Understand Current Trends to Make a Profit for Forex Traders

Good trends are hitting the Forex market and creating interesting conditions for Forex traders. For instance, the US Dollar strength is rocking the market strongly. The times when the EURUSD was knocking on the doorsteps of the 1.40 level seem ages ago and price in the meantime has hit the 1.25 level.

There is another trend that should not go unnoticed: the Australian Dollar weakness during the month of September. This time around we are reviewing the GBPAUD as the AUDUSD has already been analyzed in an earlier post of this week (click here).

The Great British Pound in fact is probably the 2^nd strongest in the market as of late. It is losing the least ground versus the USD, beating the EUR and NZD, roughly even against the JPY and dominating the AUD (Australian Dollar).

WEEKLY ENGLUFING TWINS

The bounce off of the 38.2 weekly Fibonacci retracement level can simply be described as massive. That momentum is still dominating the GBPAUD as each subsequent weekly candle posted higher highs and higher lows. Weekly engulfing twins at a confluence of Fibonacci levels (38.2 retracement and -27.2 target) can be very powerful!

The good news is that last week’s high has again been broken. With intra-week resistance out of the way, there could be awesome trade potential for intra-week and intra-day traders . Let’s zoom in!

UPTREND CONFIRMED

The 4 hour uptrend is confirming the bullish weekly candles – although if you look closer at recent price action, it becomes noticeable that the current trend angle is significantly shallower (red lines) compared to the beginning (green lines). Also, price does not break as far above resistance (purple circles on top of candles) as it did at the beginning of the uptrend.

Conclusion: price is in an uptrend but showing signs of slowdown.

Warning: this is where reversal traders often lose out a lot as they start to anticipate trend reversal way too soon. They strike out a dozen times and then do not take the actual reversal because of the previous failed attempts.

Solution: the trend is still UP. Focus on long trades unless very strong and clear momentum is present.

ENTRY OPTIONS

The break of the falling wedge chart pattern (purple lines) just at/above support (green line) was a great trade setup. Now it could be a good moment to wait for the pullback and continuation.

I will place a Fibonacci retracement key (orange) on the current swing high and swing low, which could have to be moved to the new top if price continues with its higher highs and higher lows. Any of the Fibonacci levels could be a good entry.

The very best reward to risk ratio is at the 88.6 Fibonacci level, but there is not a high chance price could retrace that deep. The 88.6 Fib is also the armpit level (blue line), which provides extra confluence.

But basically any of these Fib levels could be the bouncing spot for trend continuation. The best is to wait for candle stick chart patterns as a confirmation that price is bouncing at one of the Fib levels.

Stop loss should be below the swing low. Take profit at the -27.2 Fibonacci target and/or trailing stop loss of 1 hour bottoms.

Are you keeping an eye on this pair? What specific tools would you add to the analysis?

Happy Trading!

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Understand what you are doing

Understand what you are doingDo not blindly do things, it will get you nowhere and you will run in circles.If you look at any setup or scan or indicator and just run to duplicate it , it will not help you much because you do not understand what it is trying to do or based on.Every setup has an underlying market structure logic. If you first understand that then you do not need others scan or indicators to trade that logic. From your understanding you can create your own scan.First try and understand how market operates on different time frame. If you want to be day trader understand how it operates on that time frame and as a result of that what kinds of methods…

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Understand what you are doing

Do not blindly do things, it will get you nowhere and you will run in circles.

If you look at any setup or scan or indicator and just run to duplicate it , it will not help you much because you do not understand what it is trying to do or based on.

Every setup has an underlying market structure logic. If you first understand that then you do not need others scan or indicators to trade that logic. From your understanding you can create your own scan.

First try and understand how market operates on different time frame. If you want to be day trader understand how it operates on that time frame and as a result of that what kinds of methods have evolved. If you understand that then you will know if you look a scans and methods of 1000 day traders there will be common element to what they are doing (no matter what jargon they use to make it sound more difficult to understand).

Market behaves in a particular manner on intra day basis once you understand that you can find several ways to trade around that behavior of market. Exact indicators, time frames, scans are small tactics to catch that structural phenomenon.

If you look at 3 to 10 day time frame, markets behave differently. Swing traders operate on understanding of the market structure on that time frame. They understand the market structure for that time frame. If you understand that you can create your own ways to trade the 3 to 5 commonly found phenomenon on swing trading time frame.

If you look at larger moves lasting months or years there is an underlying logic behind the moves and understanding that would give you ways to try and capture some of these moves.

As a beginner instead of running in circles focus your energy on clearly understanding the market structure and what traders do, why do they do it and how do they do it.

Effort involved in it is one time. And if you do not do that first nothing will work for you.

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Understand what you are doing

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