Interesting setup on the USDCHF - 1HR chart

I was checking the charts, testing for confluence, and found this interesting setup on the USDCHF.

(you'll probably have to click on the image to see it more clearly)

This was a very good example of a high probability price action setup.

17th March 2012 - win on USDCHF

Chalked up a win on the USDCHF.

USDCHF

I traded my first two-bar reversal pattern yesterday morning on the USDCHF. At the moment it seems to be in the middle of a bear run, but the market close for the weekend is only an hour away so I've decided to close the trade.

I'm not 100% happy about closing here. Bearish momentum is very strong and price is hovering around the daily low as I type.

However, keeping the trade open over the weekend would've offered me a reward-to-risk of around 0.33 to 1. That's very unattractive, especially considering the extra risk of holding a trade over the weekend. Anything can happen over the next 48 hours. A candle on Friday is not so applicable on Monday. If this were any other day, I would keep the trade open.

One thing I noticed is the massive spread towards market close. The USDCHF usually has a spread between bid and ask of around 3 pips. As I closed my traded, this had widened to 9 pips. The professionals don't seem to like holding trades over the weekend.

All up, this trade netted 40 pips.

1st March 2012 - USDCHF hits SL, pinbar on GBPUSD

USDCHF

I was feeling a little uneasy when price continued to meander around support. The support level held and the bulls eventually won, hitting my SL.

The trade was offering a good reward-risk ratio so I can't complain. One likely mistake that hindered probability was the fact that I was trading the break of the inside bar INTO a support level, rather than PAST it. A better entry may've been the break of the first bearish candle that had hit support (24th Feb). An inside bar that falls short of support or resistance is a sign of market hesitation / consolidation. Either the market doesn't know what to do or the big buys are accumulating positions for a reversal. Thus an inside bar that falls SHORT of a support or resistance level may be traded as a reverse signal, rather than a continuation. If the break of an inside bar occurs BEYOND a support or resistance level, then it should be traded as a continuation signal. My lesson for the day.

GBPUSD

A textbook pin bar formed overnight on the GBPUSD. The pin bar's sticking out like a sore thumb as both a rejection from resistance AND a significant numerical benchmark (1.6000). I've decided to split my order into two, with my first take-profit at support level #1 and my second take-profit at support level #2. I'll be using a trailing stop-loss so both orders will move to breakeven once they are halfway to their target. My initial stop loss is set at the 61.8% retracement level of the pin bar.

29th Feb 2012 - update on USDCHF

My pending short was finally triggered this afternoon. At the moment price is meandering around support as you'd sort of expect. The last half dozen bars have formed a descending triangle so I feel it's only a matter of time before the bulls are defeated. As always, anything can happen.

I decided to move my TP much further along to 0.86150, a little short of the next support level. Because this is such a large R:R ratio, I've put in a trailing stop loss of around 75 pips.

28th February 2012 - inside bar on USDCHF

An inside bar just formed around a support level on the USDCHF which looks promising. It's currently testing a support/resistance level that was last breached back in November 2011. The next significant support level is around 0.85750, providing plenty of scope for bearish action. As you can see in the graph below, my TP is very short of this level, at around 0.87900. My TP is currently set at 2 * SL. Once my TP is hit, there's a good chance the USDCHF will continue to fall to 0.85750 but I'm going to stick to my 2:1 R:R rule and leave my TP for now.