USDCAD support and resistance lines. Click on the image to zoom in

My USDCAD H4 chart for 18th January 2009

Or click here to see the “mind-map” online.

EURUSD

EURUSD Elliot Wave

EURUSD seems to be displaying a perfect Elliot Wave pattern on the H4 chart. If this outlook is correct, then next week we should see a retest of the 1.3080 – 1.3000 area, followed by a big bullish run till 1.3800 – 1.3830 area. A breach below 1.3000 would invalidate this view and I will look to sell at a retest of wave 5’s low. If, instead, price will bounce off 1.3080 – 1.3000 and break 3’s low at 1.3333, I will look to buy at retests of former resistance lines that become support and finally I will sell short at 1.38 for some nice profit. This is my plan for the EURO.

GBPUSD

GBPUSD weekly outlook

This pair looks more bearish biased and the 1.4470 88.6% fib level is a key level. I will probably look to buy it if momentum is not strong near it, but I will do that cautiously, moving my stop to breakeven at +20 and taking partial profits at +30 pips. If that level gets broken, I will look to go short at a retest for a possible profit of 100 pips or maybe more. A break of 1.4470 would probably mean a break of 1.3 on the EURO, as these two pairs tend to be correlated, so I will watch this pair carefully. Another key turning point is 1.5 and I will look to sell on the first touch if momentum is not strong and then look for a breakout of this level, that would confirm my Elliot Wave for EURUSD also. So if 1.5 gets broken, I will also look to buy at that level once it becomes support.

USDCAD

USDCAD weekly outlook

USDCAD has a very strong resistance at 1.3000 and a break of that would mean a big bearish move on EURUSD and GBPUSD. A lot of time has passed though between bounces off that resistance, so when price gets there I will look to go short for a nice profit. USDCAD seems to be range-bound, floating in the 1.15 – 1.3 area and a descending wedge formation seems to have formed on the H4 chart. That will definitely be something to watch out for and look for a break of those trendlines. A break to the downside would be bullish for the EURUSD/GBPUSD pairs and a break to the upside would mean bearish continuation for those pairs.

EURJPY

EURJPY weekly outlook

I am looking for a short at 122 – 122.35 area, but cautiously. That’s a nice resistance line at confluence with a 50% fib, so it looks like a strong one. A break above it would signal EURO bullishness and I would look to buy at a retest of 122-122.35 resistance become support. Target would be over 100 pips.

GBPJPY

GBPJPY weekly outlook

I made a nice 50 pips on this one thursday and anticipated some nice moves I wasn’t able to play because of exams. Next week, it’s possible to see a break of 132 on the downside, so I would look for a short on a retest. I would probably also buy at 129 for a fast scalp, then sell short at the retest of 129 after it becomes resistance. For the upside, 137-137.5 area is a key resistance, at confluence with a 38.2% fib trendline drawn from a daily chart and we also have a 61.8% fib resistance line just below, so I would first look to go short there if it goes up. Then if it lurks back up to it, I will wait patiently for a breakout and then buy at a retest of resistance become support.

This is my trade plan for next week and these are the major moves I’m ready to face. Good luck to you all!

Hey guys. I decided I need to compile a set of rules to follow. I noticed that I lose because I don’t stand by my own rules. You see, from childhood, we are denied certain things. People give us rules. So when we grow up, we tend to want more freedom. We hate rules. In the Forex market, nobody limits you. Prices are always moving and if you find a way to guess what the market will do at any moment, then you have unlimited profits. And so, it’s hard to respect some rules in this market, until they become a habit. Until you become disciplined… So I think the best way to do that is to write my rules somewhere, print them and stick them on the wall, behind my laptop, so I can always see them. So, here are my rules:

1. Before opening up my platform, check out the economic calendar, see if important news releases came out that day, how did they affect the market, what other important reports are following and when and how can that affect the pairs I’m trading. Also read fresh financial news from the Bloomberg site and open up Bloomberg live TV. This gives me some hints about the market sentiment and what the general bias is for the pairs I’m trading (bullish or bearish).

2. Open up my platform. Update my charts if needed (maybe new support and resistance levels have formed). Check the MACD on the daily and H4 charts to see what the long-term trend is and check the MACD on the H1 chart to see the short-term trend.

3. Based on price action, momentum and market sentiment, make a forecast on how the price might act for the day, identifying the key areas that are most likely to act as a turning point. Write down this forecast.

4. After two consecutive losses, if emotions take over and I feel fear, greed or anger, stop trading for the day.

5. After two consecutive winners, stop trading for the day (euphoria is a killer).

6. If I win one trade and then lose the next one, stop trading for the day (don’t spend all my profits).

7. Always use a risk/reward ratio of at least 1:2 and optimally 1:3 or more. If the trade has weak chances of achieving that ratio, then don’t take it.

8. Only trade the H1 and H4 charts.

9. If in a bearish breakout trade, do not close the trade manually until I see clear confirmation that the price is using the resistance as support again. Only then think about closing the trade and trading the bounce. Likewise in a bullish breakout trade.

10. Cut my losses and let the profits run. Don’t widen the stop loss, stick with the RRR, only take partial profit if there are clear signals of reversal. Scaling out of positions will probably help at first.

11. The trend is your friend, stupid!

12. Buy a support only once, second time look for a breakout. Sell a resistance only once. Second time, look for a breakout.

13. Do not risk more than 2% of the account on a single trade.

14. Only trade your favourite pair, until you gain experience. If you watch more than one pair, you will not keep focus. Fall in love with a single pair and trade that until you are consistent!

15. Control your emotions. You will not win all the time. Losing is part of the game. Do not get angry when you lose. Don’t fear taking a good trade. If you only take high-probability trades, you should not feel fear or anger. Accept your losses and look forward for the winners. They will come if you don’t panic. Emotions confuse you and make you do things you normally wouldn’t. So stay as calm as possible. If you can’t stay calm, close the platform and take a walk, watch TV, do something else until you are calm.

16. Look at smaller timeframes like M5 and M15 when price is heading towards a support/resistance line and look for price action signals that would show the line will hold or will break. Especially look for pin bars forming, to jump in on the retracement. Breakouts are usually straight forward and you can predict them by price momentum/energy and the number of previous bounces off that support/resistance line ( if an intraday line already has 2 previous bounces, I would look for a breakout if price goes back to that line).

In the next article, I will compile a list of trade setups that I will take consistently.

Cheers!

Here are some other very important levels, at which the price reacts, so watch out for these levels next week. I will be trading some of them and I’ll keep you posted. The levels are marked with dotted black lines ( 1.2794 = 23.6 fib, 1.2666 = 38.2 fib, 1.2562 = 50 fib, 1.2459 = 61.8 fib, 1.2331 = 76.4 fib).

USDCAD key Fibonacci levels you should watch out for

These are key support and resistance levels I watch out for on the USDCAD chart. At these levels, price is likely to react in some way: retracement, breakout (continuation) or trend reversal.

Major support and resistance lines on the USDCAD pair. Click the image to zoom in.