn below the last swing low) and a breakout pullback short (break below an earlier range)

Bar 2 was a Double top and set up a L2 short at the EMA and trend channel line. Especially great when market is trending below the EMA throughout the last 40 bars.

Bar 3 was an Outside down bar. Here the context for a short was especially good given the break of the bear TCL (line below bars) followed by the break of the opposite side (line above bars).
The ODB was also a 3 push pullback although this was not so obvious.

Bar 4 setup a L2 short following the 5 bar bear spike from bar 3. It also formed the right shoulder of a head and shoulders pattern.

Trade 09_161112 Scratched

I thought i was buying a wedge bottom but i realized soon after entering the trade that the market has been consistently trading below the EMA. Besides that, the 3 push pattern was not the best looking I've seen.I would prefer to trade a countertrend 3push if the third push is an overshoot of a trend channel line or if the 3rd push touches an area of support.

I was better off looking for shorts near the EMA on such a day. 

Managed to close with a little profit of 6pips.

Trade 08_151112 Profit

Setup : 2 bar reversal inside up bar and EMA test

There was a major TL (Bull TL) break followed by a 3 pushed selloff (this could be a possible bottom that would lead to a test of the bull trend extreme. I saw that the rally up (from the wedge bottom) was in a tight bull channel and the pullbacks (Green circles) were only 1 - 2 pips long meaning the bulls were entering on limit at the top and the bottom of prior bars limiting the size of the pullbacks. So, I suspected that there might be lot more bulls than bears at the EMA waiting for that first test. The context was good and the 2 bar reversal provided a good signal bar for the entry.

What i think i could have done better :
 I think i shouldnt have shifted my stop to BE so early. In anticipation for a Major trend reversal, i should have waited for the market to form a Higher low then shift my stop to below that new higher low. If im nervous, perhaps i can close 1/2 or maybe 2/3 of my position and try to swing the rest.

Closed the trade for 2 X Risk..

Stop shifted to BE.

Always in remained long. market formed a DB and rallied for another 50 pips.

Trade 07_141112 Stopped out

Setup : 3 Push Double Top

What i think i did wrong here :
I think i was too eager for a reversal that i failed to see that market has been making higher highs and lows. The bar before my signal bar was a higher high compared the previous swing high and the most recent swing low before my signal bar was higher than the swing low before it. So i think there was too much risk that the market might form another swing high and hit my stop and that is exactly what happened.
I was looking for a wedge reversal in a bull channel in the absence of a strong Bull TL break. So i think the bears were not convinced that the sell off from my signal bar would eventually lead to a Major trend reversal.

Below is a zoomed out chart that shows there was indeed a TL break. But it was probably insignificant and insufficient to convince the bears to short a test of the trend extreme.

Trade 06_141112_Scratched

Zoomed out

 

Close up 

Setup : L2 short at the top of a wedge shaped channel.

What I think i did wrong :
I should not have looked at this as a wedge and short a L2 since the market seemed to still be making Higher highs and higher lows.

I also entered a little too early. The L2 i took was not even a clear L2. I should have at least waited for a stronger signal like a Double top to short a strong bull.

What i think i did right :
After market came back to my price level for the third time, i made the decision that there is a good chance of market transitioning into a range and so I bought back my short for a little profit.

Although the market went in my favor later on (thanks to the 3push double top,which is a much better entry), i feel that if i was still in that short, it would be hard for me to see that market was going to reverse.
I would think the rally up from bar 1 would just fail at the EMA and lead to more selling.

However, the sell off to bar 1 was actually the first break of a bull channel. Below screenshot shows this defined bull channel with the channel line drawn differently from all the charts above. I think I was too busy looking in the wrong direction (looking for a reversal) instead of waiting patiently for a long setup.

Trade 05_131112_Profit

Took this short as a failed breakout attempt at the top of a bear channel. Technically the signal bar setup a L1 short since there was no earlier bar that extended below the low of its prior bar. But i assumed the 2 tails (in box) as the market having already made 2 pushes up and down and so im betting on its failure and a move down to the bottom of the channel.

