Welcome back for another great trading setup for this week and next. Based off of the score carding process the Kiwi is at a -5 while the Dollar is a +4. I believe that shorting NZDUSD could be a high-quality trade to allocate your money.
First, we want to determine the direction this pair is going to move. The scorecard process determines that we have 3 missed weekly targets below price. The chart below illustrates that this week is showing weakness in the Kiwi at a -5 determined by the 13-week strategy or last quarter. I also decided to short the Kiwi with the dollar, based off of the strength that is expected for the dollar. It came in at a +4 for the week off of the 13-week strategy. It is offering nearly 400 pips of profit down to the weekly missed target around .6905
The second step I take is to determine if the pair is in a good market environment to be traded so that we don’t get chopped up or just sit in consolidation and burn time and tie our money up in a pair that isn’t set to move. I determine this by seeing if we are in a Bollinger Band squeeze. If the Bollinger bands are outside of the Keltner channel, then we are in a good market environment that should continue to show volatility as pictured below.
Third, we want to determine when it is ready to enter. How do we get into this trade? I personally like to use the Micro Price Detector on a 10 pip setting for the major pairs because they have a smaller trading range. We are also sitting at a high price as determined by the blue lines of the Keltner channel as we are outside of the top channel. As you can see, I have already entered into this trade based off the first picture. I have grid levels setup above price. If you were waiting though, you would want 3 red bricks to enter. You could also use a counter trend line break or bearish candlestick formation.
The trade is offering 400 pips of reward so I would set the grid at 40 pips and targets the 400 pips for profit. Once that 400 is hit you can keep trading it down to .690 area or take the trade off and focus on the next best pair up next. Your stop would be about 200 pips as the grid strategy tells us at around .7475/.75 and limit at .6905 but taking profit at 400 pips booked and then re-evaluate the trade. This decision is based off a decline in price from this point forward. If not then the target will be even higher and the grid will be larger and will need to be adjusted. Remember equity management is everything in this business. FOMC, BOE, and BOJ to end the trading week let’s get to pippin!!