Two Potential Setups on XAUUSDThe fundamentals over the past week have been coming out as strong catalysts for bullish momentum on the DXY to continue. Therefore, I am currently still looking for SHORTING opportunities on XAUUSD. So if or when price returns to 1940 / 1945, I will be paying attention to price action as it develops and if it starts to look like buying pressure is fizzling out, I will be executing my short positions from these areas.
I am keeping my risk very minimal on both of these orders at only 10 pips, reward is going for 218 pips on the first potential setup for a 1:21.83 RR and the second setup is going for 268 pips for a potential 1:26.8 setup.
I am expecting the 1st setup to potentially fail because it is so close to a fair value gap that was left by the imbalanced selling pressure left after the FOMC meeting yesterday but there is a small risk on the setup so I will take that risk.
The best thing that I have done for my trading is stop trying to trade every single day and wait for the setup Tuesday-Thursday only.
I keep my risk to reward at a 1:10+ so if I lose, I lose small and when I win, I win big.
At this risk to reward, I can hit 9 stops in a row, then hit one target profit, and still be profitable.
The hard part is moving through those losses and not letting it shake my trading fortitude.
I've learned that win ratio is not the most important key performance indicator when you are trading.
99% win ratio sounds better than a 13% win ratio to inexperienced traders but if that 13% win ration has a much higher risk to reward than that 99% win ratio, then the trader who has a 13% win ration will be the more profitable trader.
With that being said, if you decide to take this trade, please do not risk any more than 1% on either one of these setups.
A tight stop loss is great and can be enticing to risk more, however, the tighter the stop loss, the more often you will hit that stop loss.
Please trade intelligently.
Tightstoploss
Symmetrical Triangle Play on DashThis is a simple support and resistance play on Dash with the basic adage: the trend is your friend into the end. We have a 50 day uptrend and a three week consolidation so far within this triangle. That means we have support and resistance trades that really don't require that much overthinking. I am long at the triangle support with a stop loss as shown in the main chart. Take profit will be just short of the fib retracement golden pocket at $345. Risk to Reward is a nice 14. The dotted line is the height of the triangle and it concurs with the fib retracement target at 1.618.
Thirty minutes is a pretty low time frame to be looking for hidden bullish divergence but it is there in the chart below. Given we have a 50 day uptrend and that contains a 3 week consolidation pattern we are looking to simply set a stop loss at support with a bit of validation from the indicator. This is our third touch on the triangle support so it lets us get a tight stop on low time frames.
The bearish scenario is rather than being a consolidation pattern this is an ABC correction and we would have downside targets around 160 or 120 ash shown below. The rational for that trade would be that the blue line had flipped from support to resistance. Should the price break down from the triangle I would be watching it to retest the previous triangle support as resistance before taking a short. In other words, according to my system I would not be short just yet.
And I want to give a fair hearing to the bearish scenario. Based in daily indicators alone this chart looks really bad. But as I said in the beginning, this is a play on continuation to the upside and the triangle support is currently being validated, so I am taking my long in the face of this brutal daily chart.
If you are familiar with my system then the chart below makes a lot of sense. I use the VSTOP and MTF VSTOP to determine trend and dynamically chart support and resistance. This play is using continuation to assume the VSTOP will act as dynamic support in this instance hold. If I am wrong I will be stopped out in short order.
The linked ideas show some relatively low time frame formations that made target in short order. The BTC head and shoulders did suppose that the formation could over-perform due to how tenuous the bitcoin situation was but when price broke down it went right to the 1.618 fib retracement level before pamping. Likewise on the dashbtc target. I was hoping for more continuation but price went right to the 1.618 level then dumped. This time I am going to be agnostic when it comes to hoping for some over-performance. I will be taking all of my profits, thank you.
Competitive PricingWe are currently looking at a sell setup. Given the heightened volatility of the market we can potentially see a powerful move to the downside. We enter our sell now to get the tightest stop loss position!
BUY USDJPY: SUP LEVEL @105.5 & VOLATILITY SELL-OFF @ HIGH LEVELSBUY USDJPY @106.5 or @107.0 - SL @105 - TP @109-11 based on:
$YEN's historical most important support level - The 105.5 Key level will more than likely hold as it has many times before
- At 105.5 there are 3 significant UNSUCCESSFUL tests of the level over the last 3 years thus it is a great entry point. Also another plus is if you look at the monthly chart you will notice 105.5 is the 2nd most important level in $Yen's 20y+ history, the 1st most important/tested is the 101 level.
- Further, over the last 3 years the level has been tested 4 times in total and it only broke once when USDJPY
rose to 127 so that means LONG at this level has a 75% chance of success (based on the simple discrete math).
- Plus, around 105.5 at 106 and 106.5 these also provide "mini" strong support levels which i think are great, low risk entry points for long positions.
Normal Distribution and High Price Standard Deviation Volatility
- as you can see the weekly bar has closed below the 5 year -3SD (and -2SD 2.5year) once before, by the red bar 5 weeks ago which was also at the 105.5 support level- at which point USDJPY0.02% rallied back up to 111.5 from 105.5 after closing below the -3SD and -2SD line and on the 105.5 so we could see topside like this again.
- in addition to this, it is worth noting that the 5y -3SD blue line that was violated but rejected 5 weeks ago and is being tested again, based on normal distribution theory, says that prices touching this line have a 99.5% probability of reverting BACK UP towards the mean at 122.5. The -2SD 2.5year line that was also violated has a 95% probability of retracing up towards the mean at 126.
Historical and implied volatility at all time highs - a reversal
- Historical volatility across the board (5,10,20,30,60) is trading at all time high levels now and at some point these levels have to come down, investors cant keep pushing vols higher, which in turn, means selling of UJ must come to an end soon and we should see an upward recovery run.
- The same is true about Implied vols which are trading at 15.75% which is in the (upper) 90th percentile of the last 2.5 years of days, meaning implied vols 90% of the time have been lower than this - thus a reversal is more likely at these levels. HV is likely in the 90%tile or greater also - Usually a sell-off in volatility precedes buying of UJ.
- See more info on vols here: www.tradingfloor.com
Downside analysis
1. The obvious risk of the Long UJ play are that the 105.5 level doesn't hold, in which case i believe the long squeeze caused, as a result of all long SLs being hit causing a cascade of selling could take us down to 102/3 - however this is easily avoided by keeping tight stops at 104.5-`105 dependent on your risk appetite.
- even with a 150pip SL it still returns us 3x returns with a TP target of 111+
2. The markets may trade risk off in the coming weeks as the macroeconomic envrionment is filled with uncertainty e.g. FOMC, BOJ and UK EU Referendum, in which these events are compounded by the fact that risk markets (spx etc) are currently trading at all time highs, making a reversal in their direction and risk-off tone more likely.
Furthermore other risk-off assets such as Gold and Bonds are trading well.
All of which may combine into a strong risk off environment that fuels the JPY follow the bullish trend with its counterparts (bonds and gold) and enabling UJ to push past the 105 strong hold.
- However, these issues are all displaced by a tight SL as advised at 104.9 (to benefit from the 105 key lvl supporrt potential)
