Heikin Ashi Forex Trading Blog.

Heikin Ashi - daily chart and hourly chart analysis! 11/01

I am sure many people got sucked in to buying and selling trying to make a few pips. It was in a sideways range and with small bursts of trends emerging, only to collapse.
I lost a few pips ...45pips to be exact and then recover about 22pips later on in the NY session.

Its a trading cliche that the trend is your friend and most trading systems are based around the trend following systems. Its said that the trends last only about 20% of the time and the rest is spent in sideways range bound movement. If 80% is spent in range bound, non trending market, it only makes sense that you should not be trading the trending system in a non trending market. The real question comes is how can you distinguish a non trending market and a trending market. I believe that indicators do provide the answer. However what it does not answer is when has the market really begun to trend out of a sideways market.

The real holy grail system in my opinion is those which are flexible enough to exploit a non trending as well as a trending market.

I will try and give my version of a trending and non trending market and maybe we can exploit them to make profit in both kinds of markets.

I have plotted a EMA 20,8 and 5 period on the chart. If you look closely they seem to be bunched up indicating that there is no real direction. The longer 20EMA is as close as horizontal as it can be. However the additional confirmation is the MACD signal lines, lying flat along the zero line. I was amazed how I kept loosing pips trying to trade in the direction of the market. What I should have been doing instead is to trade countertrend.

Here is my setup for a non trending market as described above :
Plot a Bollinger Band with default settings. Identify that the MACD is neutralized. Wait for prices to reach the bottom or top of the BB and trade it counter trend. If it touches the top of BB, sell and vice versa. You will be amazed how accurate and really good this setup is. The 20EMA acts like a magnet for the prices. You can easily scalp 30-50pips even in a range bound market.

Daily Chart Analysis :

Prices have formed a swing high and with 2 days of prices failing to reach higher, there is definitely bearish mood to the markets. Sell short with a SL of 1.7700. First Target is 1.7500 and if reached , next move for 100pips is in order.

Intraday Charts :
Again looking bearish, we might prices move lower through the day. A breakout of prices below 1.7600 is good for 40-60pips.
On the upside, a break of 1.7700 is bullish again. But I think it will take some very good news to move it so high.

We do have some news affecting the GBP, predominant among them is the BOE meet.

posted by ProphetOfProfit @ 4:16 AM