Trade 04_121112_Stopped out

Market was in a bull channel when i switched on the computer. I noticed that the market could not form 2 consecutive closes below the EMA for the past 30+ bars or so. I was looking to buy a test or more preferably an overshoot of the bottom of the channel.

This chance presented itself as the market formed the first strong close below the EMA and the first  break below the trend channel line. There was a good chance this first attempt to breakout will fail.
The bulls bought the close of the bear breakout bar all the way to the top, forming an inside up, 2 bar reversal and a double bottom with an earlier swing low.

Took the long for a test of the opposite side of the channel. Since its common for channels to break to one side then reverse to the opposite side and break out again and form a reversal, i thought i should be ready to close in any case the market forms a reversal signal from the opposite side of the channel.
However, when the market formed a bear bar following the 3 bar bull spike, i thought there should at least be a second push up before the market could reverse. I was wrong.. I watched as the market formed 2 bear bars then 3 then it went all the way to the other side of my signal bar and triggered my stop.
(Please ignore the Red dotted stop loss line on the chart below. It has nothing to do with this trade. This chart was printed late and that line actually belongs to a trade i took much later.) 

I think the main lesson to take from this trade is this :
I expected the strength of the 3 bar bull spike to translate to more buying (buyers above and below the first pullback bar), at least just a second push up to the last high. A second push that I could use to assess the strength of the rally and decide weather to hold or fold.
But the 3 bar bull spike was not a breakout spike so much as a sell vacuum. So it would not function as a breakout spike and find buyers above and below a pullback bar.
The strong sellers just didnt want to short when the market broke below the bottom of the channel because they knew they could look to short higher, possibly a break of the opposite side of the channel.
In the absence of sellers, the market raced higher to the point where the strong bears were willing to start shorting again.

Look out for traps like this in the future, especially when trading in channels. Always try to distinguish between breakout spikes and spikes that are caused by buy and sell vacuums.

Trade 03_091112_Profit

Setup for this trade was basically a L1 short following a 3 bar bear spike and a Head and shoulders pattern.
I usually do not like to base my trades on the H & S pattern because it could very well be considered just a Bull flag. Price action and market dynamics come first.

This is what happened later.. Took about 18pips (1:1 Risk : Reward). I closed the trade because i started to get nervous when the market started to form a lot of tails at the bottom of the bars. What i failed to see was that the last 20 bars never touched the EMA and so I could guess that there would be strong sellers waiting with limit orders at the EMA. Plus, the move down was in a tight bear channel, so i could at least expect the first break above the channel to fail.

Trade 02_081112_Profit

Took this short that resulted in a profitable trade yesterday.
Here are the reasons that led me to decide on taking it.

1) The EURUSD was going sideways since the 7th of November so I was looking to either buy at the bottom of the range or sell at the top.

2) Market made a Bull trend line break at bar 1 followed by a 3 push test to the top of the range (3 circles).
 With the third push overshooting the trend channel line. This is what i usually like to see when trading a wedge reversal.

3)  The third push was also a double top with an earlier swing high.

4) Bars 2 and 3 were 2 attempts up. (Every tail is a failed breakout and 2 X tail is equivalent to 2 failed attempts up).

5) The rally from bar 1 low had 2 bear bodies with lots of tail on top.

Placed a stop order to go short below bar 4 and was taken into the trade 2 bars later. However i didnt quite like the tails at the top and bottom of the entry bar. I began to suspect that the market might trend higher.
and might try to form a smaller double top with bar 3 or a lower high.in this case, the bears might short on limit near the bar 3 high expecting the market to fail at that level again or they will short below the next bear bar (as a wedge pullback L2).. With this in mind i decided to shift my stop to above the bar 2 high.
Turned out to be a good decision.

This is what happened later....

