Potential Forex Trade Set-Ups
|November 20, 2012||Posted by Cory Mitchell, CMT under Forex, Techncial Analysis Tutorials|
Potential Forex Trade Set-Ups
Instead of analyzing these forex pairs, I am just going to show trade set-ups I am watching for. Basically, these trades are awaiting a “trigger”, meaning the trade may happen or it may not. Since about 90% of my trades come from this very simple set-up, even if they don’t materialize you will likely find many of your own trades using this technique.
The pair recently broke out of a range (blue box) and made a lower swing low (relative to the swing low in the box). Therefore, I am viewing the pair as in at least a short-term downtrend. We see the market has rallied the last few days; I have drawn a small trendline along the lows of that rally. When that trendline is broken to the downside, I will go short. A stop is placed above the high in the rally (unknown at this point), and the target is below the recent low of 1.26567. If the market is dropping hard I will not use a set target and just let it run. But usually, if my stop is about 60 pips to 100 pips, which is quite likely on this trade, my target will be approximately 120 to 200 pips, or a reward : risk in the area of 2:1
If the pair rallies above 1.2880 without correcting/breaking the trendline, then I will likely not take the trade as the pair will have eclipsed a prior swing high
Has a similar set-up to the EUR/USD, I am already short this pair as this signal showed up a couple times already in the past several weeks
Since this pair typically moves inversely to the EUR/USD, there is potential a long set-up in this pair. We have a higher high, but now are in a small correction marked by the downward trendline. When the price rallies above that trendline I will look to go long. Stop is placed below the low of the correction (unknown at this point) and once again the target will be above the recent high of 0.9512. As mentioned, I try to keep my reward to risk at about 2 to 1 for these set-ups but will occasionally let them run if there is a sharp in my direction.
If the market drops too much and starts creating new swing lows before breaking the trendline, I abandon the trade set-up.
Potential long set-up. The pair has been making higher highs and higher lows. Currently in a pullback. If the pair breaks above the short-term downtrend line I have drawn I will be looking to go long. Stop below recent low (unknown at this point). Target above 1.0056. If the pair drops below a recent low–namely 0.98739–before breaking the trendline the trade is off.
I have already use this technique twice on the current rally in this pair. Hopefully there are a couple more left.
Not a pair I typically trade too often. Potential long set-up. Higher highs and higher lows, and currently in a pullback. Looking to go long if the pair breaks above the small downward sloping trendline I have drawn. Stop below correction low (unknown at this point). Target above recent high.
If you look through more pairs you will likely see a few more set-ups similar to these. Usually the risk is quite low and trades can last a couple days to a couple weeks using daily charts.
I originally used this technique as a day trader, to get into moves early and with minimal risk; therefore it can be applied on any time frame.
While these are my views, it is not a recommendation for you to buy or sell. Please consider your personal situation when making investment/trading decisions, as this is not personal investment advice tailored to your account size.
Cory Mitchell, CMT
A couple weeks ago I was introduced to a piece of financial research software…and I have been using it ever since.
It’s called TradeMiner, and basically it allows me to quickly and easily see any trends or tendencies in stocks, currencies or futures.
Simply put, it helps find historical market patterns and cycles on a seasonal basis. I’ve been using it along with my technical methods, and it has been a great companion.
It is a cool, easy to use little piece of software which generates loads of trade ideas and can basically be used in conjunction with, or in addition to, any trading system or strategy.
TradeMiner has three versions, Stocks, Futures & Forex So there’s something for everyone: