Classic Trend Following on NZDCHF. Confluence of Factors.

  • Posted on: 30 June 2015
  • By: strategist
Classic Trend Following on NZDCHF. Confluence of Factors.

I submitted this classic trade on Jun 26 2015 but I didn't post it until it was closed. This one is very interesting since I haven't done any of these types of trades in a while. By-the-book trades like these are rare as you will learn with experience.

NZDCHF seemed like a weird cross at first but the daily chart was showing a very harmonic down trend. The pullbacks seemed weaker that the main legs, there was a clear trend line and the 20, 50 and 200 exponential moving averages (EMA's) were in line with one another. All I needed was a good signal bar with confluence of factors to enter the trade (short).

Sure enough a smaller bar with a bearish tail (bearish reversal bar) showed at the trend line (confluence #1), near the 20 EMA (confluence #2) and at Fibonacci retracement level 38.2 (confluence #3). I placed a pending short order off of the signal bar low (plus padding) with a stop loss above the high of the bar (plus padding) and a take profit at Fibonacci extension 127.2 (not shown on chart). I also coded and ran an Expert Advisor to move the stop loss to break-even when the price reaches near the previous low.

Soon the order got filled and in a couple of days the break-even point was also reached. The price stalled at around that level and a doji bar appeared, which could have been a reversal sign. Considering that I was trading the fourth wave of the trend and more often than not trends seem to stall or end at the third wave, I closed the trade with an approximate profit of 75 pips. Not so bad after all.

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Thank you and green pips to all of you!