Blue line = Entry
Red line = Stop
Green line = Exit

Trade 01_071112_Stopped out

This was not a good trade. It was nearing 11pm and i was just tired.
The premise for this trade was sufficiently reasonable, a Low 2 short at the EMA and a Double top bear flag, but i feel i did not manage the trade as well as i should have. The Market made few attempts to form lower prices and each time it sold off, the bulls bought it back up. This could mean cumulative buying pressure and also an increased likelihood of a trading range forming. In which case i should just have closed the trade when the 3rd push down was bought up. Got stopped out for a 14.6pip loss.

END OF DAY REVIEW 10/10/12

                                                                                                                                                                     

END OF DAY REVIEW 10/10/12

EURUSD

#1 the first bar of the day was a strong bear bar with no tail top and
bottom. It follows a double top bear flag in a bear trend so there
was sufficient reason to go short.

#2 was technically a H1 and a higher low. However, the trend was down and the
break of the bear TL was insufficient to warrant switching to long.
(The bear trend lasted for many bars so it was unlikely that the trend
extreme test would be so brief). Always in was still on the short side.

#3 was the first test of the EMA following the sell off from that double top pullback
(also a triple top).

#4 Was a huge outside up bar (it was 11pips tall and considered large in relation to
the recent bars). It also followed 3 pushes down and an overshoot of the bear trend
channel so bears will wait and see if this wedge will play out. If the market moves
higher, they will look for a failed EMA test, OR if the rally breaks the EMA, they
will look to short a Gap2 (L2 above the EMA).

#5 Was the gap 2 that the bears were waiting for. The sell off went on for about 30pips.

#6 Was a very important bar because it was an inside up bar and the 3rd push down following
an earlier TL break. (Green Line on the Zoomed out chart). Traders should be aware of the
possibility of it becoming a Lower low Major trend reversal.

#7 Was a double top but it was too small compared to the 3 push buy setup that formed
at bar 6.The market could still trend higher so it was not a logical short.

#8 formed a double top with the bar 5 bars before bar 5. At this point, it seemed like
there is a possibility of a large range forming and traders will watch to see if this
high will be exceeded.

#9 was a H2 following 3 pushes down. It was also a higher low and a Bull TL test (blue line)

#10 was yet another higher low after a 2 legged sell off to the bull Trend line.

#11 Nullified the possibility of a double top sell off (the last swing high just before bar 10)
But there was still the range high to overcome (orange line)

#12 was a H1 Long preceded by 3 consecutive bull bars and the 3rd higher low.
But, i feel that it was a setup that might not be so easy for me to
convince myself to take because it i would be buying high near to a resistance level. I would prefer to
wait for a break (to long) or a failed test and a lower high L2 (to short).

#13 finally broke that resistance level and rallied for 6 bars.

#14 was a breakout pullback that set up a H3 (and a wedge bull flag). The H1 10 bars earlier
formed after a 5 bar bear spike so a second entry would be more preferred. If i got stopped from that H2 (3 bars before bar 14) i would
have to force myself to re-enter at bar 14.

END OF DAY REVIEW 09/10/12

END OF DAY REVIEW 09/10/12

EURUSD

#1 Follows a breakout pullback (break below a range) and was a L1 short.
The 7 - 8 bars before it were small but they were all bear bars with openings that
were lower than the previous bars close. This is similiar to a spike phase and a L1
short following a bear spike is a reliable signal.

#2 At this point i was weary that the Long term bull Trendline (green line) was
near. I was flat, waiting for a failed attempt to break beyond the trendline. But
what i didnt realize was that i had unknowingly formed a bias in my mind. I only wanted
to go long, and was focusing on buy signals.


#3 Broke the Long term bull TL. The move down had too much strength. No Long should be
considered at this point. Only look to take a H2 after the H1 has clearly broken the
bear Trendline.

#4 Was an inside up bar. It had a good sized body with minimal tail. But its a very risky
long following such relentless selling. There could be traders waiting to short below
its low.

