10/27 Analysis: Sometimes Profits Take Longer Than Expected
During the London session, the JPY (yellow line) is the strongest currency and has momentum up.
The CAD (green line) is weak and momentum is coming into the market pushing it further down.
- CAD/JPY SELL
So if you placed your entry 10 pips below the opening price (per the breakout strategy rules), your order would have been triggered only to bounce sideways for a couple hours before finally breaking through to your profit target of 20 pips.
This shows you how even with a good pattern on the indicator and with current momentum present, we can’t predict what the market will do or when. In this case, you still have a profitable trade but it took a little longer than normal.
You can watch the entire video analysis below:
[00:00 – 05:53]
[slide] [1st view indicator: blue / green red down, yellow / orange up]
Hello, I’m James Edward from CompleteCurrencyTrader.com. Welcome to today’s Currency Strength Analysis training video. And, today, we’re looking at an example of a break-out trade which shows you that you’re not always assured of a fast profit when you are trading a break out. We can only do what the Market is allowing us.
So, let’s start out with our initial analysis. This is what the indicator looked like at the London Open earlier today and, initially, you’d see that the (yellow) Japanese Yen (JPY) is the obvious strong currency, which is, actually, continuing to move up to strength. So, that is a currency you’d have your eye on and, down to the weak side, it’s a little bit more messy, but, the (green) Canadian Dollar (CAD) is the weakest currency, overall, over the last hour. And it is, in fact, the only currency that, right now, immediately, at the London Open, is starting to turn down further to weakness. So, that immediately tells you to take a look at the (green) Canadian Dollar (CAD) against the (yellow) Japanese Yen (JPY), as a pair.
I wouldn’t suggest you actually immediately trade. You know what to do, and that is to place a pending order 10 pips below the Open price and, if that trend does continue, that pending order is triggered as the trend gets better and that’s what would actually get you into the Market.
However, I’ll fast forward through this indicator to show you how those two currencies–
[slide] [2nd view: yellow higher, green dives lower]
(continues)… developed and, you can see that it is both of those currencies that continue with the (yellow) Japanese Yen (JPY) to move up to strength and the (green) Canadian Dollar (CAD) moving down to weakness. And, if I–
[slide] [3rd view: green dives, yellow / orange climb]
(continues)… pause it at this point, here, this is 10 minutes after the Open, just coming up to 11 minutes after the Open, and what you can see now is you do have that excellent pattern [points yellow initial climb] for an immediate entry. So, even if you hadn’t placed your pending order 10 pips below the Open, immediately at the Open (back here) [points 2nd point yellow’s climb] you could now be entering with a Market order because you have sufficient momentum on this particular currency. The (yellow) Japanese Yen (JPY) is now continuing up to strength very, very nicely and it is getting steeper and steeper, which means the momentum is picking up.
And, remember, it is the momentum that we really are looking for in this break-out strategy. This is the precisely the kind of condition we are trying to take advantage of in this when a new financial center opens. And you do have a lovely pattern between the (yellow) Japanese Yen (JPY) and the (green) Canadian Dollar (CAD) because this is a currency that is weak and continuing to get weaker and is now, again, moving much more steeply down.
So, again, at 10-11 mark after the Open, you have the absolute strongest pair to match against the absolute weakest and they are continuing to move with increased momentum.
So, if I go–
[slide] [B&W vertical line CADJPY.MS]
(continues) … over to that chart now, this is the (green) Canadian Dollar (CAD), the (yellow) Japanese Yen (JPY) on the five-minute price bars. And this is the Open five-minute price bar at this level [points abt 1/3 in during fall] (here). And you can see, prior to the London Open, there had actually been a trend which is what we were seeing on the indicator. And, at the Open, the price did, actually, start moving down [strokes length of bar] further and further.
This is, actually, a trade that I took, myself, today, with my own strategy, as well, so I actually enter this trade. I actually entered [points bottom 3rd midi-length bar left center] round about at the bottom of this price bar. I waited for all this conformation [points same 3 midi-length bars] to say, “Yes, this is the price, actually, breaking out,” and that, pretty much, coincides with what you’d do had you, at the Open, actually placed your pending order 10 pips below the Open price.
So, there’s [points middle of 3 bars] the Open. Ten pips below is around about [points 3/4 down 3rd bar] here, around about where I actually entered my trade, as well. But what this trade is demonstrating, as well, is just because we are entering with momentum and it is at a Market Open, so we generally do have that flurry of all activity which will carry the trade very quickly into profit, that doesn’t always happen. Sometimes, the Market is just slow.
So, assuming that you’d entered around about the same price as I, down [points 3/4 down 3rd bar] here, after your entry, not an awful lot would happened. The price went sideways and then pulled back, so, for a lot of this period (here) [points generally at center] you’d be in an unrealized loss. You wouldn’t be stopped out for loss because, remember, you’re entering this with a 20-pip stop-loss, so your stop would be [hovers cursor in space above sideways mov’t] up, somewhere. It hadn’t really trailed down because the price hadn’t really moved into profit.
By the time the price starts moving down into profit when you’re trading stop would start closing up behind–
[slide] [2nd view zoomed out B&W vertical line CADJPY.MS]
(continues) … that trend actually gets underway again. (And I’m going to have to zoom out a little bit to fit everything in.)
This [points same 3rd midi-length bar] is where your entry would’ve been–this is where my entry would’ve been. You can see for the most of the London morning, or, certainly, for the first hour to an hour-and-a-half, not an awful lot happened and, then, gradually, [points along sideways, then down fall] the price started pushing down. And, this would be a trade that, if you’d left it open, would’ve been opened for a long time before it actually went down and hit your profit target. So, your profit target would’ve been around about [points dip just right of ctr] here. So, [points length of sideways mov’t to drop] this would’ve been a long, slow trade before you actually reached it. But, at no point did it reverse or go near your stop-loss. So, this wouldn’t have been a losing trade. It would’ve been a profitable trade.
It just goes to show that, even though you are–
[slide] [prior 3rd view: green dives, yellow / orange climb]
(continues)… entering with momentum, which is a great entry at this particular moment ten minutes after the Market is Open–
[slide] [previous 2nd view zoomed out B&W vertical line CADJPY.MS]
(continues) … that doesn’t guarantee that the price is immediately going to rocket down in that direction and stop you at your actual profit within five or ten minutes, which is, ultimately, what we would like to have happen. But we can’t control what happens next after our entry. We can only “go with the flow” of the Market and, if the Market decides it’s going sideways, then that’s just what we have to live with.
But, even so, if you are [points 3rd midi-length bar, 1 after Open] trading strength against weakness, you are playing the odds dramatically in your favor. And, as long as that imbalance continues to exist, then the chances are [draws cursor along progress to drop] that trade will continue on down. And, again, you’ve walked away with another profit–
[slide] [prior 3rd view: green dives, yellow / orange climb]
(continues)… on what is a very simple strategy to get you into the Market with not an awful lot of analysis.
You can see that our Currency Strength Indicator is an effective tool for picking out the highest probability, lowest risk trade set ups while avoiding market conditions that aren’t favorable. If you keep using this tool every day along with our daily Forex analysis, you will increase your win rate and be on your way to becoming a profitable trader long term.
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