Seems like a Bearish Divergence is forming in the USDCHF 1 hr chart. The RSI is currently moving to the downside. In the 1 day timeframe we see that according to Stochastics we are in an overbought area and are nearing the upper bollinger band. Seems like the pair is losing steam and is potentially going to reverse to the downside. Your thoughts?
In addition we are seeing a lot of resistance at the 0.9670 mark.
Hi James - first of all - well done. I can see you posted your charts well before the EU summit announcement and you must have been delighted with your results.
I believe you were using many reasons for your prediction -which all seemed to agree and compliment each other - ie near strong resistance area - price overbought which was confirmed by your RSI and also bearish divergence shown by your MACD. Did you use any other indicators as well which you might not have wanted to put on your posted chart - as not to make them look too cluttered?
Also did you compare this information against the EU or any other instrument?
Finally last question - I am sure you might not have expected such as nice drop so quickly - so your RR was probably easily over achieved - raising the question - what size stop did you use?
Thanks, I appreciate the compliment. First off, I use a swing/pivot method when trading and I always keep my charts simple and uncluttered. In addition to indicators you see above, I focus on the 1 hr candles themselves. I don't like to have more than 2 to 3 indicators on my chart and feel it is too confusing and causes me to be indecisive when pulling the trigger. I do, however, use one other 1 hr chart that has a 34 EMA and a bbsqueeze indicator. But this chart was not my sole focus when executing this trade, the two charts above were. I will post this additional chart below though.
In fact, there was the inverse of the USDCHF trade that I considered. The EURUSD had a very appealing Bullish divergence and was nearing the overbought side of the stochastics on the 1 day chart. I didnt execute the long eur trade for two reasons: 1) I had been primarily studying the usdchf from the beginning of the week 2) Once the usdchf trade was executed, an additional trade would have gone against my risk parameters.
Lastly, I was up all night watching until the early morning watching this trade. In fact, I haven't gotten any sleep and soon will go home for the day. My initial SL/TP was 30/60. Once I saw the initial plunge that broke the trendline at 4 am CET and the very bearish 1 hr candle, I moved my stop to break even and the and my TP to about 150 pips. I did this according to my support/resistance levels.
In short, I feel the less cluttered, the better. I prefer reading the candles in combination with a couple of indicators. Lastly, the technicals are what guide my trades. I feel the technicals forecast or foresee the outcomes of the fundamental events, not the other way around. Although in my mind I knew that the EU summit would act as a catalyst.
Hi James - Thanks for your reply. I was interested in you stops size as I am carrying out a survey which i hope to have completed in July about stop sizes and targets.
Your initial 30 pip stop and 60 pip approx target is a fairly popular trading style - giving you a RR of 2 and a target that should be reached in a trading day - or even within 4 hrs in main session times. I notice you had looked upon 0.9670 as being a good resistance area and then you entered at 0.9667 and the actual high before the drop was only 0.9678 - only 11 pips above your entry.
As I trade mainly as a scalper I try and work on 5 pip to 10 pip maximum stops - but even I would have been impressed with just needing 11 pips to achieve an approx 145 pip gain ( actually drop made about 200 pips - but catching over 70% of it is excellent trading )
With regards to your technique - I think you must be a very experienced trader as everything you have said in your reply makes good sense and would agree with you on. Although I use a tick chart for scalping entries - the one hour chart is my favourite for letting scalps go into swing trades. I use similar indicators but on non standard settings and wondered whether you have tried both the bollingers and the rsi on tighter setting for intraday trades?
On the money management side I see that you did not want to expose yourself with additional risk on an EU buy - which I can understand and although in hindsight you might have regretted it - you are far better to play safe and be content with just one great trade with your maximum permitted stake on it.
Like you I prefer to "oversee" my intraday trades and increase and decrease my lot size according to market flows. I don't trade Asian sessions unless i am in a long term trade so would not have caught your trade On position or longer term - I try and achieve above a daily ATR on decent stake size and then drop down to a smaller size whilst allowing me a 150 -200 pip stop buffer to play with. Last year I had 3 really good longer term trades - one achieving over 1000 pips - but in the end i had neglected it was down to less than half a lot and it made me think why bother when i can achieve better cash returns in a few hours on high lots - rather than waiting 6 -8 weeks.
Look forward to more of your forecast and have a great July
Hi Lisa - good question - I will keep it brief and try and answer in more detail when I am back home.
Basically, I guess I am not experienced or good enough to do what you mention on long term position trades. In over 8 yrs of trading I have taken probably less than 100 live position trades - whereas i have taken "multi" - thousands of live short term trades. I have had far more success at introducing larger stakes with short term trades that I monitor and expect to be out of in under one hour.
My expertise is on catching waves from 10 -50+ pip than 500-1000 pips. If you notice there are far more of them - in both directions and as I am neither a bull nor a bear - they suit me. My RR results can be as high as 10+ and that's the same as 100 pip stop and 1000 pip stake - but it is far more efficient - as a higher probability - and far less risk.
This might be contrary to everything you read and have heard of - but that's my findings. I will still attempt targets of 500 - 1000 pip trades - and I hope that over the next 3 -5 years I will become more successful with them - but for now - I know what works for me ;-)