The market gives & takes. And, we have little – I would even say – no control over that.
Still, most traders are trying to do exactly that: trying to control the market so that it goes in the direction they want. We all know this is not possible.
So, why are traders trying to do exactly that anyway? Because, this is how we are conditioned to be successful in life: the bigger our dreams, the stronger our intention. And the more effort we put into achieving something, the higher the likelihood of getting what we want. However, trading does not work like this. It is a counter-intuitive activity and success comes in its own ways – which is why consistency is not easy.
Let’s have a look at what you can and do control as a trader:
Look at this long list! You actually have a lot of “control” as a trader on what you are doing.
However, your Control is on the Process, not the Outcome!
In fact, the markets teach humility to those who have not mastered this important lesson, yet.
A trader can only control the trading process, so his focus should be on how well he is following the rules and executing his trading plan. Patience is key as the markets do provide, at times, unexpected gifts. Patience opens up the space to receive such a gift. This last week was a phase during which the market provided a large number of low-risk pattern entries resulting in big R-multiples.
In this first week of March 2022, the markets showed a lot of strength in the AUD & NZD currencies (CHF, JPY, CAD and USD partly as well). On the other side, the EUR, as well as the GBP, were very weak currencies. Now, if you combine a strong currency with a weak currency, what you get is a great trend and a great currency pair to trade with a trend-following system!
As an example, let’s have a look at the EURAUD currency pair. First, from a higher timeframe perspective. Then, from a perspective of lower timeframes in which very profitable trades have shown up.
The EURAUD Higher Timeframes – the Weekly & Daily chart – were clustered with consecutive Stop-Run Levels (light grey lines) plus a Big Number (dark grey). These levels are areas of certain resistance that do, when run over, trigger a lot of selling pressure. Longs need to cover their positions through panic coverage. This is what we call a stop-run move (see red arrow). These moves happen very fast, like a slingshot. Here it only took a couple of days of successive selling pressure to run down to the important, psychological, Big Number level (1.5000).
See how the individual levels – the grey lines in the chart – have been taken out one-by-one at an accelerating speed, like dominoes falling? These are opportunity days because a strong trend move mostly always creates a lot of great pattern entries on lower timeframes.
The predominant systems traded during that week were System S2 and System S1 in the 5-min, 15-min and 1-min charts. See below for real trading examples from David (a retired lawyer in Canada) and Jack (an MD in Australia) who are both advanced traders from my Masters’ Class. Living on different continents and trading in different timezones, they both saw this opportunity and greatly benefited from the freefall of the EURAUD currency pair.
The Game Plan is simple: “Getting into the trend based on a low-risk pattern, make it break-even early on, eventually scale-in building a pyramid, and then, ride the trend till it ends while following along with the stop to protect profits”.
David’s Trade Pyramid consisting of 5 pattern entries rendering in total a +24R result:
David has traded the EURAUD chart as a Trade Pyramid scaling in to build an overall position by adding new trade patterns whenever they occurred. See his five consecutive trades above. The first three trades are from System 2, while the latter two trades are based on System 1. Overall result of the Pyramid: +24R.
Now, let’s see how Jack traded this same week, but on another continent and in a different timezone.
One of Jack’s BigR trades – a week that ended up for him totaling +122Rs:
Just like David, Jack traded the EURAUD 5-min chart, but he got into this trend one day earlier. This allowed him to generate, with this one trade alone, a very BigR multiple (+20R). One can nicely see how he traded the trend, until the end, trailing the stop along the way until stop-out.
The market provided a week of huge R-multiples for those who were able to listen and sit with patience. Letting go of the typical trading behavior of “trying to control the market” is not easy and, for most, requires them to mature on their trader development path. Letting go of the need to control is not only rewarding for trading success, but it changes people’s lives and relationships for the better, too.
Focus on what you can control and let go of what you cannot.
And most of all: Let go of the struggle…
So why did the AUD & NZD currencies increase so much in value especially against the EUR & GBP? We do not really know. We only know that both AUD & NZD are commodity-based currencies and there are some serious political tensions in Europe, the war in Ukraine. But, as technical chartists, we only focus on the charts, the trends and the visual price patterns coming up.
Simply: Trade what you see! And trade low-risk patterns within a strong trend!
With the world in turmoil on many different fronts, there are always opportunities available for those who are patient, who can sit quietly and who can watch, listen and act according to their well-founded trading plan.
PS1: Watch how we frame, evaluate and execute a trade with the plan to run over important higher timeframe stop-run levels.
PS2: Check out the “Sneak FX Workshop Preview” (youtube playlist).
Note: Gabriel is teaching visual pattern recognition systems that are built around strong trends. These systems do not specifically capitalize on news, geopolitical events, nor do they bet on macro trends. It is very simple: “The Patterns Tell The Story”! It is not unusual for a pattern to position itself well in advance in the right direction before an important price move occurs.
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