Good morning all

What`s up or down this morning?

A couple of weeks ago in one of my Friday posts I showed you how the average daily ranges of most pairs have dropped significantly. I looked at 29 pairs and out of the 29 only one (GBP/Aussie) had a daily range over a 100 pips.

The average daily range for all the 29 pairs I think came in the mid 50`s per day…..most of the majors were only in the low 40`s.

Earlier this year the figure on average was double.

I remember trading the Gbp/$ 6 or 7 years ago when the average range was around 150 pips!

In those days price didn’t move much overnight in the Asian session and it was often easy to make profitable trades when London opened.

So we know the market did change – and we are struggling to get follow through we want…..

Ok…..we need to adapt…..BUT HOW ? 

Are you familiar with that TV show – Who wants to be a millionaire?

It is an international television game show franchise.

In its format, contestants tackle a series of multiple-choice questions to win large cash prizes in a format that twists on many game show genre conventions – only one contestant plays at a time, similar to radio quizzes; contestants are given the question before attempting an answer, and have no time limit to answer questions; and the amount offered increases as they tackle questions that become increasingly difficult.
The maximum cash prize offered in most versions of the format is one million of the local currency.

Now…..you also have some lifelines if you can’t answer the question…….

The most well-known lifeline to American viewers are……

* Ask the audience
* Phone a friend
* and 50/50 ( they give you 2 possibilities and the player needs to pick the correct answer)

After three strikes – you are out !!!

So yesterday I used one of my lifelines…..

I phoned a friend who works for a very big international Forex broker…..to find out what they are doing to overcome the current challenges.

Well, I am not going to go into details……but their traders also had to adapt after experiencing deeper drawdowns than usual…..and one way is to look at the potential profit take areas and to lower the expectations of a homerun trade.

Now they all have different ways how they get into trades…..but some of them follow the same principle when it comes to profit take areas.

The conclusion?

They fib from their entry to their stop to get potential profit take areas.

  • Once price hits the first profit take area they take some profits and either leave the stop where it is or move the stop to just under/above the entry.

 

  • Now they go for target 2 – medium probability. Once that is hit….they take some more profit with the stop just under/above the entry or moved it to 161.8 fib.

 

  • and leave the balance to either kick out with the correction or reached the profit take area at  the 423.6 fib.

How to Trade Smaller Daily Ranges:

Ok Pierre I have lost you here……. 🙂

Let us have a look…..let`s put it to the test…..let me show you.

On Monday in my Quick Quack post I flagged some pairs – Can you still remember?

Possible resistance coming up for potential sells on………..

Euro/Dollar……possible resistance coming up at 1.1400 and 1.1413 and 1.1438 for possible shorts.

Euro/CAD……..possible resistance coming up at 1.5045 and 1.5075 and 1.5121 for possible shorts.

Euro/JPY………possible resistance coming up at 122.43 and 122.65 and 122.85 for possible shorts.

Euro/SGD……..possible resistance coming up at 1.5452 and 1.5497 for possible shorts.

All of the above are correlated so don’t take ALL of them !!!

GBP/Dollar…..possible resistance coming up at 1.2764 and 1.2824 and 1.2870 for possible shorts.

Aussie/Dollar..possible resistance coming up at 0.6965 and 0.6980 and 0.7000 for possible shorts.

NZD/Dollar…..possible resistance coming up at 0.6631 and 0.6652 and 0.6674 for possible shorts.

CHF/JPY ……..possible resistance coming up at 110.00 and 110.15 and 110.53 for possible shorts.

Some of the above are correlated so don’t take ALL of them !!!

………………………………………………………………………

I prefer to find my high probability areas on the 4 hour and then to wait for confirmation before I take the trade.

So lets take the above currency pairs and the above fib levels into consideration after I found the confirmation on the 60 min envelope break.

Pink lines on the charts = my levels I called on Monday. 

So once the entry candle triggers, I will fib from the confirmation candle`s close to the top area where we want the stop…….so that we can get the potential target areas. 

Euro/Dollar : Reached the first profit take area. 

How to Trade Smaller Daily Ranges

Euro/CAD : Reached it’s first profit take area…….then dropped to second profit take area

How to Trade Smaller Daily Ranges

 Euro/JPY : Reached first profit take area…….JUST !!

The Euro/SGD didnt get to the prefered resistance areas 

The GBP/Dollar : Reached first profit take area

The Aussie/Dollar : No confirmation yet 

The NZD/Dollar : No confirmation yet 

The CHF/JPY : Reached first profit take area

 

Looking at the above……we can clearly see that there is no problem with our levels. We were spot on with them.

We can see that 90% of the pairs that did trigger got to the first profit take area…….

and only one to the second profit take area.

So clearly no follow through to the deeper levels…..on the above charts.

…………………………………………………………………………….. 

Now I haven’t had the time to test this in real time  – so this will be next week’s challenge for me.

I will keep you posted.

Remember as Barney says –  sharing is caring !!

So if there is anything you might want to add and something you have spotted that I missed – let me know.

Have a super weekend

Pierre