The Forex Chronicles

Archives for August 2018

EUR/USD Approaching Strong Resistance Level At 1.1700

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Previous Price Breakout

I have posted a few trading updates about the EUR/USD pair just recently, and as you may recall, I pointed out that it was worth watching out for a possible breakout when the price was trading in a very narrow channel.

Well the price did in fact drop below this channel and although it did pull back a little, it did subsequently drop around 280 points from the closing price of the initial breakout candle.

Since then the price of the EUR/USD pair has rallied somewhat and is now back to where it was before this downwards breakout. So where does the price go from here?

Resistance at 1.1700

Well if we keep the same trendlines on the chart from last time, it is clear that there is strong resistance at these levels.

EURUSD Price Resistance At 1.1700

First of all, the upward and downward trendline from the previous channel act as resistance, but you will also notice that the EMA (100) is sitting just above this trendline at around 1.1700.

So when you also consider that these round numbers often act as strong support and resistance levels, it is clear that it is going to be hard for the price to break through this level in the coming days.

Trading Opportunities

At the time of writing, the price of the EUR/USD has reached a high of just over 1.1650 at the start of the overnight trading session (check out the last blog post to read about a trader who has managed to develop a highly profitable overnight trading strategy for the EUR/USD pair), but has subsequently dropped back to 1.1600. So it has already been sold off after approaching this resistance level.

Therefore if the price moves above 1.1650 towards the critical 1.1700 level once again, a short position might be a high probability trading opportunity that is worth taking because the price is unlikely to have the momentum to break through this level.

Alternatively, it might be worth watching just to see how the price reacts and then opening a position accordingly.

For example, if the price is sold off once again, you might want to think about opening a short position between 1.1600 and 1.1650, but if the price does actually break strongly upwards through the 1.1700 level, it might be worth opening a long position and trading a possible upward breakout because this is quite a strong level of resistance.

Disclaimer: These are just my own personal thoughts and doesn’t in any way represent financial advice. You should always do your own research and make your own decisions when trading forex.

Night Trading Strategy On The EUR/USD Pair

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Profitable ZuluTrade Traders / Strategies

It has often been the case that many of the top signal providers on ZuluTrade (and other sites) tend to trade various different currency pairs, and will generally trade during the busiest times of the day, ie the London and New York sessions.

So it is quite surprising to discover that one of the most profitable signal providers is actually using a night trading strategy on the EUR/USD pair because this pair doesn’t usually move a great deal during the quiet overnight session.

Any strategy that is used during this session has to capture lots of small gains in the region of 5-10 pips because of the low volatility, but this particular strategy appears to do just that.

ThePipsMasterUK’s Strategy

Unfortunately it is hard to find out the exact strategy that this trader is using, but if you visit their trader profile page, you can read more about it.

You will see that this trader uses a number of different filters to find possible entry points, and will often open several positions in order to catch the trend.

Indeed they will actually open up to a maximum of 8 positions (0.1 lots per trade) at any one time, so this is something to bear in mind if you decide to copy the signals of this trader in your own account.

Most interesting of all is that this trader specifically trades the overnight session to avoid the volatility of the daytime sessions, and only ever trades the EUR/USD pair, which is good because it means that they have learned the behaviour of this pair and know exactly how it is likely to move during this session.

This certainly seems to be a profitable strategy because most of their trades tend to be closed out for a profit of between 5 and 8 pips, on average, and the losses are generally very small on the rare occasions that they do experience a losing trade.

Trading Results

At the time of writing (23 August 2018), ThePipsMasterUK is currently ranked as the 9th best trader on ZuluTrade, and has a total profit of 2429 pips since they started trading in March 2018.

They have had 395 winning trades out of 402, which equates to a remarkable 98% success rate, with an average profit of 6 pips, a best trade of 34 pips and a worst trade of -58 pips.

It should be pointed out that this trader appears to use a maximum stop loss of around 150 pips, so I would imagine that big losses could occur from time to time, but nevertheless I think it will be interesting to keep an eye on the performance of this particular trader, and to see if their night trading strategy on the EUR/USD pair continues to yield results.

Here is a widget that displays the very latest trading results of ThePipsMasterUK:

If you would like to automatically trade the signals of this trader in your own trading account, or would like to open a free demo account with ZuluTrade, you can do so by clicking on the Follow or Register buttons above.

However please note that I am not recommending that you copy the signals of ThePipsMasterUK or any other signal provider. This blog post is designed to be used for educational purposes only, and does not represent financial advice. You are solely responsible for any trading decisions that you make.

Final Thoughts

The main point I want to get across is that you don’t necessarily need to come up with a strategy that looks to capitalize on large price swings or high volatility.

By trading the overnight sessions, you can trade at a more relaxed pace with reduced volatility and no market-moving news announcements to worry about, and the long-term success of this particular trader suggests that it is definitely possible to be successful by coming up with a night strategy that trades the EUR/USD pair, or any other major pair that has tight spreads.

USD/CAD Symmetrical Triangle Chart Pattern For August 2018

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Triangle Chart Patterns

It can be very useful to draw trendlines connecting the highs and the lows to see the underlying trend, and to spot any potential breakout opportunities that may be available.

Sometimes you will get ascending triangles and sometimes you will get descending triangles, but where there has been a sideways trading range, you will often see symmetrical triangles where the price is trading in an ever decreasing trading range / triangle.

This is beneficial for traders because the price has to eventually break upwards or downwards out of this triangle at some point, and when it does it often results in a strong breakout.

