Finding a Suitable Trade Entry

By February 27, 2017Uncategorized

Last week’s (Feb 20-24, 2017) FOREX WEEKLY trade idea was to sell the GBPJPY pair. Here is the full text of that trade idea:

TRADE VIEW

  • Bearish GBP
    • on weak CPI, average earnings, and retail sales last week
    • GBP was also the worse performing currency last week
  • Bullish JPY
    • Did much better than perhaps it should have last week
    • Nikkei is weak
  • Bearish USD
    • Should have done better last week

TRADE IDEA

Sell GBPJPY

 

 

 

 

 

 

 

 

 

 

 

This GBPJPY “swing trade” sell trade idea was a combination of fundamentals and technical. The 300 point stop is where the sell trade no longer made technical sense from a swing trade perspective.

The challenge for my subscribers and for traders in general is to choose an entry point and stop loss that makes sense for them (clearly, very few traders will put a trade on with a 300 pip stop loss).

Here is the price action starting from 140.05 on Friday Feb 17, 2017 at 5pm Eastern Standard Time and ending at 139.73 on Friday Feb 24, 2017 at 5pm Eastern Standard Time:

 

 

 

 

 

 

 

 

 

 

 

 

 

A quick summary of the GBPJPY price action Feb 17 close of business to Feb 24 close of business: the pair rallied on Monday and Tuesday; retraced most of the Mon-Tues rally early on Wed; rallied again through Friday morning; and then collapsed. I will show you some of the ways you could have “got on” the collapse. There was a “perfect storm” of GBPJPY sell signals on Friday. I will briefly describe them below:

  1. Fibonacci 78.6% retracement sell at 141.70

 

 

 

 

 

 

 

 

 

 

 

 

2. European breakout sell at 141.11 (essentially getting below the “Asia” low

 

 

 

 

 

 

 

 

 

 

 

 

3. Jimmy’s band sell at 141.41 (unique trading band envelope (first candle “outside” is a signal)

 

 

 

 

 

 

 

 

 

 

 

 

Getting “back to back short term sell signals (5 minute charts) is a plus for sure:

 

 

 

 

 

 

 

 

 

 

 

 

It looks even better when you add the 78.6% Fib retracement into the mix:

 

 

 

 

 

 

 

 

 

 

 

 

Especially when the 78.6% retracement is also a Gartley Pattern:

 

 

 

 

 

 

 

 

 

 

 

 

Sometimes the simple stuff can be compelling:

 

 

 

 

 

 

 

 

 

 

 

 

Or a simple 3 candle reversal (getting below the low of the last 3 candles essentially):

 

 

 

 

 

 

 

 

 

 

 

 

Of course 2 heads are better than one: big red candle and 3 bar reversal:

 

 

 

 

 

 

 

 

 

 

 

 

Lastly, some additional support (courage) from the “big picture”. Here is a unique envelope trading band on the daily chart (signals are first candles completely outside the envelope): 

 

 

 

 

 

 

 

 

 

 

 

 

Did a good job of signaling the Brexit trade as well…:

 

 

 

 

 

 

 

 

 

 

 

 

Of course everything above is isolating the best scenario; there were plenty of ways to “screw up” the GBPJPY sell trade as well

My point here is to give you some ideas on how to get bit right. I hope you enjoyed this!