In these times of low volatility and ranging markets in the Forex markets (outside of the recent GBP strength) we are presented with a great opportunity to create beautiful swing positions in the some currency pairs! As some of us may know, volatility refers to the amount of uncertainty or risk about the size of changes in a security's value. A higher volatility means that a security's value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security's value does not fluctuate dramatically, but changes in value at a steady pace over a period of time. Thanks Investopedia lol. So basically swing positions need low volatility to perform optimally. This is because they depend on time market participants to cohesively move the instrument lower steadily as to not touch stop-loss orders and trailing stops. Dramatic price swings in volatile markets reach to touch these orders which upsets the entire position.
PAIR AVAILABLE FOR SWING TRADE:
EUR/USD is the perfect pair to stalk for the next week or two because it's been loosing lots of volume and volatility moving towards it's 2014 low. As of now the pair is testing it's previous price of 1.35 which was most recently supported Friday (July 18) and before that June 5. Right now the pair's RSI on a daily chart shows bullish divergence from May 28th where price was 1.35864 and the RSI was at 27.1. Most recently (July 18th) the price has moved lower to 1.34903 with a higher RSI of 36.55!! This gives me the impression price wants to move higher but the pair isn't trading in that fashion which tells us to wait a bit.
From 1.2744 the pair has seen a high of 1.39928 which is now the swing high. The price 1.35 is around the 38.2% retracement of this swing while 1.33 is the nearest round price to the 50% retracement of this swing. With the 50% Fibonacci level being the most often tested price level along with the lack of upward momentum off 1.35, leads me to believe there's more room to the downside for this pair.
The ATR is around 43 pips daily which we can say will lead us to our entry target at 1.33 by the end of the week or the beginning of next week. By the 28th of July the ascend towards 1.38 should begin.
1.38 is our most recent resistance which was support for the upswing in April and May. Our first target should be reached by around August 11th or 12 days or so. Our next target of 1.400 (just above our swing high looking for new high) should be reached around 5 trading days later which would be around August 18th.
# Beware of Wednesday July 30th as the US Fed. Bank announced it's fed fund rate. I think you know how important this is so try to already be locked into profits (at least +43 pip). By now price could be around 1.34 and if price retraces to 1.33 and holds I would look for an opportunity to increase my position size.
# The next day to fear is Wednesday August 6 when the ECB announces it's EURO minimum bid rate which essentially the same as what the US fed bank will be doing in July. On this day you can look for a pull back to a previous resistance that may turn into a new support for another opportunity to increase your position size.
With an entry of 1.33 we can safely set our stop/loss at 1.32 or -100 pips. From a 4-hour chart view we can see the last downtrend from September 2013 was the next resistance level on the 4th and 5th which can now act as our 1.33 buy support on our way up this 2014 August. [That's almost perfect market symmetry, off by maybe 20 days lol.] Below 1.32 the next support we can assume is 1.28 which would disrupt any risk tolerant trades. From 1.33 to our target 1.40 we are pretending a 700 pip profit. From 1.33 to the next EXTREME support 1.28 we pretend to assume a 500 pip loss. Even if we took this trade our risk reward:ratio would be 1:1.4. Our trade isn't so risky as we are setting our stop/loss -100 pips away. That gives our trade a 1:7 risk:reward ratio, WITH confluence in indicators and price & volume.
With respect to the law don't copy this idea lose money and try to blame it on me. If I trade this plan I'll make money because I know my strategies and plans. If you want to trade and make analysis like me let me know. And don't say I never gave you any ideas.
PS: IM IN FLORIDA RIGHT NOW
GBPUSD should continue lower into my target of 1.42300. Along with this we have GBPNZD which I have set a target range of 1.94 and 1.92 for traders to sell into.
