Daily Lesson # 5

Posted on 27. Mar, 2010 by Jakob in Forex Signals, How To, Random Noise

Yesterday I took two profitable trades, and here is a short recap. There was some really good setups and I was only in the market for about one hour in total. Click on the picture below to see a picture of the EUR/JPY on the 15-minutes timeframe.

As you can see, there is a very clear cup and handle formation. This is a strong continuation pattern. However, as the timeframe was 15 minutes, I was expecting to get in and out as fast as possible. I went long at a break of 123.60, with a stop loss of 10 pips, with an expectation of the pair to continue up to 123.87 which is the former high in the same timeframe. Click on the picture below to see the next chart.

As you can see, the market went up, exactly to 123.87 and then moved back down, giving the last candle a long wick. I got out at 123.84, for a total profit of 24 pips, all within 30 minutes. As I was busy at this time (trying out a new signal service) I didn’t have time to call this trade over twitter, but I did manage to call it in the room. The next trade was called over twitter. Here goes:

Click on the picture below to see the ERU/JPY from a 15-minute timeframe.

After I got out of the last trade, the pair started to give us lower highs and lower lows, all within a very narrow range. This turned into a very clear parallelogram (flag) pattern, which is another continuation pattern. With the previous breakout of 123.60, this level was now support, so when the pair went back down to this level, I went long, this time with a stop loss of 20 pips. Click the picture below.

As you can see, this trade worked out perfectly. The pair spiked out right after touching 123.60. I got out at 123.94 for 34 pips. Now I was aiming for 40 pips, but with the close of the second candle I got cold feet, and took profit. However, another option would have been to move stop loss to break even, and then give it some more time. As you can see from the chart, the pair went all the way up 124.15 and then started to retrace right after touching the resistance level. Keep in mind that these trades were in the direction of the trend (at least on the 4-hour timeframe) and there were no expected upcoming news which could surprise the market. The only aspect which made me reconsider these trades, was that it was Friday afternoon, which is very often a bad time to base your trades on technical analysis. However, everything worked in my favor, and it was a good way to start the weekend.

Related posts:

1. Daily Lesson # 3
2. Daily Lesson # 4
3. Daily Lesson # 1
4. Daily Lesson # 2
5. Forex Signal # 1 – Trade Setup EUR/USD

Tags: daily lesson, forex trading, Trading Forex