Double top formations on a bearish trending pair are very low risk to good reward positions. Conversely, double bottom formations on an uptrending pair have a similar risk to reward. Remember that breakouts retrace and retest constantly on all time frames. So if a big move was missed the first time, Smart Money plays the retest of that previous swing high reversal, or swing low reversal (depending on the trend of the pair). Smart money will place a limit order at this strategic location, with a stop loss reasonably set on the other side of that swing reversal level, and will target support/resistance, quickly taking partial profits at relatively safe profit-taking levels, and letting the remaining trade run its course naturally while playing with HOUSE MONEY.

The above chart is an excellent example of a double top formation taken from the hourly chart for usd/jpy.

Short term traders must be quick to adapt to a changing momentum in wildly swinging markets, such as we have seen lately. As long as this market condition continues, be prepared to take PARTIAL PROFITS quickly, short cover your positions when called for, again taking only PARTIAL PROFITS and letting the positions expire using trailing, positive (or break even) stop losses, with HOUSE MONEY. At times you may have both long and short positions active on the same pair at the same time.

The USD/JPY has fallen precipitously from the June 2007 swing high of 124.12, to the recent low from October 2008, at 90.89, as seen on the following monthly chart.

 The pair is in a long term downtrend. We place positions at logical reversal levels on any corrections/retracements (up) to catch a resumption of the downtrend. in other words, we trade against any move up as long as we are fairly certain of a resumption down occurring. We are protected by our strategic  entry level, combined with a reasonable, affordable stop loss, if the market reverses trend on us.

Trends change, so study to show yourself worthy. Build wealth slowly and steadily, be logical, and protect your account from unnecessary drawdowns. Analyze your losers. We all have them. We sort through an array of small tester positions on multiple pairs, elimating those that are unprofitable and building a base of those that are income producers, preferably daily interest income producing, along with a considerable pip gain using HOUSE MONEY, after we took out partial profits and set a break-even stop loss, and trailed that stop to secure some bit of profit. Then you use the profits taken and establish another tester position, knowing that the original cost of the remaining open position has been covered. We now have a free position earning us a no-risk income, no matter what happens. On some pairs we may pay some swap, but that is the cost of doing business.

The 4 hour chart and the hourly chart are used to maximize entry and exit levels. You look for candlestick formations, pivot support, sma’s, and fibs to locate where the buying interest resides, and where the selling pressure resides. Long wicks on candles show strong resistance or strong support, depending on the bias of the price momentum.

Using this “Cruise Control” strategy, we are free to enjoy the good life, and not be obligated to sit in front of the pc for hours, while neglecting our family, and our honey-do list. Or our fishing time. Yeah…. WE ARE PROTECTED, BECAUSE WE MADE LOGICAL CHOICES AND EXPLOITED WHAT THE CHARTS TOLD US THEY WANTED TO DO. The array of small tester limit orders will activate independently, opening and sometimes closing all on their own, with a properly prepared order, resulting in an acceptable loss, or a very profitable gain. It functions as an automated E.A. or robot program would function. It requires minimal maintainence: a few hours a week for those of you who are required to work a real job at this point in time, as are most newbies when they begin to take an interest in Forex trading.

Search your charts on all currency pairs to find this set up. Place your orders with stop losses and take profit targets in place. Set it and forget it… Live Life to the fullest.

On the hourly chart above we see exactly where the price reversed trend on the 15:00 GMT hour candlestick of November 6, 2008. That short term resumption of the downtrend lasted until it formed a new reversal candlestick pattern on November 7th on the  01:00 GMT hour candle. For around 24 hours, that position gathered almost 200 pips, where it retraced up again and retested that high on the 19:00 GMT candle of the same day. Our strategy calls for a limit order sitting at the retest area waiting for a bounce on that second attempt. The entry is placed around the high of that previous swing candle at 98.67. That level has been tested and bounced there, triggering our limit sell order. 1st downside target was the open of the previous hourly candle at 98.04, where partial profits were taken and a trailing stop loss was in place, which also got hit, closing the trade in profit.

EASY MONEY…

Daily chart shows the price testing the bottom of the descending channel. Risk to reward is good for a buy here to test the upside of the channel. Stop loss safely below the channel. Less risk tolerant traders will wait for the price to bounce off that bottom trendline, and reverse trend. 

The weekly chart shows the one candle mom to be pointing up, telling us that the price will test the yellow 5 sma sometime this week.

The new monthly one candle mom is showing us a retrace up to test the 5 sma channel sometime this month.

Strategy: Buy dips to test the 5 sma channel IF risk aversion is not present. Risk aversion will cancel this view.

Look at this Head and Shoulder forming on the 4 hour chart. Things would get bearish if the right shoulder gets broken.

The daily chart for aud/usd shows shows price breaching the green 22 sma, but encountering selling pressure and showing a possible evening star reversal candle formation. It will take a while to play out. Moms are looking flat and mixed. Decision time.

Strategy: Range Trade Technique until breakout occurs.

The daily chart for eur/usd shows strong selling pressure sitting around the 61 fib area, and the green 22 sma area (previous swing low). Price sneaked back into the 5 sma channel.

Downside target is the yellow 5 sma close, or the white 5 sma low. Upside target would be the 50 fib and the brown 55 sma.

The daily chart shows the price still inside the descending channel formed on the flag formation.

Where is the buying interest sitting? Look at the 38fib area, and that brown 55 sma.

The weekly moms are quite bearish. all 4 moms are pointing down in agreement. The current candle is quite bearish. Until risk aversion returns, she will trade sideways in consolidation, or reverse the trend to bearish.

Look for the range that has been established, denoting the buying interest areas and the selling pressure areas. It could take a while to play out. Patience and discipline are needed to trade this scenario.

Strategy: Range Trade Technique until breakout occurs.

the weekly chart for eur/usd shows the retrace up to the yellow 5 sma and the red 200 sma areas before running out of steam. The market will price in around a 100 basis point rate cut for the ECB in the next 12 months or so. Expect the USD to regain some strength.

We have exited our long positions and will stand aside until the NFP next week. Expect some choppiness and profit taking for the end of the month accounts.

The daily chart shows the move up hitting resistance and stalling. We see cluster resistance here provided by the 61 fib, the 5 sma and the red 200 sma, on the weekly chart and the green 22 sma on the daily chart.

Beautiful flag (or pennant) formation on this daily chart for eur/aud. She will test the lows of her range before heading higher.