#5 was a H2 and an acceptable entry. However i feel that if i took this entry, 1 should beware
that the market might try to form one more down leg after the big sell off.
The next bar went a fraction of a pip above bar 5. It was unlikely that the stop
orders above bar 5 were triggered. the market sold off for 2 more bars and hesitated (doji).
At this point the formation of a trading range (or channel which is also similliar)
might ensue.

#6 was an inside down bar following 3 pushes up to the EMA. But the market just didnt want
to sell off. I would have been stopped out of the short if i had taken this entry.
After the 3 push failed, i should reassess the "always in" direction. There was a good H2 long signal 
nearing a Major Bull trendline and a 3 push pattern (wedge bear flag) to the EMA following a 7 bar
bear spike. Conflicting signals always hint of a possible trading range looming ahead.

#7 was an inside up bar following 3 pushes down. And it happened near the
Long term Bull TL. It was a reasonable long.

#8 was the 3rd bear in a row (spike) and most traders from the bar 7 long would have covered their longs
just in case the strong bears from earlier in the day start to reinstate their shorts. This is exactly
what happened here and the market started to sell off very quickly. At this point, i should stop
looking for long entries and instead recognize the fact that the bias is leaning more heavily
on the short side.

#9 was a strong move up to the EMA but any EMA test at this point should be viewed only as a short entry.
No matter how scary it looks, i have to force myself to take such trades especially whhen the market
seems to be screaming out the always in direction.

#10 was a L1 short at the EMA following a sharp spike down consisting of mostly good sized bear Trend bars
and only sideway pullbacks.


#11 Broke below the converging triangle (bear flag) and was a reasonable entry.

END OF DAY REVIEW 08/10/12

 

END OF DAY REVIEW 08/10/12

EURUSD

#1 Was the 1st overshoot of the bull trendline follwing an earlier trendline break.
Traders could look for a L2 to short. This chance presented itself 9 bars later.

#2 Was the 4th bar of a bear spike phase.

#3 set up a H1 after a 4 bar bear spike however the sell stop order was not triggered
in the next 3 - 4 bars so the order should be cancelled and the tarder should reassess
the market for the next entry.

#4 Was the underside test of the bull trendline. It was also an outside down bar.
This could be the entry for the 2nd leg down following the earlier bear spike.

#5 Was a double top lower high short but probably not the best looking entry at this
point since the market seemed to be transitioning into a range. A safer bet would be
to wait for a break below the last swing low that would determine the always in direction.

#6 Was the largest of all recent bear bars and a break below the range low. At this point
traders might view the always in direction as already changing to the short side.


#7 Was the first pullback that went near the TL following the large bear trend bar at bar #6.
It was also an inside down bar.

#8 Was a H2 Long but with so much bearish momentum and without a prior trendline break,
no long should be considered. Traders could instead wait for a test of the bear trendline
to look for short entries.

#9 Was an inside down bar, a bear TL test and also the first Gap bar in the new bear. 

#10 Was a reasonably easy with trend L2 short at the EMA. The bear TL is yet to be broken therefore traders should only be looking for short entries.

#11 Was a breakeven stop test of the bar 11 short entry. It was also a L2 short beyond the EMA. 

#12 Was a tiny inside up bar following a 3 push that overshoot the bear trend line. The bear TL break which happened 2 bars before bar 11 lacked conviction so no long should be considered.

EURUSD 08th October 2012

DAILY MARKET OUTLOOK

EURUSD

H4 - Clear uptrend since July.

H1 - In an uptrend since July. No Bull TL break.
market broke through a previous resistance level (1.29681) and is now
returning to test that same level. Perhaps forming a Breakout pullback.

M5 - Currently in a bear leg. Looking for long entries near the ST Blue Bull TL or LT Green bull TL.
So far no bear TL break yet. Beware of bull traps happening near the Bull TL.
WAIT FOR BEAR TL BREAK BEFORE INITIATING LONG POSITION.