Symmetrical Triangle on USD/CAD Pair

You may be interested to know that there is a classic symmetrical triangle pattern on the daily chart of the USD/CAD pair right now.

USDCAD Symmetrical Triangle - August 2018

This pair has been in a slight upward trend since September 2017, but has been trading in quite a narrow sideways trading range this summer with little upward or downward momentum, which is why we now have this triangle pattern.

Potential Trade

As a result, it might be worth keeping a close eye on the daily price chart of the USD/CAD pair because it is getting very close to the lower trendline at the moment, and may be about to close below this trendline either today or in the coming days.

Therefore it could be a good time to open a new short position if the price does close strongly below this trendline because there could be a strong downward move in the following days and weeks.

As always, I am not recommending any trades. There is always the chance that any breakout could turn out to be a false one.

I am just sharing with you my thoughts and demonstrating how you can trade any breakouts that occur when the price breaks out of a symmetrical triangle pattern.

Potential Inside Bar Breakout On Bitcoin For August 2018

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Trading Bitcoin

After the European Securities and Markets Authority increased cryptocurrency margin rates to 50%, it has obviously become a lot more expensive to trade Bitcoin and other cryptocurrencies, and a lot less appealing.

The spreads can also be quite off-putting as well because even if your broker does offer Bitcoin trading, you may need the price to move 50-200 points (or more) just to break even.

Nevertheless those that do have enough capital in their trading accounts can still potentially benefit from some big price swings because this is still quite a volatile market to trade, and when the price does start moving, it can easily move upwards of 1000-2000 points in just a few days.

Inside Bar Breakout

Many people are sceptical about treating these cryptocurrencies the same as any other market, and using the same kind of technical analysis to find profitable trading opportunities, but based on previous price action, it does seem to be very profitable to trade any breakouts that occur.

That’s why I wanted to highlight the current price action because the price of Bitcoin has been trading in a sideways range just recently, and more significantly, the last 5 daily candles are all inside bars, ie the last 5 candles are all within the high and low of the large candle from 15 August (indicated by the arrows), which had a daily range of around 500 points.

Bitcoin Price Chart 20 August 2018

How To Trade

A lot of traders have their own personal inside bar and breakout strategies that they like to use, but I myself like to enter a new position when the price moves above the high or below the low of the initial candle and CLOSES above or below this candle.

In my experience, you don’t want the breakout candle to be too large, but you don’t really want the breakout candle to be one that has a small trading range either because this could be a false breakout.

Anyway I just wanted to share my thoughts on the latest Bitcoin trading action, and explain how I like to trade these breakouts when they occur.

Whether the price moves strongly higher or strongly lower after the price closes above the initial candle remains to be seen, but it will be interesting to watch what happens regardless because the price has barely moved in the last few weeks.

An upward breakout could see the price test its recent highs of around $8500, whilst a downward breakout could potentially see the price collapse if it breaches its recent low of $5887 from last week and its previous low of $5769 from June.

Please note I am not offering any advice or recommending any trades. You should always do your own research and make your own decisions before entering a position.

US Crude Oil Closes Below EMA (200)

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Crude Oil Price Trend in 2018

If you have been following the price of US crude oil, you will have noticed that the price has been in a slight upward trend so far in 2018, going from around $60 per barrel at the start of the year to a peak of just over $74 per barrel at the start of July.

The price of Brent Crude has also been in a similar upward trend, rising from $67 to a peak of just over $80.

As a result of this, many of the large-cap oil stocks have seen their share price rise dramatically during this time.

Downward Trend in Summer

Since the price of crude oil peaked, it has since started to trend lower because we have seen a series of lower lows and lower highs.

This is relatively normal during the hot summer months because there is not the same demand, but from a trading perspective, it is interesting to look at the price chart to see if this is a temporary drawback, or the start of a more significant downward trend.

Price is Now Below EMA (200)

US Crude Oil Chart - August 2018

One key development is that the price of US Crude has just fallen below the 200-day exponential moving average (EMA (200)) on the long-term daily chart for the first time since September 2017, as shown in the chart above.

This is significant because this is a major indicator of the long-term trend, and is an indicator that is viewed with interest and acted upon by many traders.

So if the price continues to fall and establishes itself below this EMA (200) indicator, it could well be an opportunity to go short if there is a strong downward breakout.

Key Indicators of a Change in Trend

It is far too early to say for certain that US Crude is now in a bearish trend, and therefore likely to fall a lot further, just because it has closed below the EMA (200).

What we really need to see is a downward EMA crossover, where the EMA (20), EMA (50) and ultimately the EMA (100), all cross downwards through the EMA (200) because this will give a much stronger signal that a new bearish trend is emerging, and it is time to start looking for opportunities to open short positions.

It is also worth paying attention to the price of Brent Crude as well because if you look at this price chart, you will see that the price hasn’t yet closed below the EMA (200), but is very close to doing so.

Therefore if we do see downward EMA crossovers on both of these charts, this would suggest that the price of crude oil generally is entering a period of weakness, and is highly likely to continue falling.

Closing Comments

Even if we do see downward EMA crossovers, I still think it is highly unlikely that we will retest some of the previous lows of 2016, when the price of crude oil hit really did hit rock bottom, but I think a move towards $55 and possibly even $50 is certainly possible.

Either way, it will be interesting to see how the price reacts around these key levels because the EMA (200) is such a significant indicator in the world of trading.

We may find that this indicator acts as support and the price will eventually resume its upward trend, or at least stabilize between $65 and $70, but if we see further price falls, a big downward price move is definitely possible.