Browse Symbol Stacks: USDJPY: Blanks of the trader

Well done to traders who took advantage of Cypher pattern posted last week for CAC40 index. As anticipated 3620's area served as pivot support and market shoot up north hitting at least 3 targets netting about +100 pips of net profit which is quite significant for this market. Another Cypher pattern on USD/JPY pair hit target 2 at 0.618 retracement before stopping me out in trailing stop, that trade netted about +110 pips of profit. All other setups were invalidated. Will spent a bit more time on drilling down EUR/USD BAT pattern completion that was posted couple of weeks ago. As presented in the chart below it took time and fair amount of hesitancy to get there before market started moving anticipated direction from 1.3326's area. As my target 1 was not quite hit while the week progressed i started to look for the ways to protect the position if suddenly market would decide to continue to the downside. At the time when market was hitting 1.34's the cost of weekly PUT option for 1.3250 (the area where my initial stop was) was very close to zero. I was looking to employ options in my trading strategy for quite some time and that was very appealing case.

There are handful of quite straight forward explanations on the web what PUT's and CALL's are like the one below.

The main benefit from using the options is that they are limiting downside of position entry as the price of 1.3250's PUT  in my case when EUR/USD hit 1.34's was close to 0. If i would be "wrong" for this hedge, the risk would be limited due to the fact that option price cannot go lower than 0, while my original long position would be very much in the money. Another great benefit of options is that this instrument if used correctly does not care about market spikes and other nasty things like High Frequency Trading black swans etc. Due to the limited downside and limitless upside even if the price went down much lower than originally anticipated stop, the "option" position will not get stopped out as it would be the case with typical price action trading. Finally coming back to my example of EURUSD i got stopped out as market turned against however option premium grew on PUT option i had entered when the price hit 1.34's that covered the downside and i made some positive return at the end  in fact. I would encourage traders to look at those powerful instruments, they can definitely make your trading life more stable. Having mentioned all those benefits for options, understanding price action is still remains the key, as if used incorrectly options can cause much more damage to trading account than originally anticipated. Eventually combining open "naked" positions with options, market savvy trader can enjoy neutral approach meaning that regardless which direction market will take off it will be profitable at the end.

Looking ahead for the next week there are quite few potential setups that could be used to take advantage of. South Africa was in the spot for multiple reasons last week, it's ALSI40 index rolled over south about 1000 pips, well done to ones who took advantage of that H&S setup. Will be looking for continuation of that move as this market is on a verge to become a bearish one if looking at 50 and 200 MA crossing. Will be looking to sell 35370's on the spot anticipating downtrend to kick in.

On FX side much discussed earlier EUR/USD pair is bottoming out at least temporarily around zone between 1.3180 and 1.3122. There is also AB=CD pattern completion at this zone, so will be looking to get involved in long setup for next week.

Another setup on FX side of my watchlist is on USD/JPY pair. I'm not so convinced about it but technically it is still valid bullish BAT pattern completing around 92.47's. Will be watching the ranges of ATR closer before deciding if it will be sound decision to get involved in this long setup.

Last but not least is Gold (XAUUSD) that was sold heavily recently. There is huge bullish Gartleys pattern to be completed around 1530's if will get there. In current context it very much countertrend setup that bigger guns may be starting to buy. The main reason for it is mainly that stops have to be really wide for this setup, so not every retail trader could afford entry. Alternatively options could be utilized to take advantage of it and get better entry conditions with less risk on board.

Much more interesting and "affordable" is bearish BAT setup on this market in my book. Going short from 1611's and not higher than 1619's would be in synch with prevailing downtrend on 4 hrs chart.

That would sum up this weeks stub, have a good one traders!