Trading On Thin Ice



Legends! Hope you all had a wonderful week! The markets this week have been a bit choppy due to all the high volatile data being released however we still managed to survive! This week, the team and I took two trades, AUDUSD & USDCAD. Both trades ended up moving to our desired target but not without a fight. AUDUSD attempted to stop hunt us out by less than 1 pip, 9 ticks to be exact, while USDCAD stop hunted us out by 1.6 pips. Many people have asked me why I didn't adjust the stop loss to be to account for the potential stop hunts and the reason is simply due to the fact that the risk/reward ratio would have not been a 1:1. With this, where the stops had been placed based on the way we looked to execute the trade, from a risk perspective, it would have not been wise to adjust the stops. Regardless that the trades taken this week weren't the cleanest trades at the start, we must always remember that this game is a game of statistics, that is all. The trades taken this past week, give me 10 trades like that again, and I will pull every single one in the same exact fashion. No fear, emotions, strictly technicals. Conviction is what separates the rookies from the professionals legends. As reviewed within this past weeks live training, as long as structures fails to shift momentum counter to my trade idea by creating lower lows or higher highs, the trade idea presented, statistically will push through. We must allow structure to develop through time. We must always remember that there is no perfect timing. We act based on the data presented at the current time and we simply look at the probability of the movement we desire. Below you can find the breakdowns of how we looked to execute both AUDUSD and USDCAD's trade ideas!

AUDUSD


Entry

-Initial impulse made by the sellers in which the current short term ascending trend we are in is warranted as a liquidated movement (profit taking). With this, any bullish trades taken will be warranted as short term and moderate to higher risk as the pressure is still in favor of the sellers.

-Within the liquidated movement (profit taking), we receive a sharp short term impulse made by the buyers. Indicating to us that continuation of this bullish momentum may come about if a trend cycle is to form. Keep in mind a trend has not formed from a bullish perspective just yet in this instance as the bullish movement was simply an impulse which consists of only two points, a low and a high, in which a trend needs four points to be validated as a trend. In this case, we would need, a low, a high, a higher low, and a higher high.

-We then see price shift into a continuation pattern indicating to us a potential higher low is being formed + telling us liquidation is occurring for further continuation of the short term bullish trend. Within the continuation pattern, we receive a structural retest of where the initial bullish momentum began. Another indication to see further continuation of this bullish momentum.

-We then seeked a break out of the continuation pattern creating a short term higher high indicating to us market momentum is continuing bullish + validating the higher low has been in fact formed from the continuation pattern (another indication of receiving continuation of this short term bullish momentum).

-In addition to the breakout, we seeked an invalidation of the previous short term bearish momentum (where the initial impulse began of the continuation pattern) to give us further indication that price is no longer in a state of liquidation from the initial bullish impulse.

-Retest the previous broken level or trend which coincided where the initial short term continuation pattern occurred and closing above, confirming to us market momentum should push in the direction that we seek.

Exit

-Our end target area for this trade setup was only to the weekly resistance due to the facts down below 👇 -Markets momentum (bullish) is in a liquidated state due to the initial impulse (bearish and daily momentum being bearish) therefore risk is warranted as moderate/higher. In addition, the trades taken are warranted as short term as we are still keeping in mind that the bearish momentum can kick in anytime as that is the momentum driver for the entire structure.

-Structure only created short term higher highs from the previous liquidated movement when breaking out but hasn't shown us true higher highs being formed which would be warranted by cracking the initial high of the bullish impulse as well as breaking a previous lower high of the bearish impulse.

-In addition, we can take a look at the inverted head and shoulders formation that seemed to come about once we broke out of the continuation pattern in which the neckline of the pattern (0.72353) or weekly resistance was guarded as a very strong area from the bears.

