Now the bat has been filled. In addition, I have readjusted my wave count and it shows that now the wave (v) of the ABC 5-3-5 pattern may be completed and that wave 4 has just stopped short of the wave 1 end point. This is a good place to get LONG on this pair. The upcoming wave 5 should be pretty interesting!
For those that are more conservative, waiting until prices actually break through the channel it is currently in (see Related Ideas: "EURUSD: How To Trade The EUR") would be wise. However, I trade what I see. And with the completed bat and my wave count, my charts is telling me to BUY.
MY TRADE PLAN
Since today is Friday, I'm not expecting any major move here. And in addition, by taking this trade now, I will be holding it over the weekend. So there is always the risk of this market gapping down on Monday open. But that is a risk I am willing to take and more importantly, that my trading plan allows me to take. Never break any of your trading plan's rules. Not taking the trade now would not be a bad idea and waiting until the market opens on Monday would be wise as well. By doing so, being that it's Friday, I don't think it would make much difference. But to each his own.
Please keep in mind that I am not giving any trading signals or trade calls here. Only providing my own trade thoughts for your benefit and insight as to my trading technique and style. Please don't ask if you should or should not take the trade or ask for stop loss and take profit levels. Any SL or TP given on my trades are my own I have used for my trade and are not recommendations for you to use. If you are not sure, then you do not have a trading plan for yourself in place. I suggest you make one before you continue to do any trading!
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"Sure, It could be. But there is a reason for drawing X where I did. Locating the proper XA leg is a skill in itself. Without that mastering that skill, your patterns will be hit or miss. But as you know if you have been following me for awhile that I am not a pure pattern trader. I use the art of harmonic wave trading. Basically, combining advanced patterns with Elliot wave theory principles. The reason that I did not draw X lower is because if I did, the bat's D point would then violate my wave count. Do you see that?"
Having said that, this bat is somewhat "forced" and not "natural". But the wave count rules are more important to me than the pattern. Patterns, the way I use them, complement my wave count and not the other way around. So in this instance, it necessitated the use of a "forced" bat. It is still a valid bat for sure. But on a scale of 1-10, 10 being the best, this bat may only be about a 7. Still, a bat is a bat is a bat. Prices can for sure still drop lower before turning. But if you want to catch the potential upcoming wave 5 up, gotta withstand the drawdown. GL!
I am a big bull on USOIL now. Since EURUSD is highly positively correlated with OIL, your count further strengthens my oil bull thesis.
But I do have a question for you, why don't you trade OIL, seems to be of low risks and high profit potentials? Also, why do you think EURUSD is positively correlated with OIL?
Thanks in advance!
Anyway, I'm sure USOIL has some very good trading opps, but so does many other pairs. Grass is not always greener on the other side.
As for the USOIL correlation with EURUSD, maybe it's not so much that USOIL is strongly correlating with the EUR as much as it is negatively correlated with the USD for now. You see, oil is predominantly bought and sold all over the world using USD as its settlement currency. When you have a strong dollar, that means oil is cheaper for USA to buy but not necessarily so for the european countries.in the EZ. Since oil is settled in USD, they must basically exchange EUR for USD to buy oil. So when USD is strong, the EUR is weak and vice-versa USD and EUR have a strong inverse correlation. Personally, because I mainly trade the majors, I use USD/JPY as a correlation gauge against the EURUSD since USDJPY has a strong positive correlation with the DXY. The USDJPY has a correlation coefficient of about >-70% with the EURUSD (using the Pearson scale).
So what is happening is that as the USD gets weaker (as I am projecting it will), the EUR gets stronger. Therefore, one euro buys more oil than before. Why is this important? Remember, although the U.S. is the largest SINGLE consumer of oil, the rest of the world combined (including of course the fastest growing country in oil consumption: China) far out consumes more oil than the U.S. alone (sorry, I don't have the actual facts and figures but this is just my opinion and I am not writing a thesis so I don't need to spend my time searching for the facts). So what happens when you have a weaker dollar now that you know oil transactions are dollar-based? Oil is cheaper for non-US buyers! So what do the non-US buyers do when the dollar weakens? They buy and stockpile oil like crazy! So when the rest of the world is buying more oil upon a weaker dollar, the demand for oil will go up. At least that is the perceived notion. But forex trading and speculative trading in general is based on perceived notions. Perception is reality in the trading world. So more demand for oil, the higher the USOIL and other oil-based indexes will rise. At the same time, so does the EUR.
From a trader's POV, another factor that can't be ignored is with speculative commodities trading. Large institutional traders use oil as a hedge in trading. So when the perception that oil prices will go higher prevails, oil futures will rise and USD futures will fall because those institutional traders will settle oil LONG and short the USD. So that is my long-winded macro-economic explanation as to why USOIL and EUR seem to have a strong positive correlation.
Whew! Haven't written this much on econ-theory since I don't remember when!
I think that a good investor/trader is almost always a good philosopher. I can see the philosopher in you between the lines :-)
I am sure you are making big money but I do have a suggestion for you, don't know if you are already doing it, that is to set aside certain percentage of your gains for long (relatively) term investments. The biggest problem of a trader is that he can't make extra large bets. A long term investor based on fundamentals can place large bets with very limited risks. That's why a Warren Buffet out performs a Jesse Livermore in the long run.
Your answer is greatly appreciated.
I don't want to make "extra large bets" because extra large bets means even more stress! And when you say "extra large bets", that automatically implies "extra large" in relation to each person's own account. 1 million is not extra large to Mr. Buffet. But it is to you and I. I'm sure that if Mr. Buffet made a "bet" of 50 billion, that would be extra large to even him and would cause him a lot of stress! Something he'd never do! Trading is best done with as less stress as possible in order to be able to trade with a clear mind. That's why you never ever trade with your rent money!
As for long-term investments, I don't feel the need to do that. As my "short-term" investments (i.e., trades) outperform any long-term investments by a long shot. Besides, I like trading. I don't want to get up everyday just to "check" on my long term investment to see how it's doing and that's it. Even when wealthy, I could see myself still doing day trading! Maybe just a little less is all. I like the thrill I guess.
Sorry, I've never posted a chart before so I don't know if this correct. I drew this up a couple of days ago , and I'm sure you have as well. I totally forgot to go back to it somehow, as I have impatiently waited, searching for a better long entry. It just might have been right there for me the whole time, for some reason I never went back to the daily. If there is no chart, I apologize. Trying to figure it out.