- At the time of entry background was neutral. In this case you should check above timeframe. If it is weak – o’k for a short entry. In case the background is strong – you should not open a short trade right now.
- Weak signal (Minor Supply) before the trade was opened – o’k.
- Dynamic trend is still green. You should open a short trade when you have the whole set for a bear trade and only after the dynamic trend turns from green to red.
This is not enough just to see a weak signal and at once enter the market, because you have to analyze not only individual bars but look at the whole picture. Analytical Trader will help you to do this. You just have to follow simple instructions and wait until you have all the necessary signals before you open a trade. It will significantly increase your chances to be sucessful in trading.
Right after last short trade in EURAUD there was one more chance to use weak signal near the resistance level (this level has shown itself many times). Weak signal appeared during up-thrust. Up-thrust is a wide spread up during the bar, accompanied by high volume, to then close on the low. Up-thrusts are usually seen after a rise in the market or when the market is trading sideways. It is a sign of weakness – you do not normally see up-thrusts in strong markets. Up-thrusts are all moneymaking maneuvers helping the market-makers to trade successfully, at your expense.
- Background is weak
- Weak signal (Supply) near the resistance level
- Dynamic trend turned from green to red
- Entry when the price still didn’t move too far
- Exit by reaching TP level
Total +388 Pips
In previous EURUSD analysis I noticed how the price is moving in an ascending triangle. The same pattern you can see in the above chart. Now Analytical Trader has detected bullish setup: Background is strong, dynamic trend turned to green. Only one component is missing – strong signal behind.
I want to note how accurately it showed SL (stop-loss), TP (take profit) and BE (break-even) levels.
SL level is below up-trendline – it is a safe place, because it will require effort to cross this trendline and it will not be easy to trigger SL in this level.
BE is right on a long term resistance – you will not get losses in case of false break-out.
TP is on the level of previous support and very high volume. There is a big chance that in this area the price may change its direction.
In H1 timeframe we see how the price crossed long term resistance (area of previous Major Supply) with wide spread up-bar on high volume. It tells us that this break-out is genuine. Before the break-out the price was moving in an ascending triangle – look how lows grow up.
- Background is weak – it is ok for short trades.
- There is no weak signal before the entry – it is a mistake to enter the market if you do not have confirmation from strong/weak signals. These signals show you the status of imbalance between supply and demand.
- Dynamic trend turned from green to red – it is o’k. If other part of a short setup is in order, you should look for up-bars with low volume (no demand). No demand means that the traders who matters (smart money) are not interested in higher prices. In this case – why should we?
- When you see a strong signal in the chart (Major Demand, Demand or two Minor Demands), it is time to close your short trade, because there is a big chance that the price will change its direction.
Always remember that it is very important to make a good entry. But it is no less important to timely exit the market.
Earlier I noticed that short-term resistance in EURAUD has formed strong obstacle for higher prices. The price has noticed this resistance several times. Retail traders will set their sell-limit or market orders as soon as the price comes closer to the resistance level. If professionals want higher prices they will have to absorb this selling. Therefore volume will be high. Volume Spread Analysis can help us to understand whether the resistance will be broken this time (in Analytical Trader it is red bars, presence of strong signals before a move takes place and absence of weak signals).
In the above chart the price once again approached the resistance, but several weak signals suggest that there will be no rally. Therefore I found here the following setup for a short trade:
- Background is weak.
- Several weak signals (two supply signals and minor supply) near the resistance level
- Dynamic trend turned from green to red
- Entry when the price still didn’t move too far
- Exit after strong signal (minor demand)
Total +118 Pips
More than 1 week AUDJPY was moving in a trading range (limited by 82.80 and 85.05) between long term support and 2 resistance levels (long term and short term resistance).
The first resistance level was formed when the price started to move down after several weak signals. Later the price came again to this level. Weak signals (Supply and Minor Supply) tell us that this time there will be no break-out. Two resistance levels which are very close to each other – it is a very strong barrier for higher prices. It will require effort to cross this level. Look carefully when the price is near the support or resistance levels. Volume, spread and strong/weak signals will help us to understand if the price is going to cross these lines now.
In the chart I highlighted down bar with wide spread on high volume. This movement was created by important news – “Nonfarm payroll employment” in the US. There is always high volatility in the market right after the news. Here we see that the result of this effort is negative – the market has turned and started to move up.
