The gbp/$ could present us with some very good trades on Monday, both with and without the LMT. Take a look at the 4 hour forex chart below. Notice how price has been trapped within a 400 pip range for the last few weeks. 400 pips @ $10 a pip will give you $4000 ! and is a months worth of pips if we can catch this move !
Price has failed to break the upper resistance line of 1.6600 since the 3rd of june (recent high). Price did actually “spike” through to 1.6620 on the 11th of June, but the candle closed back down below. Price promptly fell back to 1.6200 which has acted as strong support 3 or 4 times.
Fig 1
Gbp/$ trending sideways on 4 hour forex chart
Notice how the price at the last bounce back up returned up off the daily trend line which has been supporting price since april (diagonal yellow line). So how do we use this information to grab some of those pips ?
Lots of traders will be sat with orders placed to sell the pair at 1.6600 with a stop above 1.6625 (more conservative may go to 1.6670 recent 3rd june high). If you see that price is turning back down before there, look for reasons to support your theory, fibs, emas rolling over etc- as per the free lessons on the main site. This is not an LMT trade.
For lmt followers do not take a buy signal near to the top resistance line unless price breaks and closes above the 1.6600 resistance line.
However if price falls back to 1.6200/ daily trend line and we get an LMT trade. That would be great.
If price comes back down to the daily trend line (as I write this that would be the 1.6300 area), all of us need to look for reasons to buy with a stop either just the other side of the trend line (look for fibs/emas to help you decide) or more conservatively the other side of the 1.6200 strong support. 1.6180 is the recent low, so below that would be ultra conservative. Adjust your stake accordingly.
The other option is of course that price may break through (up or down). Do not be tempted to dive in. Wait for a candle to close. Often price will break through an area of strong support or resistance. Come back to that line and THEN continue the move. This is known as resistance becoming support or vice versa.
Fig 2
This is the same 4 hour fx chart, just before the move shown in figure 1.
Working from the left, notice how price twice failed to break up through the 1.6200 line & the doji (indecision) candle.
The 6th candle finally breaks & closes above. The very next candle price comes back down and touches the line before continuing back up. That is a pullback. That is where we should enter. Resistance has now become support.
The 2nd arrow shows how price comes back down to this area and (line is still continuing as support) price bounces back up again. Then we have a red candle that comes down and pierces (but doesn’t close). Finally a candle closes below the line. The next green candle comes back up and touches the line (pullback entry). The support line is now acting as resistance.
This is all basic forex chart tactics. Support and resistance are main areas to look for price to react. The secret is to plan ahead. Be sat waiting, like a bear waiting for a salmon, at just the place you know something is likely to happen.
Hope this helps. Get in the habit of looking in detail at the charts, the week-end is a great time, when the markets are closed, to just sit and go through the different time frames.
Other pairs in brief: I have started to ignore the market open and wait for price to settle. The aud gapped down for the last 2 weeks.
The euro/$ is coming up to a strong resistance area on the 4 hour chart at 1.4115. The last three or four, 4 hour candles are reversal/indecision. The LMT rightly has the pair in an uptrend, but I will not go long so near to that price. Wait and see how the market opens. Pullback likely. Then look for reasons to long.
Chf/$ has broken 50% fib on 4 hour chart. Could be on way back down as per long term trend. Be careful around fib lines.
Jpy/$ Potential double bottom at 94.86 area.
Take a look at the other pairs. Learn to look for clues yourself. Lots of them are at double top/bottoms/support resistance lines.
Having said all of the above, alex sent me a staement from last week. If you had just taken all the LMT signals, you would have made good pips. 73% wins to 27% losses in difficult markets is a hell of an achievement for a semi automated system.
To find out more about the LMT Forex Formula, Click on the link below;
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