As we begin our new trading week we are greeted with large gaps at the market open. It is commonly known amongst traders that approximately 90% of these gaps will close at least 80% of the way. Armed with this knowledge, we can use this to our advantage in our trading for this week.
I have a couple of trades on my radar. These particular trades follow a simple trend trading system. I affectionately call it my “Pip Generator” strategy. Basically, once a trend is in place, you wait for a retracement back into the ema’s and then enter the trade based on candlestick formations. If there is extra confluence with a support or resistance level, this will give you additional reasons to take the trade. The following examples will show you what trades I have my eye on over the next few days and where I will be looking to enter them.
Pip Generator Strategy
I will look for a bearish candle set up ie. pin-bar reversal or doji candle, upon the close of the 4 hour candles. If one of these bearish candle formations appears within the 10 & 21 ema channel, then I will look for extra confluence with the resistance line at .9289. As this pair opened with a gap this morning, it is more than likely that this gap will be filled, so I am anticipating price moving up towards this .9289 line. When it does, and if there is a good candlestick formation, then I will enter the trade on the close of the 4 hour candle. The area I will be looking to short this pair is highlighted in yellow. This is a longer term trading system, so I will be prepared to hold this trade for a few days, or longer, if the trend remains in place.
Pip Generator Strategy
When price retraces back within the 10 & 21 emas and has the extra confluence of the 1.3300 support level, I will look for a bullish candle formation at the close of the 4 hour candles. Once again, I am looking to enter long at the yellow highlighted area if a bullish candle formation appears. My target will be the resistance level at 1.3394.
I will look for a retracement back into the 10 & 21 emas and also with the support level of 1.5834 as confluence. The highlighted area is the area I will be looking for a bullish candle formation to enter this long.
I will be looking to buy the UDJPY at 98.66 as it is a support level, 50% fib and 55 ema ie. multiple reasons. Stop Loss is just below 61.8% fib and the trendline. The risk to reward ratio for target 1 is 1:3 and for target 2 is 1:4.5, so extra reasons to take the trade.
Reasons for this trade: strong support level, whole number, 50% fib
These should be enough trade ideas to get you started for the beginning of the week. I will update you as the week progresses.