Being a target trader I am naturally looking for points where we believe the market has reached a major support/resistance point and has just struck a D extension on the fib scale. In my opinion, trading back from the D (or a “sweet spot” trade as my mentor the FX Chief™ has dubbed it) offers excellent risk-versus-reward and in general, a relatively reasonable stop. However, we don’t see these exact conditions form the way we want them to all the time. However, if you are reading this you are looking to become a forex trader or already are one, this is where I, and the other writers come in. Each week, I try to point these opportunities out to you guys as often as I can.
Let’s take a look and see what I found this week:
Now, most of the forex market is looking to this pair right now. Brexit is still an active force in this market and in my opinion, seems to be holding up the market in general. This has caused (again, my opinion here) shorter trading ranges when we expected larger ones and has caused most of the market to slow. However, even considering all of the aforementioned, I believe this pair is going to offer us a 210 pip short over the next few days. This is a classic negative space trade created by an over-run market. We are just about to hit a D extension and It looks like we are starting to get divergence between the momentum and Stoch at the bottom of the screen — indicating a readiness to sell off. Let’s look at the entry plan that should make sense to most of you. In addition, I will be trying to scale in on this position since it’s not the largest (210 pips is not huge, but respectable) to make this trade worth more of my time.
At this point in time, I have pending market sells and sell stops ready for when this market is on the right side of that trend line in black. I need price below my first proposed point of entry; selling in at no less than 144.879 only after this market has struck the D extension at 145.609. I then need to get another stop above the old D by about 25 pips. If we do this we are risking 79 pips on this trade entry to take the short all the way to the weekly target at 142.870. This would be a 210 pips reward. However, I see common resistance that could slow the market on its way — no doubt becoming possible areas we can scale in on this trade to make it worth more of our hard spent time. I have pending sell stops with the same stop as the original entry and the same exit of 142.870. These additional 2 orders would stack an additional 150 pips to this trade if we are right. If I am wrong and the market does not go that deep, then the order cost us very little in time to set up, so no skin off our backs! Again, I do see the market going to the monthly rather early in this pair but that is just my opinion.
Good luck, hope this helps you guys make some money this week! Shoot for the pips and keep your equity management in check!
P.S. I usually post a follow – up to my last idea. EUR/JPY was wonderful this week. Check the screen shot from the 19th last month (below) and then go check a recent chart. My favorite strategy, Target Trading, does it again!