Hello again! This is Chris Ness, writing to you with what are my favorite trade setup for this upcoming couple weeks. Based off of the score carding process that I use at the core of my trading methodology, I believe that shorting EURUSD could be the best place to allocate money for short-term profit potential. So first, let’s dive into EURUSD and why I believe this is a good shorting opportunity that’s been ready since market open on June, 11th 2017.
First, I want to know which direction is the pair going to move. The scorecard process determines the missed weekly targets, (which this week is showing major weakness in the euro across the board at a -6), determined by the 13-week strategy or last quarter. I also determined to short the euro with the dollar because of the strength that is expected for the dollar — it came in at a +5 for the week off of the 13-week strategy. It is offering nearly 500 pips of profit potential down to the weekly missed target around 1.0702. To take a closer look at the chart below, click to enlarge.
Establish Market Environment
Second, I want to establish if this pair is in a good market environment to be trading so I don’t get chopped up, or sit in consolidation; burning our time and money in a pair that isn’t set to move. To determine this, I look to see if the trade is in a Bollinger Band squeeze. If the Bollinger bands are outside of the Keltner channel, then we’re in a good market environment that should continue to show volatility as pictured below.
Entering at the Right Time
Third, I want to determine when it is ready to enter. How do I 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. I’m also sitting at a high price, as determined by the blue lines of the Keltner channel, and have closed below back into the channel. This gives me a double confirmation to enter this trade!
Managing the Trade
For management of this trade, or to try and maximize profits, I use the grid for Leveling in or set up pending orders of sell stops and sell limits above and below price. This trade is offering 495 pips of reward so I would set the grid at 50 pips and target the at 495 pips for profit. Once that 495 is hit, you can keep trading it down to 1.07 area, or take the trade off and focus on the next best pair up next. The stop would be about 250 pips, (as the grid strategy tells me at around 1.1445 and limit at 1.07), but taking profit at 495 pips booked and then re-evaluate the trade.
Remember, equity management is everything in this business. It is the number one killer of traders — always use it! Hope this analysis helps. If you decide to trade it, let me know how it goes for you in the comments. Happy trading!