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
This is a follow-up trade of previous USDCHF analysis. In H4 timeframe price has broken long-term resistance and continued to rise. Background is strong. This is a good time to look for long trades.
- Background is strong
- Strong signals appeared on the chart (Demand, Minor Demand) before dynamic trend changed from red to green
- Entry after dynamic trend turned green
- Exit immediately after weak signal (Supply).
Total: + 61 Pips
There is no stable trend in EURCHF (M15) and the price is moving sideways. On the above chart we have upper and lower limit of trading range. It is not a good idea to open a long trade when the price is near upper limit and you do not have strong signals suggesting that the resistance will be broken. Because it is unlikely that the price will leave trading range if there is no imbalance between supply and demand.
- At the time of entry background was weak – this is not o’k for a long trade. If we watch the price movement in this chart we see that background often turns from weak to neutral and to strong. This is because price is moving in a trading range and there is no clear trend.
- Weak signal near resistance before trend changed – this is a mistake to open a long trade in this point. Because this is a clear indication of price reversal. Also there are no strong signals which would suggest that price will continue to rise.
- Dynamic trend turned from red to green – o’k
- Long trade has to be immediately closed after Supply signal
On January 15th this year, when the Swiss National Bank (SNB) suddenly announced that it would no longer hold the Swiss franc at a fixed exchange rate with the euro, there was the biggest single-day move for this country’s currency in the last 40 years. Now let’s see how the Franc is doing in 10 months after this event.
Since May USDCHF movements have been limited by two lines: 1. Up-trendline which represented support for the prices (each next low is higher than previous one); 2. Resistance level (at 0.984) – it was a reversal point for the prices. Also this figure is known as ascending triangle. Each time Analytical Trader has detected strong signals near the up-trendline and weak signals near the resistance right before the price turned its direction.
Recently we had a break-out through the resistance. Then the price moved back to this resistance just to touch it and continue to move up (it happens very often when the resistance becomes support). In time of touching there was no big volume (it is called no-supply) and it means that professionals are not interested in down move – they are now bullish.
Now background is strong. The price is reaching two important long-term resistance levels: previous high and the price level which was valid before the SNB unpegged the franc. It will be interesting to watch price behavior near these levels. Look carefully for weak/strong signals and volume when the price is close to the resistances.
