Trading higher TF charts

In general I've found that I prefer trying to catch swings when I trade and letting profits run as long as I can. This form of trading seems to me to be the form with the least stress and the best possible R/R ratios. The flip side to this is it's a bit more sparse as a method of trading. Typically, when I sit around looking at the charts, I'm watching some of the lower TFs and the PA around support and resistance levels. Generally, my profit targets and breakout targets have been in decent places and have provided some insight into which levels the market really responds at. So far this method has been great for spotting small swings in price or finding levels to possibly reload already running positions or to take profits. I think one key mistake I've been making is focusing too much on these timeframes as the backbone of my trading strategy when I should really be focusing on the charts far less frequently and instead be searching for ideal entries on the longer timeframes. This post will go in a slightly different order than usual, that is, I'll post a chart with useful areas marked off on it and then explain why I think it's relevant. Most of this information is pretty remedial (at least for most I imagine) but I'm starting to get used to looking for these things and getting off my fast moving charts.

This first chart is just from the last week or so of the EUR/USD pair. Now unfortunately, as I mentioned in a previous post, I had originally placed a short up at the 1.400x level at the beginning of the week but did not let it run and only took a small profit. Imagine how I feel about that one now! At the bottom here, marked in blue, is what people refer to as a pin bar. A candlestick with a very small body and extremely long, one-sided wick formation. This formed right before the speech by Angela Merkel this evening and while this formation might have been reason enough to go short on the pair, given the current state of the EU crisis, the news really gave it a boost and price rocketed downwards in the next hour and has even since started to fall further.

This next chart is a 4H chart for the AUD/USD pair and showcases a pattern called an evening star. After a strong move upwards starting at the beginning of October, we see that price gets rejected once around the 1.0750 area and then again later. Only the second time it's rejected we get this formation the arrow points to. A bullish bar, followed by a bearish rejection with a small body and small wick formation, immediately followed by another bearish bar. After the close of the third bar, we might have good reason to enter short. The double top formed over the course of a couple days along with this formation gives us good reason to enter at around 1.0690 or so with a stop above the previous resistance level. This gives us a good 50 pip stop loss or so but we see very quickly that price plummeted over 400 pips to the level it is currently at, in only a few days.

This chart showcases the doji candlestick formation on a 4H chart. This is evidenced by a bullish candle with open and close prices which are very close and a long wick indicating quite a bit of competition between buyers and sellers. At the bottom of such a strong downtrend a doji like this indicates that even after such an impressive push down the buyers were able to win the four hour fight and close the price slightly above the open. Here presents a good opportunity to go long on the pair and place a stop below the recent support level which rejected price twice. As you can see afterwards, the price took off to the upside. Naturally, this was not only due to the formation, as price stalled for over a day while slowly climbing. Then when the BOJ stepped in to intervene they drove the price of this pair up as well in their efforts to strengthen the USD vs the Yen. Even so, the trouble in Europe drove the pair even higher as the Euro sank to lower levels.

This chart from the USD/CAD shows another doji style candlestick at the bottom of a very strong downtrend. This time should we have entered the trade, we might have felt we did so prematurely, but with an appropriately placed stop below the lows of these candlesticks we would have been safe as this support level managed to hold and eventually reject price again for a double bottom formation, another possible sign of reversal. Again, as in all the examples before, price took off in the direction we wanted offering some opportunites to move the stop levels up and even reload depending on your confidence level about the move upward.