GBPUSD Weekly Elliot Wave analysis

GBPUSD is currently in a wave 3 or wave 5 of a long-term corrective wave C. We probably are at the begining of a wave 5 of that C corrective wave. So, for next week, I am projecting a bullish run up to 1.68 (161.8 fib extension of the last correction) and then the continuation of the big bearish trend, that will eventually take us below 1.35. If we’re in a wave 3 of C (though not likely), we may get a bigger bullish rally before we go down again (maybe up to 1.7320).

Taking into account that EURUSD has a strong correlation with both GBPUSD and EURJPY, we should expect the same iminent bearish continuation for both. But, as I said, next week we will probably witness a final bull rally, so I’m bullish on these pairs next week. If this is the case, then EURUSD may have a top near 1.4719 high of December 18th, 2008. So I expect a break of 1.4330 to the upside on the EURO and a break of 1.666 on the GBP. A possible top on EURJPY would most probably be 145.46 and I’d expect a break of the 139.21 high.

These highs could be taken out tuesday or wednesday, as we have a lot of important news coming out. So watch out for this and good luck!

Today I realised one important thing about trading. It’s very important how you start the day and how you gauge market sentiment at the begining of the trading day. Many times the same trend goes on the entire session. If you are wrong in the morning, you may not be able to adapt/accept that your analysis was wrong and you will lose over and over again.

Ability to adapt and get in tune with the market is a crucial element for traders. You have to become a market chameleon.

So, what I did today was that I made a fast analysis, without thinking too much about what’s happening. I was long on all three pairs (EURUSD, GBPUSD and EURJPY). The trend was actually bullish, but I didn’t pay close attention to a few other important facts:

- Friday – Fridays tend to usually move prices against the weekly trend, due to profit taking (last day of the week, some big guys close big positions in the market);

- Candlestick patterns at resistance – I did watch these, but I missinterpreted them. I wasn’t paying attention to what the market was telling me.

Let’s take this GBPUSD H1 chart for example:

Lesson learned!

Lately I’ve been using Bollinger Bands to confirm my supply/demand trades and found them to be pretty efficient. Bollinger bands give you, in my opinion, both the power of an oscillator and that of a moving average. They let you gauge the trend and also tell you when a market is overbought or oversold.

A market is trending up (bullish) if price is moving between the upper and the median bands.

A market is trending down (bearish) if price is moving between the median and the lower bands.

A market is overbought if price is piercing the upper band.

A market is oversold if price is piercing the lower band.

These clues, however, are not entry signals. They are only used to confirm the strength of S/R zones. Let’s take a look at one of the three trades I just made a few minutes ago, which are currently at +75 pips, but should bring me 160 pips if they go well

Long GBPUSD

Reasons for going long were:

- price was rejected from 1.6517, which is near 1.65 (a good demand level and also a round number);

- price was rejected from the middle band, while it was trending up (trading between the upper and the middle band);

- inverted bullish hammer showing reversal signs;

I find that taking trades like these (with good confirmation) adds up to your win ratio pretty good.

General rules

1. Before thinking about putting on any trade, look to see if there is enough profit margin and a reasonable stop loss. If not, stand aside!

Emotional plan

1.If I see a good trade opportunity with a good profit margin, take it (eliminate fear)!
2.If I lose a trade, don’t get angry and don’t make revenge trades (eliminate anger)! Prepare for the next good opportunity!
3.Do not take trades just for the sake of trading!
4.Cut your losses short and let your profits run!
5.Always stick to the rules!

Trade plan

A. Breakout trades

Put a buy/sell stop above/below resistance/support with stop below/above resistance/support if:

1.Price has already touched the level at least twice recently or price has touched the level less than 10 hours ago.
2.Volatility is rising near the level (strong momentum).

Only take a breakout of a level a single time in a day span.

B. Classic S/R trades

1.Put a limit order for the strongest S/R zones!
2.For weaker S/R levels, wait for a confirmation on the M5 chart, before entering a trade!
3.Do not trade used and abused levels!
4.Do not fade the same level twice in a single day!

Hi, guys (that is, if anyone is still reading this blog)!

I’m back. Sorry for not posting lately, but I’ve been very busy with work and University exams. Today, though, is my first day as a Forex trainee at Active International, a trading company based in Bucharest, Romania. I’ve started trading a demo account for a month and after that, hopefully, I will be granted a 10.000 EUR or bigger real account to trade. Can’t wait to make some cash

Cheers!