We like to take a contrarian view on retail trader market sentiment, with most retail traders being strongly bullish on this pair we are thus looking to go short. Going short at this area is very plausible because the trend is down. Furthermore, there is evidence that this will be a powerful rejection because these two currencies' strengths are different and diverging(4h, D) in strength; one must establish strength over the other. In this case USD is strong, and so we want to sell EUR. We all know currencies hate being strong or weak together, one must dominate the other, we are looking for USD to show more strength to also feel comfortable with going short.
To confirm entry into this trade we are going to look at price action(nice rejection of area) + similar rejection on EURUSD's strongest correlated pair, EURJPY and AUDJPY; on approach to area we want to see structure to the left of EURJPY and AUDJPY's chart to show that not only is this a place sellers come in but a TIME sellers come in. A forex chart is a 2D chart; it has time and price (when and where)
*bold means checked
Things that make this trade powerful:
PERFECT SETUP
This list is not a checklist, it is merely a list of the order of importance to getting into this trade.
If you like this analysis, feel free to follow me and post your comments, tell me what you see that I may have missed that can put this trade against me.
This is my road to 1 million dollars series.
To confirm entry into this trade we are going to look at price action(nice rejection of area) + similar rejection on EURUSD's strongest correlated pair, EURJPY and AUDJPY; on approach to area we want to see structure to the left of EURJPY and AUDJPY's chart to show that not only is this a place sellers come in but a TIME sellers come in. A forex chart is a 2D chart; it has time and price (when and where)
*bold means checked
Things that make this trade powerful:
- Risk reward of 1:2 = we need to be right 33% of the time which is about how much a market trend and we are trend traders.
- Trend= We figure out the dominant trend to increase our odds since the market trends 30% of the time. Being with the trend increase odds of success by 15%
- Price action = a rejection of the area.
- Retail trader market sentiment = Taking a contrarian view on market sentiment which gives us a short bias.
- Currency strength divergance= Big move coming to decide which currency is strongest.
- Correlation = When EURUSD reaches this area we are looking for a similar structure on AUDJPY to know the time and place too long on the chart.
PERFECT SETUP
This list is not a checklist, it is merely a list of the order of importance to getting into this trade.
If you like this analysis, feel free to follow me and post your comments, tell me what you see that I may have missed that can put this trade against me.
This is my road to 1 million dollars series.