Sunday, March 29, 2009

Day Trading Rules - Trade What You See Not What You Think

Thursday for euro was a NR7/ID (narrow range 7 & insider day). Since euro already stayed in a top range for 5 days, such kind of volatility dried up would indicate a high probability trending day on Friday. For a NR7/ID, there is no need to predict which direction market will breakout, cause either direction is possible. We just need to follow what the market is leading us.

The first short signal was given at breakdown Thursday's low. On hourly point and figure chart, it's a double bottom breakdown at 1.3500 confluence with the break of support trend line. The second short signal was given at breakdown the bottom of the top range, on hourly point and figure chart, this was a breakdown at major support at 1.3433.

1st downward target: 3356 (average daily range)
2nd downward target: 3265 (average daily range + 1std)
3rd downward target: 3174 (average daily range + 2std)

The major downward movement happened in London session. In US session, euro found support at its daily 2nd downward target. By the way, Friday formed a WS7. This was a classical NR7 setup. Detail information about NR7 setup can be found in Linda Raschke's Street Smarts: High Probability Short-Term Trading Strategies or Toby Crabel's book.

Cable made a similar breakdown at the bottom of its top range. Before the breakdown, cable already made a series of lower highs and lower lows, on point and figure chart, cable formed a downward channel, the short signal was given at the double bottom breakdown at 1.4533, confirmed by the breakdown from the channel at 1.4433, then followed by the breakdown from the support at 1.4400.

Yen met the same resistance from 99. Last week on hourly point and figure chart, there was a triple top false breakout. This time we got a double top false breakout. History does repeat itself.


daveM said...

nice thorough approach.....!!

Trader Rich said...

Thanks daveM

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