September 16, 2015Daily Analysis

9/16 Analysis: Breakout VS Market Entry

Today, I’ll show you a breakout trade as well as a trade where conditions were right for an immediate market order so that you can see the difference.

When we first do our analysis, we are looking for strong and weak currencies. Right now, the AUD (orange line) is strong up top and the JPY (yellow line) is weak down below.

However, both are trading flat currently and have been for quite some time.

In this case, you can either wait until momentum enters the market or place a pending order 10 pips away from the current price to see if the trend will continue.

  • AUD/JPY BUY

You can see how the market traded sideways (that corresponds with the flat movement we saw on the indicator).

Then, trend continues up and your order would be triggered. From that point on, the pair went up over 20 pips.

When you watch the entire video analysis below, I’ll show you what conditions are necessary for a market order entry:

[00:00 – 04:43]

[slide] [8 currency lines tight left, dispersed immed ; widen rt]
Hello, I’m James Edward from CompleteCurrencyTrader.com. Welcome to today’s Currency Strength Analysis training video. I have two examples of break-out trades from the London morning session today.
So, this is what the indicator looked like at the London morning Market Open. You can see, if you do your initial analysis, you have a very strong [orange line] Australian Dollar (AUD) and a weak [yellow line] Japanese Yen (JPY). Now, neither of those two currencies are currently moving. So, they’re pretty much flat over the last 30 minutes. So, there wouldn’t actually be entering immediately.
Now, in this situation, you either would do nothing and wait to see how the market developed or, because of the strength of the trend that had been happening (and you’ll see this on the price chart in a moment), in our leading up to the London Market Open, you may want to use a pending order. You certainly wouldn’t be entering a trade immediately with a Market order because this is not an entry pattern, but you would, potentially, place a pending-by order on the AUD / Japanese Yen (JPY), 10 pips above the Open price.
If I go–

[slide] [B&W price bar chart – AUDJPY.MS]
(continues) … to that chart now, this is the AUD / Yen on the five-minute price bars. [sets cross point] This price bar (here) [indicates] is the London Market Open and you can see there was this big trend in the early European trading but, in 30 minutes leading into London, it’s very flat and sideways, which is why you wouldn’t be entering.
However, if you’d placed your pending-by order 10 pips above, you’d be getting traded around about here [cross point indicated] and, from that point you can [extends rt diagonal line] see that the price in total has gone up almost 21-22 pips. So, potentially, a profitable trade, there, depending on what sort of spread you get with your broker. (My broker, the spread is quite small on the AUD / Yen, typically less than a pip, so that could be a profitable trade.)
But that is an example of you using a [NOTE: believe he meant a “pending-by order”] pending order not immediately at the Open, but you place that 10 pips above–

[slide] [1st slide]
(continues) … the Market Open price.
However, there was another opportunity if you just quickly look here, you have the second-weakest currencies: actually, the [pink] Euro here… and, if I just fast forward–

[slide] [new view, 8 currencies squished left, then dance independently immed]
(continues) … 10 to 11 minutes. This is actually 11 minutes after the Open. You can now see that the currencies are starting to move more steeply. So the [orange] Australian Dollar (AUD) which we already established was the strongest currency is now moving up more steeply and, down to the weak side, the [pink] Euro has moved down to the absolute weakest currencies, now moving quite steeply.
So that is a trade that you could, potentially, enter with a market order at the 11-minute point. If I go over to that chart now and–

[slide] [B&W price bar: EURAUD.MS]
(continues) … show you the Euro / AUD. This is the Euro / AUD five-minute chart. [points] This is the London Open at this level (here). Now, from the Open [pulls diag line down from cross point] you can see that the price has actually gone straight down 76 pips altogether.
I’ve marked a red line on here [points] at the 11-minute point which is what corresponds–

[slide] [prior view, 8 currencies squished left, then dance independently immed]
(continues) … with this pattern that we’re now seeing, which is a strong confirmation pattern on the indicator.

[slide] [2nd view, B&W price bar: EURAUD.MS]
(continues) … That’s this point [indicates] here, so you have this big move down, after, in the second price bar of the session and then, this [red] line here, although it is at the bottom of this price bar, actually corresponds with 11 minutes into the Market (which is this price bar). And, from there [creates cross bar pt] you can see, if you’d ended with a market order [drags diag line down rt] because that was a strong signal with momentum, you’ve still got a 53-pip move. So you would’ve easily hit your 20-pip break-out trade there.
So, two good examples, there–

[slide] [prior view, 8 currencies squished left, then dance independently immed]
(continues) … in the London session where you could either enter with a pending order [slides view left to initial starting slide view] at the Open (or place your pending order immediately at the Open) because you can see that there is a very strong currency and a very weak currency. And, although they’re not moving, you’re not entering immediately and allow the Market to come to you.
If it doesn’t, of course, then your pending order wouldn’t be traded and you get into that trade. But that’s one way to trade there. [points top rt]
Or, alternatively, if you’d waited [rets to squished / widened currencies view] a little bit longer, which is probably what I would actually recommend in that situation, is you wait to see the better pattern. You wait to see if the market picks up and, you want to look for the steepening of lines. Look for the momentum. That [points rt to AUD orange line] is a higher-probability trade. And that is what–

[slide] [previous 2nd view, B&W price bar: EURAUD.MS]
(continues) … would’ve given you this move on the Euro / AUD, which is a much-faster move, much stronger, and gets you into that profit with a higher probability than the other ones.
So, two good examples there for you to look at:

[slide] [prior view, 8 currencies squished left, then dance independently immed]
(continues) … a pending order or a Market order, depending on the conditions that you see on the indicator at the Open.

[end]

(4:43)

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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James Edward
James Edward has been a successful Forex hedge fund manager & educator for over a decade. He founded Complete Currency Trader, a London based firm that has consistently trained individuals to become professional and profitable traders long term using the individual currency strength analysis methodology. CCT is an elite Forex educational firm and has a reputation second to none with over 90 positive reviews and an overall 4.538 out of 5 rating on the third party verification site Forex Peace Army. James’s affable personality, expert knowledge, notoriety for getting results, and steadfast dedication to his clients, has secured his position as one of the most trustworthy, liked, and in demand authorities in the industry.