Are you still struggling to identify when a trend impulse is forming?
The lower timeframes could be the piece you are missing.
In this video we unlock the best trading pattern when trading trends.
Watch the video to learn more…
Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
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In this video, we’re going to go over EUR/USD, the key support and resistance areas to watch, and a key trading pattern to identify the next impulse phase.
So, looking at EUR/USD, we talked about it in the Forex Market Outlook this week. 1.2 was the resistance level where we expected some sellers to come back into the market and then back down at around 1.1940, which was the support level for EUR/USD, and where we would expect the four-hour trend to continue from.
That’s what we had nicely played out here. The market rallied up into that 1.2 level, rejected, came all the way back down into 1.1940, and again, we saw a nice reversal set up here, then the market rallies to the upside. As the trend continues, we want to buy from those previous structure points. As the price approaches this level, we look for those key trading patterns.
First of all, if we want to buy the market, we need to ask ourselves where that is going to be bought from previous structure highs. If we can change this 1.2 into a support level – and I’m just going to grab a rectangle box and identify the high of the candlestick down to the opens and closes of the previous area –this is a great area to look for buyers to step back into the market because the market has found some sellers previously. So typically, when the market does that, we usually see a push back down for the market to retest these structure points and continue the trend.
Very much like down here, we consider the market rallied to the upside, it pulled back into those structure highs, it rallies, the market pulls back into structure highs, and it rallies. We’re looking for this trend to continue, especially as we looked at the seasonality report of the US Dollar suggesting that the market will continue to be bearish until the end of December to the start of January. So, we’re looking for that continuation. So, buying from 1.2 makes sense as it is that previous structure, like we said.
Now, one key pattern you can look for when the price enters these positions is what we call the change of cycles. Now typically, when we look at trading in the markets, we have trends within trends.
If the four-hour – this pink line here – is our uptrend, then typically, within that, we would see a trend on the lower timeframe.
So, the green will be representing the 15-minute timeframe. Now at the turning point, let’s say the market is in a nice impulse phase and the market starts retracing back. Typically, we would see the 15-minute timeframe create a slight downtrend at that moment. Then, what we’re looking for in line with this is for the 15-minute trend to become bullish again so that comes in with a change in the cycle. These are typically found when we see patterns like the double bottom pattern or the inverse head and shoulders pattern. But what we want to do is to get involved in the market when we see these patterns forming.
So if we go down to highlight a couple of these actions that we’ve seen recently. So, if I highlight this retracement phase, here, – if I just turn that into a nice red and then if we grab the other retracement phase when we were looking for the market to pull back and if I grab the current one that we’ve seen here –, what I’m going to do is just place a line on the impulse phases – I’m just going to highlight that with a purple line – again, I’m going to highlight this next impulse phase, through here and where I expect the impulse to come through, just through there.
So, what we’re looking for at these points are those turning patterns, and what I’d, like to do is just go down into that 15-minute timeframe. I’m just showing you how this change in trend forms. So we can see here – we’ll just go back a little bit back down into our first change in cycle area when the market starts forming a bearish downtrend – that the market is pushing to the downside, through here. We’re getting that the market is making lower lows and lower highs, and it is showing us that the market is in that four-hour retracement phase.
As soon as we break out of that and we start making higher highs, through here, the market then starts impulsing on the four-hour timeframe, causing this uptrend on the 15-minute timeframe. Next, we can see that as the retracement phase begins, the market comes into an area of resistance, and we get a double top pattern. The market breaks lower, we then make a new lower low. The market then comes back up and changes cycle. this is our area where we can say: “Let’s start buying the market.” This is a great risk-reward ratio here, the market rallies up. Now, we’re starting to get that downtrend situation forming. This is highlighting that the market is now in a retracement phase. Now, we can trade this one or two ways: we can trade the retracements or we can wait and trade for the trends.
Now, the trends give you the larger impulses, which means you have a higher probability of a trade outcome in your favor and you have a higher risk-reward ratio. Whereas, counter trend moves can be very shallow, depending on the strength of the trend. However, if we’re expecting to buy from 1.2 and we’ve seen that the market has broken and made new lower lows, we could look for the market to continue to do that.
So, if we make a new low here, around 1.2040, we could look short on a pullback into and down towards this 1.2 level.
When the price gets to that support point, then we can look for the change in cycle patterns again on the 15-minute timeframe to get involved with a long opportunity, in line with the higher timeframe trend. So, I’m going to leave it there.
I hope you enjoyed the video update and I’ll speak to you soon.
If you’re new to trading, it can be quite overwhelming. But fear not, you can practise trading EUR/USD by opening a demo account through Blueberry Markets. If you’re trading live, our customer support team will be there to assist you.