ETHUSD: Mixed Price Action Unfit For Long Signal.

ETHUSD update: Pin bar forms in an attempt to break the primary bullish trend line. This candle stick pattern is usually a key requirement for a buy signal, but not the only requirement. This price action is tempting as a long signal, but the location makes it more risky than its worth.

At S.C. we apply rules based trading techniques to call our trades. The first rule is that price needs to be at a predetermined level (support or resistance). At the moment, price is fluctuating between the 575 support area (.382 of recent bullish swing) and the 741 to 845 resistance zone (.618 of recent bearish structure).

In order to go long, price needs to be gyrating around the 575 area and then establishing a bullish pin bar. The 575 area also happens to be where the secondary trend line is located as well which adds to the bullish argument. Or price needs to be testing the 493 to 434 support zone (.618 of current bullish swing) in order for a long signal to meet the criteria for taking risk.

Just like in BTC, there is nothing attractive or special about the current price area which means price action is more likely to behave randomly here. Situations like the one visible on the chart, are what lure traders who are driven by greed and focused on money into the market. They focus more on the potential profit rather than the probability of generating that profit consistently over time. Remember even when everything lines up perfectly, the trade can still fail. So imagine the performance over time of trades that are taken for no reason. The performance is completely random minus your costs.

In summary, either price pulls back further and retests the 575 level, or it pushes higher from here and retests a broad resistance zone. Momentum favors the push to resistance, but what kind of risk must you face at current levels? Would you be okay with taking a swing trade now, and then watch it pull back 100 points all while hoping it recovers? That is not the kind of trade that we would call whether it works out or not. Controlling risk is our primary concern, especially when sharing signals with the community. Forcing a trade is one of the more expensive bad habits that newer traders must shake as soon as possible. At S.C. we don't force trades, we wait until market variables line up so that we have a much better chance of coming out ahead consistently and avoiding low quality setups that randomly yield profits. The value is not in the profit, it is in the repetition.

Questions and comments welcome.