TRADING METHOD FX
has broken above both the Primary SRVs at 1.51437 and 1.51491, but has subsequently retreated back to the area near those two SRVs. Before going on to my cons er vative trade, I note that
the Figure 5 However, if I was interested in a
longer term trade – and probably holding the position overnight, I could enter a long trade right here and set a stop about 100 to 150 pips below our SRV at 1.51078. My profit target would be in the area of 1.52200, so even the larger risk might be justified by the substantial profit potential.
The volatility in current markets is such that I personally would rather not take the larger risk required by holding overnight. I prefer to leave such aggressive trading strategy to the young tigers in the market. I prefer to sleep without concern for what the market is doing overnight.
The next morning, opening our primary intra-day trading chart, shown in Figure 4, I note that price
a g g r es siv e trader who jumped in yes t e r d a y might have
been taken out of the market if they had used a trailing stop of less than 400 pips. Market volatility today is really a problem for long term traders.
I see a long trade opportunity if price breaks out of its channel - and moves above the SRV at 1.51491, as there is
no visible
resistance from there up to the secondary SRV at 1.52224. R each i n g a
target at
1.52224 would give us a trade of about 700 or so pips. With a soft stop just below the SRV
at 1.51437 – risk would then be in the area of 100 150 pips depending on actual entry price. That’s a reward versus risk of almost 5 – I love such trades.
For this type of trade I use my
secondary chart to construct the trade. My secondary chart for Friday, August 2, is shown in Figure 5.
Note that at 6:30, our starting time, price has broken above both the SRV at 1.51437 and the SRV at 1.51491 and is trading in a narrowing range just above those two SRVs.
What I am watching for is a potential breakout of this narrowing trading channel to the upside.
For a substantial time prior to 7:30, price had just wallowed around in the area of the two SRVs. Te bears and the bulls were jockeying for a position from which they might move price out of the tight channel and in their desired direction.
At the beginning of the 7:30 bar - just
Figure 6
FX TRADER MAGAZINE October - December 2013 75
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