During my live webinar on Forex trading at Admiral Markets, I took a short trade setup based on the EURJPY 15 minute chart at a price level of 135.15 with a stop loss at 135.43 and a target aimed at 134.30. This post will explain why I took the trade, the idea behind it, the steps taken, the analysis performed and the trade management and exit.
First of all, I liked the setup simply because the currency pair was trending nicely to the downside and there was good bearish momentum in play. There was a well built triangle formation as well that offered clear boundaries of a break point (support line) and an invalidation spot (resistance line). When reviewing the moving averages I noticed a couple of things that supported a short setup:
1) The short-term EMAs (21) were below the long-term (144) EMA’s and confirming the downtrend.
2) There was a sizeable gap between the 21 ema band and the long-term 144 ema on the 1 hour chart, which indicates short-term bearish power.
3) The 21 EMA band was also orange which confirmed the fact that 21 EMA high, low and close were all bearishly angled.
My next step was to zoom into the 15 minute chart and I saw the same structure with trending moving averages and a wide gap between the short and long term EMAs. The GBPJPY had the same 1 hour setup but their EMAs were intertwined on the 15 minute world, which was one of the reasons I preferred the EJ. Both turned out to be fine trades in fact, similar to the AUDUSD and GBPUSD breakout shorts I was discussing during the Admiral Market webinar.
I took the trade setup when the 15 minute candle stick pushed through the trend line and the group of fractals just to the left of the breakout. This break confirmed the fact that support was broken but I waited for the close of the candle to be near the low.
The reason was straightforward: I wanted to see the bears stay in control throughout the break out process. If a major wick is visible on the bottom of the candle, then I would anticipate a pullback before pulling the trigger and entering the trade. This time around the break out was clear so I took a market order immediately at market close with a stop loss above the candle and EMA band.
The cool thing about Elite CurrenSea’s Quant tool is that it helps with 2 parts:
1) Establishing clear and simple targets.
2) A clear-cut statistic about any and every setup.
It’s a tool which can always be used for getting feedback from the market, contrary to strategies which filter out many of the market situations. In this case I did not use the tool when taking the live setup because running a live room and trading is already enough multi-tasking.
However, when I punched in the trade details into the Quant form, then the calculations did clearly show that the trade had good odds of success (75% is a good number compared to my typical setups).
Also the target tool worked as a charm. It displays purple lines as potential targets areas and shows the open spaces when a momentum gets going (see yellow circles in screenshot).
I had my take profit (TP) setup just at the beginning of the 3rd zone due to other Fibonacci targets. When price came close to my TP but then showed a possible bounce just before hitting it, I followed my trade management plan and took the profit there for +63 pips. Of course price did eventually reach the end of the 3rd zone (and even went further) but I was happy with the execution.
Thanks for tuning in and don’t forget that the EMA indicator is available for free when sending an email to info(at)elitecurrensea.com and check out the webinars at Admiral Markets!