In these summer months with reduced numbers of forex traders and hence reduced liquidity in the forex markets it can be very difficult to trade. In many ways the best advice is simply to have a break and do not trade.
However, there are low risk trades out there, but you need to be patient and disciplined in your approach. I find it best when the forex markets are bouncing around to stay away from the smaller time frames and go to the 4 hour and daily forex charts. This way you avoid most of the intra-day choppiness and you have much more time to plan your trades.
Below are some great forex trade examples taken from this current week.
I previewed them in my analysis that was sent to members at the start of the week; if you would like to be included in these free updates simply e mail me and ask: marc@forex-fxtrader.com
I mentioned in last weeks update that the euro/cad and cad/$ looked good for a move. These were both potential moves off the 4 hour and daily forex charts.
I said with cad “Ironically cad (which I normally avoid) is holding above 78.6% fib on daily for last week,and trend has been up for a while. Could go up to 1.1800 or if breaks down to 1.1450. It broke down, straight through 1.1450 all the way to 1.1112. for a 400 pip gain. You read it here first !
Unfortunately I dont usually trade this pair, it whip- saws far too much for my liking. Ironically it was one of the best movers of the week. I spotted it but didn’t take it.
Below is a detailed explanation as to what happened and how you could use this knowledge to improve your future forex trading.
There are also a few tricks you can use to catch some of these bigger moves and integrate this knowledge with the LMT Forex Formula that many of my followers are trading.
Fig 1
Daily chart for cad. Price is trapped between
Here we can see price bouncing between the 2 fib lines for over a week.
The doji candle was the 1st indication that price might be reversing.
If we had decided to long this pair we would have had to wait for a candle to break above and CLOSE before taking a trade.
As it was price broke and closed down below the 78.6/support line. The very next candle came back up and touched this area before setting off back down (support became resistance) a fundamental rule in forex trading.
There was an even better example of this kind of break out trade on this weeks euro/cad. The following is a 4 hour forex trade example.
Fig 2
Euro cad break out on a 4 hour forex chart
As you can see in Fig 2, price for the euro/cad was squeezed into a narrow price band which coincided with my fib levels
(100 & 23.4%).
Once price entered this range it had multiple attempts at breaking out but either spiked or pulled back completely.
When this situation arises it is indicative of buyers and sellers being in agreement, but it does seem to forge a build up of latent energy. Once this energy is released price will often race away.
Notice the dotted blue line. This is the recent high of price which was rejected 4 or 5 times on the far left. This would have kept us out of going long (up) in this area, as you should never take a trade with such a poor risk reward ratio, ie the chances of price failing to break and then bouncing back down here were very strong.
Had price broken up you should wait for price to break through and stay above this area. Another trick that I use is to only take a trade if price moves 5 pips + spread beyond the breakout.
My preferred method of dealing with break outs is to wait for price to break out and close through support or resistance. Then look for the next candle to pullback to this area. For example when price finally broke down through the 1.6130 area, the very next candle came back up and touched this area before bouncing off and racing down 400 pips in a fairly straight line.
You would have only needed to place your stop 20/30 pips above this former support line therefore your potential risk reward was great as well.
Target
Notice how price stopped at 78.6 fib area again, as covered previously here and in the free lessons on the main site.
If you would like to trade forex successfully with us here on the blog, we have more than 1500 registered traders, and 15.000+ on twitter following both my advice, and sharing advice with each other.
The following is concerning the LMT forex formula. More than 500 of us here trade this system. It is the BEST, SIMPLEST,CHEAPEST forex trading system I have found in almost 6 years of trading forex. Click on the coloured banner below to find out more, regards, marc walton
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