Confirmation Entry Day Trades GBP/USD & EUR/JPY 21/04/2011
Early on in the tradingÂ session we had a day trading opportunity on the GBP/USD. The market came into resistance and then gave a nice confirmation entry down. However we didn’t see any follow through to the downside after the dayÂ trading entry, and this ended up -20 pips. Still and all I would like to go over this forexÂ trade as it was a solid confirmation entry. The only thing I can say about why I shouldn’t have taken this trade was the market correlation. At this point in time the USD correlation was out of sink and the USD/CHF was moving down towards USD weakness, and therefore we should have waited for the entry on the GBP/USD.
Candle #1 touched resistance and then closed back down below that resistance, thus giving a nice reversal candle off of resistance. Candle #2 closed well below the body of the reversal candle. In the case of a short position candle #2 must close below the body of the reversal candle, which it did. Candle #3 is the entry candle. The entry is taken when it pulls back into the body of the reversal candle, and this is where we took the entry. Unfortunately there was no follow through to the downside.
After the GBP/USD trade above we waited for another day trading opportunity, and eventually the EUR/JPY gave us just that. The black line is theÂ support level we were looking for the market to hold on and it did just that. Again I do not care if the wick of the candle goes below the support level. The key to weather or not the support is holding is if theÂ candlestick closes back up above the support, and as you can see it did.
Once candle #1 touched the support and then closed above it we then had the first candle in the 3 candle confirmation setup. The next candle we were looking for was a confirmation candle. As you can see candle #2 clearly gave us a confirmation candle by closing above the body of the reversal candle (candle #1). Once these 2 candles formed we then knew direction and simply waited for the market to pull back into the body of the reversal candle which it did perfectly during candle #3. As soon as the pull back candle touched the body of the reversalÂ candlestick we went long.
We took +20 pips on thisÂ day tradeÂ overall, and put us at aÂ +9.5%Â so far for the monthÂ . Could have taken a bit more but I got a little greedy with the take profit. After the EUR/JPY trade from Wednesday where we took +130 pips, I tried to stretch this one out for an overnight run but the market wouldn’t give it up:) We will be trading tomorrow but it is a banking holiday. The forex market on banking holidays can go one of two ways. Either you will see extremely volatile price action or you will get a stagnant market with very little price action. Either way we will be in the live trading room, see you all tomorrow!