WEBVTT 0 00:10.320 --> 00:16.650 Here we have euro-dollar on a 4-hour chart and you can see that I have drawn a channel, an up channel 1 00:16.650 --> 00:20.310 to be more accurate, to identify the up-trend. 2 00:20.490 --> 00:23.120 Maybe it is not so clear on this 4-hour chart, 3 00:23.130 --> 00:28.510 so I switch to the daily chart to give you a better view of this up-channel. 4 00:28.980 --> 00:34.280 Ok, let's go back to the 4-hour chart to check when this up-trend started. 5 00:34.470 --> 00:41.880 So I need to go back and you can see that it's quite a long time ago. We can say that it started here but 6 00:41.970 --> 00:45.080 of course, at this point of the chart, we couldn't know that 7 00:45.090 --> 00:52.200 an uptrend was taking place. We could find out about the new uptrend only after several days with 8 00:52.290 --> 00:54.570 other clues on the market. 9 00:54.570 --> 01:01.590 For now, we can only say that the price hit the bottom of this uptrend line many times, then going on 10 01:01.590 --> 01:09.330 the price hit again the same level here. The price goes up then and it hits the top of the channel that 11 01:09.330 --> 01:10.520 I have drawn. 12 01:10.710 --> 01:15.580 By this time, I could start to figure out that the pair was in an uptrend. 13 01:15.660 --> 01:17.970 I'm talking about the end of May. 14 01:18.450 --> 01:26.220 If I couldn't identify the up-channel, at least I had my uptrend line at the bottom, which is quite clear 15 01:26.250 --> 01:32.940 because you can see that the price went there many times like at the beginning or, going on, another time 16 01:32.940 --> 01:33.620 here. 17 01:33.780 --> 01:40.180 So at least we had a hint of this new uptrend simply following our trend line. 18 01:40.260 --> 01:46.190 So starting from this part of the chart, I will look for long positions at the bottom of the channel, 19 01:46.320 --> 01:52.630 that means that I want to buy Eurodollar when the price is convenient because we are in an uptrend. 20 01:52.650 --> 01:59.280 So what I'm basically going to do is to monitor this line here and check the reaction of the market 21 01:59.310 --> 02:01.640 when the price is near that level. 22 02:01.920 --> 02:09.180 The first time that I'm going to monitor the price and look for trade opportunities is here. The price 23 02:09.180 --> 02:15.750 goes on the line and I can start to study the candlesticks to check if there's a good opportunity to 24 02:15.810 --> 02:18.120 enter my long trade. 25 02:18.120 --> 02:24.680 So there are two long red candles and we have another red candlestick on the line. For now, 26 02:24.690 --> 02:28.300 there's no clear signal to buy the currency pair. 27 02:28.560 --> 02:34.650 Even going on, we have three small candles, so we can imagine that the market is taking a breath and 28 02:34.740 --> 02:38.110 the battle between sellers and buyers is even. 29 02:38.370 --> 02:41.190 And they are preparing the next move. 30 02:41.190 --> 02:46.980 Actually this could be the first signal to buy the couple, because it looks quite suspicious to me 31 02:46.980 --> 02:53.100 that the price is coming from a bearish retracement and it stops right on the up-trend line. 32 02:53.250 --> 02:59.040 For me this is the first time during the bearish retracement when sellers realized that they need to 33 02:59.040 --> 03:01.410 be careful at this price. 34 03:01.620 --> 03:08.610 Then we have this long green candle that forms a bullish engulfing pattern because it engulfs the 35 03:08.640 --> 03:10.110 previous candle. 36 03:10.110 --> 03:13.800 Actually not only that last one but the last four. 37 03:13.860 --> 03:17.080 So I can open a long position after this pattern. 38 03:17.220 --> 03:19.500 It perfectly makes sense. 