Once again this afternoon there have been plenty of intra day trading opportunities for us as forex traders, both on the tick charts and also on the time based charts, and as the European and UK sessions come to an end, we’re now starting to focus on the Japanese yen once more, which is moving away from an oversold position on the fatman indicator.
Both the Australian dollar and the euro look to be presenting good opportunities, with both having reached overbought positions earlier in the trading day, and we’re now looking at the 15 minute chart for a possible change in sentiment for the EUR/JPY later, following the bullish momentum that has seen the pair climb from the morning position of 104.16 to reach an intraday high of 105.20 at the start of the US trading session.
As we can see from the chart there are several interesting signals. First, the magenta wide bar price activity failed to follow through earlier in the day, with the pair continuing to trade within the spread of the bar, a common feature following a wide spread bar, suggesting weakness in the move. Second, the short term trend has now changed from green to white, indicating a lack of direction and sideways consolidation. Thirdly, the longer term volume has now changed from green to white, confirming that buyers are no longer in the ascendancy in the market, and finally, the heatmap has now changed from bright green to dark red.
One of the hardest lessons to learn as a forex trader is that we have to be patient, and the reason I wanted to highlight this trade is that this is a classic case of watching and waiting for ALL our indicators to align, to give us those high probability, low risk trades, which ultimately make us succesful in the long term. BUT, we have to be patient, and in this case we are now waiting for several signals to combine to give us that low risk set up.
First, we need to see both the long term and short term trends turn red – at the moment we have one which is white, whilst the longer term is still green. Second we need to see both our short term and longer term volume bars turn red, and finally we need to wait for an initial entry signal from our roadkill indicator. Then and only then will we be ready to open a position, confident that we are trading in a low risk, high probability position.
Equally important is our exit, something few forex traders ever consider when opening a new position, and here we would be looking to take profit or close out the position in the 104.16 area, defined by an area of potential price support which could provide a barrier to any move lower.