We like to take a contrarian view on retail trader market sentiment, most retail traders are shorting this pair, but i will explain why i am also consider shorting further in this comment or when the trade develops more. Going short in this area is very plausible because the trend is down, it also makes me feel comfortable shorting with other retail traders since most retail traders were shorting in the previous up thrust. Furthermore, there is evidence that this will be a powerful rejection because AUD is stronger than EUR(4H D); one has established strength over the other. We all know currencies hate being strong or weak together, one must dominate the other, we are seeing AUD showing strength, which makes us feel comfortable going short.
To confirm entry into this trade we are going to look at price action(nice rejection of area) + similar rejection on EURAUD's strongest correlated pair, USDCAD; on approach to area we want to see structure to the left of USDCAD's chart to show that not only is this a place sellers come in but a TIME sellers come in. A forex chart is a 2D chart it has time and price (when and where). Luckily there is such a structure and shorting at market open is very plausable.
Things that make this trade powerful:
This list is not a checklist, it is merely a list of the order of importance to getting into this trade.
If you like this analysis, feel free to follow me and post your comments, tell me what you see that I may have missed that can put this trade against me.
This is my road to 1 million dollars series.
To confirm entry into this trade we are going to look at price action(nice rejection of area) + similar rejection on EURAUD's strongest correlated pair, USDCAD; on approach to area we want to see structure to the left of USDCAD's chart to show that not only is this a place sellers come in but a TIME sellers come in. A forex chart is a 2D chart it has time and price (when and where). Luckily there is such a structure and shorting at market open is very plausable.
Things that make this trade powerful:
- Risk reward of 1:2 = we need to be right 33% of the time which is about how much a market trend and we are trend traders.
- Trend= We figure out the dominant trend to increase our odds since the market trends 30% of the time. Being with the trend increase odds of success by 15%
- Price action = a rejection of the area.
- Retail trader market sentiment = NOT TAKING INTO ACCOUNT read above
- Currency strength divergence = currency strength established
- Correlation = When EURAUD reaches this area we are looking for a similar structure on USDCAD to know the time and place too long on the chart. WHICH THERE IS!!
This list is not a checklist, it is merely a list of the order of importance to getting into this trade.
If you like this analysis, feel free to follow me and post your comments, tell me what you see that I may have missed that can put this trade against me.
This is my road to 1 million dollars series.