TomHall

USD/JPY - 2618 Trade Explained

FX:USDJPY   U.S. Dollar/Japanese Yen
USD/JPY - H1 - 2618 Trade Explained

Having had a double top and now approaching a retracement back into the 61.8% Fib level, we can now look for reasons to short the USD.

Unlike patterns we can't just place BUY or SELL orders in advanced.
Once we have completed the rules of engagement below, we are looking for confluence within a certain area that all coincide.
This in the long term will give us a better success rate.

Rules Of Engagement 2618
- Double Top
- Break below Neckline / Support
- 0.618% Fibonacci retracement
- Stop loss above double top
- Target 1 at 38.2% Fibonacci
- Target 2 at 61.8% Fibonacci

Good luck.
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Nice chart! I always add the following when I explain to others how to spot a valid double top: a double top is a double top if the wick of the second meets at least the candle close of the first, while the candle close of the second does not exceed the wick of the first. In other words, PA tried to make a higher high, but failed. This retest of resistance with less strength, usually coincides with regular bearish RSI divergence at the second top.
+1 Reply
TomHall TOP JasperForex
2 years ago
Thank you for adding that valuable content, I should have explained that above.
+1 Reply
gytn25
2 years ago
though it is a very conservative strategy, it often works very well, good explanation!
+1 Reply
TomHall TOP gytn25
2 years ago
It's certainly a strategy i have on my trading plan, but on many occasions it doesn't quite meet my criteria to execute.
It is a profitable strategy non the less if traded conservatively.
+1 Reply
TomHall TOP
2 years ago
snapshot

Great to see the 2618 setup show its potential.
Reply
gytn25
2 years ago
Can you tell me what you mean by target 1 at 38,2 fibonacci and target 2 at 61,8% fibonacci? Don't you mean target one is retest of structure ( the 0,618 retracement)) and target 2 the 1,272 fib extension?
+1 Reply
TomHall TOP gytn25
2 years ago
Of course, I will quickly draw on a chart to demonstrate for you.
+1 Reply
TomHall TOP gytn25
2 years ago
snapshot

I hope this helps a little more on taking targets. this is the same method i use for all my trades not just the 2618.
Anymore questions just shoot me a message.
+1 Reply
gytn25 TomHall
2 years ago
snapshot


But don't you create a rather big inverted risk reward then?
Reply
TomHall TOP gytn25
2 years ago
I tried to make it clear above that there are a couple of factors.
we are looking for confluence within a certain area that all coincide, so just because it hits the .618% doesn't mean we will short straight away.
I then look for other confluence e.g fib levels, ABCD, Gartley and Bat patterns, RSI divergence, Doji candle ect, so i am looking for other reason to short.
Historically this is a winning strategy, again depending on money management, discipline and a couple of other factors.
I do hope this helps a little more.
Reply
gytn25 TomHall
2 years ago
okay, I understand, so you use the 2618 is more like an indicator?
+1 Reply
TomHall TOP gytn25
2 years ago
That's correct it more of a signal to say okay we now have a 2618 setup where do we now look to get long or short.
Reply
chuck.soros
2 years ago
Interesting setup, I've seen it mentioned a few times in the chat and have always wondered about it as its new to me.
One thing that isn't defined is at what point of the retracement of the dbl top extension does the 2618 setup become invalidated?
In this USDJPY example the retracement goes beyond the 61.8 (closer to 78.6) would the setup still be valid?
+1 Reply
gytn25 chuck.soros
2 years ago
I think it becomes invalid when the price goes below the initial retracement before hitting the 0,618 or when it goes above the double top ( in this case it probably hits your stop)
+1 Reply
TomHall TOP chuck.soros
2 years ago
Technically speaking, the 2618 is not INVALID until we see a break of the double top.
Once we see a double top and a break of the neckline, we always then look for that .618% retracement, once that occurs it is then a valid 2618. Aslong as that retracement does not surpass the double top we are still valid.
+1 Reply
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