Great Ken de Hato setup to the short side.

We like to take a contrarian view on retail trader market sentiment, with most retail traders being strongly bearish on this pair we should be looking to go long but because there are so many other factors that are playing to the short side we are planning to short this paid.. Going short at this area is very plausible because the LARGER trend is down. Furthermore, there is evidence that this will be a powerful rejection because these two currencies' strengths are different and diverging(4h, D, W) in strength; one must establish strength over the other. In this case, AUD is strong, and so we want to sell EUR. We all know currencies hate being strong or weak together, one must dominate the other, we are looking for CHF to show some strength to also feel comfortable with going long.

To confirm entry into this trade we are going to look at price action(nice rejection of area) + similar rejection on EURAUD's strongest correlated pair, GBPAUD ; on approach to area we want to see structure to the left of GBPAUD chart to show that not only is this a place sellers come in but a TIME sellers come in. A forex chart is a 2D chart; it has time and price (when and where)

*bold means checked

Things that make this trade powerful:

  • Risk reward of 1:2 = we need to be right 33% of the time which is about how much a market trend and we are trend traders.
  • Trend= We figure out the dominant trend to increase our odds since the market trends 30% of the time. Being with the trend increase odds of success by 15%
  • Price action = a rejection of the area.
  • Retail trader market sentiment = Taking a contrarian view on market sentiment which gives us a long bias.
  • Currency strength convergence = Big move coming to decide which currency is strongest.
  • Correlation = When EURGBP reaches this area we are looking for a similar structure on EURUSD to know the time and place too long on the chart.

This list is not a checklist, it is merely a list of the order of importance to getting into this trade.

If you like this analysis, feel free to follow me and post your comments, tell me what you see that I may have missed that can put this trade against me.

This is my road to 1 million dollars series.

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