-When taking trades up to critical areas, that can cause price to move in either direction, we simply wait for price to prove to us which way it is going to move. A)Breaking out of the liquidated movement warranting continuation of the initial bearish impulse B)Breaking the neckline of the inverted head and shoulders pattern + creating true higher highers within the liquidated movement warranting further continuation of this bullish momentum. Regardless, we simply allow price to make the first move. We act based off of that! -Last but not least, if we take a look at the daily time frame, we can see that structure could have simply created a structural retest off the initial lows that were broken from the bearish impulse and from there, potentially causing price to start rejecting due to the bearish pending orders sitting within the 0.72353 handle.

-Therefore, we would concluded that the most optimal area to close would be at the weekly resistance and if price surges through, we will take the continuation of that impulse or if price rejects, we will simply reassess.

USDCAD


Entry

-If we start from a daily perspective, we can see that USDCAD falsely broke the daily descending trend line attempting to break structures previous lower high but failed to do so last week. With this, this gave us our first indication that market momentum was still in favor of the sellers due to the false move.

-Moving down to the 4 hour time frame, price makes an initial impulse made by the sellers which coincides with the descending momentum found on the daily time frame.

-Price then moves into a continuation pattern or state of liquidation (profit taking) indicating to us that continuation of this bearish momentum may come about if a trend cycle is to form. Keep in mind a trend has not formed from a bearish perspective just yet from the initial impulse in this instance as the bearish movement was simply an impulse which consists of only two points, a high and a low, in which a trend needs four points to be validated as a trend. In this case, we would need, a high, a low, a lower high, and a lower low.

-Within the continuation pattern, we receive a structural retest of where the initial bearish momentum began of the most recent short term impulse. Another indication to see further continuation of this bearish momentum.

-We then seeked a break out of the continuation pattern creating a short term lower low indicating to us market momentum is shifting from bullish to bearish which is a continuation of the initial bearish impulse as well as the descending momentum on the daily time frame. We also validate a lower high has been in fact formed from the continuation pattern (another indication of receiving continuation of this short term bearish momentum).

-In addition to the breakout, we seeked an invalidation of the previous short term bullish momentum (where the initial impulse began of the continuation pattern) to give us further indication that price is no longer in a state of liquidation from the initial bearish impulse.

-Retest the previous broken level or trend which coincided where the initial short term continuation pattern occurred and closing above, confirming to us market momentum should push in the direction that we seek.

Exit

-Our end target area for this trade setup was only to the weekly resistance due to the facts down below 👇

-Markets momentum (bearish) is in a liquidated state due to the initial impulse (impulse therefore risk is warranted as moderate/higher. In addition, the trades taken are warranted as short term as we are still keeping in mind that the bullish momentum can kick in anytime as that is the momentum driver for the entire structure in this current moment.

-Structure only created short term lower lows from the previous liquidated movement when breaking out but hasn't shown us true lower lows being formed which would be warranted by breaking the low of the short term bullish impulse (continuation pattern) and creating lower lows by breaking the low of the previous bullish run that began at the end of August.

-If take a look at where the initial bullish run started within the four time frame at the end of August, we can see that the 1.2950 handle was the previous resistance that began the bullish run. With this, our target was only to the 1.29550 handle as price could have simple created a structural retest warranting this bearish momentum as liquidation for further continuation up.

-In addition, if we take a look at the daily time frame, the 1.2900-1.29500 was a very guarded area by the bears in which when price surged through this region back in mid June, indications of bullish pending orders could be sitting within this region as well as a structural retest could come about from the bullish impulse that started in June.

-Therefore, we would concluded that the most optimal area to close would be at the weekly support and if price surges through, we will take the continuation of that impulse or if price rejects, we will simply reassess. As stated in the post above, even though this trade had stop hunted us out by 1.6 pips, we simply go back and make the minor tweaks necessary to make sure an issue like this doesn't come about again. We are students of life. As long we have an account to trade with, constantly making minor tweaks, live to trade another day, manage and preserve capital correctly, the future is bright legends. Keep striving family!

If you need anything legends, don't hesitate to send me a message on my website or send me message on one of these platforms down 👇

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