Forex Trading Signal Alert On AUDUSD

Hello Traders,

first up:

ok, let’s get to it…

I took a buy trade on AUDUSD  but this trade got stopped out at breakeven. I should have moved my stop loss  and locked some good amount of profits but I was not around to do that  ( I think I was sleeping) and the market reversed and knocked me out.

As a matter of fact, that trade that I took, the price went up as much as 90 pips from the level where I bought at but I got nothing of that, not even half!

This was the forex trading signal alert I am referring to:

But now I see that there’s an opportunity presenting itself again to buy this currency pair.

Here’s the thing you should know:

When a support or resistance level get broken, don’t think its over yet. Observe the price action to see if there are any signs that the market may reverse (even though you can see that the levels are already broken).

One reason that explains why support and resistance levels get broken and then head in the opposite direction soon after is explained here on this post about stop loss hunting.

For me, the way to do this is to watch the price action…here’s two simple ways on how to do it:

1. I wait to see if the price momentum is losing steam or not. How do you know if there is lack of momentum? Look an the length of the candlesticks, they should be getting shorter and usually after that, you will see the formation of reversal candlesticks.
2. sometimes, you will not see  decreasing momentum but you will see bullish/bearish reversal candlestick signals just after the levels have been broken.  If you can’t see these reversal candlesticks in the 1hr or the 4hr, that does not mean its over yet. Switch to the daily chart and watch there.

Now, this exact situation I have described above is happening in AUDUSD currency pair. If you go to the daily or the 4hr timeframe charts (much more clearer on the 4hr timeframe), you will notice that price has hit this support level twice.

And then there’s this bullish looking daily pin bar/hammer that forms and closes above the support level. See daily chart below to see what I am talking about.

HERE ARE SOME IMPORTANT CLUES I SEE ABOUT THIS TRADE SET UP (refer to the daily chart above)

1. support level was tested twice on the daily chart and each time the candlesticks closes above that support line.
2. the first test candlestick looks like a spinning top. This candlesticks shows indecision as well as showing some signs of lack of momentum as well.
3. the second daily candlestick shows increased buying pressure which results in the formation of the pin bar/hammer candlestick.

And don’t forget that all these is happening around a major support level.

HERE’S WHAT I WILL BE WATCHING FOR TODAY TO LOOK FOR A GOOD ENTRY POINT/PRICE LEVEL TO BUY

I will use looking to use any of these two techniques to buy if any one of them happens:

1. daily pin bar trading with a twist for low risk high reward entry
2. daily pin bar trading strategy
3. or a third alternative is this: you can place a pending buy stop order just a 2-3 pips above the high yesterday’s candlestick and if price breakouts to the upside, this order will be activated ( I won’t be using this).

Best place to put the stop loss will be at least a few pips below the low of yesterday’s candlesticks…maybe 2-3 pips below the low, I’d say.

What if these trading setups do not happen? Well, sometimes that how the market behaves, isn’t it? So what can you do? Nothing.

IF PRICE MOVES UP AS ANALYSED, WHERE ARE THE POTENTIAL REVERSAL POINTS/LEVELS?

Here are some 3 potential levels for price turning back and going down I see in the daily time.

What do  I think will be the most likely?

I think it will be the downward trendline. (I can be wrong!) If price goes up to that downward trendline, I’d be moving my stop loss tighter and looking to sell If I am in on a buy trade.

See chart below to understand what I am talking about:

WILL THIS TRADING SETUP BE PROFITABLE?

If I was a time traveller, I will tell you the exact answer. But I cant.

As traders we make decisions on certain things we see on our charts, whether it be from forex indicators or just price action or a combination of price action and other indicators.

So will this trading setup be profitable? That’s not the question you should be asking. The question you should be asking is this:

What is the risk on this trade and if this trade works out as expected, what will be my potential reward? 

Because at the end of the day, it does not matter if you win or lose but what matters is how much money you make when you are right and how much money you lose when you are wrong.

That statement simply means: risk vs reward.

UPDATE: 9th JAN 2015

Hello traders, this is the update of what has happened with the AUDUSD trade setup. I was waiting for price to head back down to 50% fib (by using the high and low of the daily pin bar candlestick) but that did not happen at all as you can see how the  price moved up after breaking out the high of the daily pin bar (red candlestick).

You should watch the 3 areas/levels shown on the chart above.

Here are a couple of scenarios that could happen:

1. price can go up hit resistance at #2 and move down.
2. If #2 high get broken, the next potential area where the price will head for is the downward trendline. It can  hit it and can move down.
3. if the trendline is broken, the next potential level/area where price will head for will be the #3 and it can hit it and move down or can break it and continue to move up.

What’s the secret to know when price hits these lines/levels, its going to move up or move down again?

I use Price Action. And this book teaches you how. Click here to download.

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Thankyou.