In USDJPY analysis at first I would like to discuss H4 timeframe. After the shake-out which was also a stopping volume for mark-down movement, the price started to move sideways within trading range. This was a wide trading range. Therefore trading strategy was to wait price reversal near the resistance/support of the trading range and open a trade after the necessary signals from VSA setup. With VSA and Reversal indicators it is very easy to find a good entry and exit place. This pattern has been valid for 2.5 months until we had very strong signal (Major Demand) + Reversal signal. As a result there was a break-out from this trading range.
More recent picture we can see in M15 timeframe. Now the price has drawn two key levels:
- Long term support – on the above picture you can see how this support was established after several strong signals detected by VSA indicator. What is more important – the support has already shown itself twice when the price turned direction near this line (every time we had strong signals before price reversal).
- Long term resistance – this is the level which has also shown itself. Very remarkable setup here – up-thrust, which was also a stopping volume for mark-up movement. The up-thrust is a wide spread up-bar on very high volume which closed on the lows. The high of this bar is slightly higher than previous top (not shown in this picture). Weak Holders went long in this point and smart money used this liquidity to open short positions. VSA indicator also detected a very weak signal (Major Supply) on this bar.
Look carefully when the price is approaching these levels. VSA and Reversal indicators will help you to understand next price movement.
At the time of entry background was weak. Therefore it was o’k to look for short trades at that moment. The entry was made after dynamic trend turned from green to red. But before the trend changed to red there were no weak signals. Entry bar is a wide spread down bar – the price moved too far. It is better to go short in an up-bar with low volume, because it shows that professionals have no interest in higher prices.
The main mistake here is that the trade was not closed after buying has entered the market. You should exit immediately after 2 Minor Demand or Demand, Major Demand signals. In addition as you can see the Reversal also confirms exit in this point.
As it was noticed in CADCHF analysis, price was moving in a trading channel. In the above chart we see how the price has broken the upper limit of this channel. Break-out was made by high volume up-bar. Later price touched the trendline (very often once resistance is broken it becomes support) and continued to rise. There are several wide spread up-bars with high volume near the break-out. Background turned to strong and it was clear that pattern of moving in trading channel was changed. It was time to look for long trades.
- Background was strong
- Several strong signals (Demand and Minor Demand) before trend changed. Reversal also confirms these signals.
- Entry after dynamic trend turned from red to green
- Exit by reaching TP level.
Total: + 125 Pips
Right after my exit in the chart appeared weak signal and signal from Reversal indicator, price turned down.
Reversal indicator is looking for different patterns compare with VSA indicator and quite accurately detects price reversals in the chart. The best view of market can be achieved by using both indicators.
If we look at big picture in USDTRY, we can see that Turkish lira is moving up and now we have the biggest drawdown for the last 1.5 years.
Let’s look closely at the top of the market before price changed direction. Here we see several weak signals detected by VSA indicator. Reversal is also confirming price reversal. I want to draw special attention at up-thrust bar. This is a strong bearish signal suggesting that the price will continue to fall, especially when we have confirmation – following down-bars. Up-thrust has big volume representing high activity in this point. High of this bar is higher than previous one. Weak holders often place stop orders at the level of previous high and here these orders were activated. But it seems that professionals are not interested in upward move at the moment – the bar was closed on the lows. It means that selling absorbed buying in this bar.
There is a potential stop of the drawdown in H4 timeframe – wide spread down-bar on high volume closed on the highs. Also we have a Major Demand and Reversal in this place.
It makes more difficult to profit in USDTRY in long trades, because of swap value in this instrument: long swap is -67,6; short swap is 32,9. Therefore this instrument is interesting for Carry Trading (trade based on the different interest rates between two countries. The carry trade process involves selling currency of country with a low interest rate and using it to buy currency from a country with a higher interest rate). Therefore the drawdown is a very interesting moment to short this instrument on the top of the market or at the end of up-waves.
This is a trade analysis where I give some tips about what you should avoid in your trading. This trade was opened right after strong signal (Demand) appeared on the chart. Strong signals show that buying has entered the market. But if you do not have other components of a valid VSA setup you need to step away and wait another chance. This demand may represent buying from weak holders which open long trades against current price movement.
- At the time of entry background was weak and it was wrong to think about long trades in this case.
- Entry was made after strong signal, but dynamic trend is still red. For a long trade dynamic trend has to turn from red to green.
Also in this chart you can see our new indicator – “Reversals”, which is designed to detect price reversals. As you can see “Reversals” also does not support the entry after the strong signal.
In this trade I will show how to use in your trading joint work of two indicators (VSA and Reversals) in order to significantly improve your chances for success. Trading becomes much easier with these indicators. As you can see Reversals with high accuracy shows places where price changes its direction. It may be used alone and as a good addition to VSA indicator (in this case you have the best view of the market).
- At the time of entry background was weak;
- Weak (Minor Supply) and reversal signals before trend change. Reversal signal confirms the signal given by VSA;
- Dynamic trend turned from green to red, entry while price didn’t move too far;
- Exit after reversal signal. Right after this signal on the chart appeared several strong signals, high volume and the price started to rise.
Total: + 41 Pips
