After my previous blog post on Best Practice: BM on AUDUSD, AUDUSD did another BM. Let’s see how we can take advantage of this clear trending pair.
On the Overview
- On the higher time frame, we can see that price is currently at resistance. So does that mean we’re going to short?
- No, don’t forget our timeframe for reference is always on the H4. So let’s see what H4 looks like.
Closer look at the H4 time frame
- Week to week it is very clear that price is heading up with 2 previous bullish expansions fitting a big move criteria.
- At the moment, we can see a familiar 1234 pattern forming.
- We are now missing a potential point 4 which we can predict using Fib-R of the flow as well as previous boxes highs and lows.
Looking for trade zone for point 4
(Note: we do not trade at the trade zone. We only enter upon a trigger)
- Plotting some lines at where price confluences with previous boxes highs/lows with Fib-R levels.
Going back to the H4 charts
- Another tool which can be used to predict is the equidistant channel.
- Again, I emphasize that we do not trade at the trade zone. Instead the trade zone is where we expect point 4 will form.
- With point 4 forming at these support levels it will fit into our criteria of a good point 4.
- Support of previous Boxes High/Low
- Fib-R Level
- Higher Time Frame Support and Resistance
- Equidistant Channel
- Beyond this, you can also do a final check with the Bollinger Bands and OsMa.
(Update 21 Apr 2014 by Jerome)
- Think of Bollinger Bands as a rubber band; at the outer edges, price tends to snap back.
- Looking at Price now, it is closer to the oversold region (lower band) so chances are higher that it will head up rather than down.
- Based on OsMa, plotting a trendline on point 2 and point 4. (In this example, I’m using the latest 2 turning points)
- We can see a Bullish divergence forming. This also points to a higher probability that price is heading up.
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