39 03:19.530 --> 03:24.200 I studied the market to find out that euro-dollar is in an uptrend. 40 03:24.330 --> 03:30.660 So I was waiting for a good opportunity to buy at the bottom of the channel, then a bullish engulfing 41 03:30.660 --> 03:37.150 pattern shows up and is telling me that buyers are strong again and they push the price higher. 42 03:37.170 --> 03:41.930 So how to consider a position with this bullish engulfing pattern? 43 03:41.940 --> 03:48.510 First of all, I'm going to draw my lines: one for the entry, one for the Stop-Loss and one for the take 44 03:48.510 --> 03:49.720 profit. 45 03:49.800 --> 03:56.340 The first one is my entry and I want to set the price at 1.1165, 46 03:56.340 --> 03:58.280 that is the price that I want. 47 03:58.620 --> 04:01.460 I also colour my line with a light blue, 48 04:01.500 --> 04:06.390 so it is clear that it is the line that identifies my entry level. 49 04:06.870 --> 04:11.110 So this line here on the Meta trader is my entry level 50 04:11.160 --> 04:18.410 after this bullish engulfing pattern. Then I need to decide my stop loss and my take profit. 51 04:18.420 --> 04:20.390 Let's talk about the stop loss first. 52 04:20.390 --> 04:27.670 I want to place it below the channel and if it is possible below the previous low. 53 04:27.780 --> 04:31.230 So what I need to do is to look for my previous low 54 04:31.350 --> 04:33.490 and it is quite easy to find it, 55 04:33.540 --> 04:35.540 I can see that it is here. 56 04:35.550 --> 04:43.400 So my line will be here but I want to colour my line in red because this will be my stop loss. 57 04:43.620 --> 04:49.240 Also, I'm going to look for other recent lows like this one that is not very distant. 58 04:49.380 --> 04:51.610 Just about three weeks earlier. 59 04:51.780 --> 04:54.700 So I will draw another line on this low 60 04:55.140 --> 05:01.350 and another consideration is that whatever Stop-Loss I'm going to choose, it will not be at the same 61 05:01.350 --> 05:03.470 point of the previous low. 62 05:03.540 --> 05:09.930 Of course I will move to stop loss below the previous low, because I want to set my Stop-Loss in an area 63 05:09.970 --> 05:12.870 that the price doesn't reach very often. 64 05:13.270 --> 05:21.640 So let's say that this one is 1.1131, I will change it with 1.1120. 65 05:21.880 --> 05:32.110 And that's it, we have the line here now. This one is 1.1108 and I will change it 66 05:32.170 --> 05:36.150 with 1.1095 for example. 67 05:36.150 --> 05:39.200 So below the last low. 68 05:40.110 --> 05:46.020 Ok, so I need to decide which one I want to choose as my Stop-Loss for this position. 69 05:46.020 --> 05:53.160 Both of them look fine for this trade, but I'm going to choose the lowest one for a very simple reason. 70 05:53.400 --> 05:59.530 I can have a very huge take profit because the top of this up-channel is very far. 71 05:59.700 --> 06:06.690 So I don't have any problem in terms of risk to reward ratio. Even choosing the lowest Stop-Loss, 72 06:06.720 --> 06:12.500 I will still have a convenient risk to reward ratio. If I choose this one, 73 06:12.630 --> 06:21.480 I'm going to risk 70 pips, but you can see here, at this point, we are near 1.13, that is 74 06:21.480 --> 06:24.270 more than 135 pips. 75 06:24.450 --> 06:29.960 But I can go even higher because the top of the channel is still far from this point. 76 06:30.030 --> 06:38.460 So I will have a very very good risk to reward ratio. So I can have a larger stop loss this time, trying 77 06:38.460 --> 06:39.330 to avoid that 78 06:39.330 --> 06:44.920 a random movement will hit my stop loss before the price continues to follow the uptrend. 79 06:45.180 --> 06:53.000 So I delete the first stop loss. About the take profit, I do like this to check the top of the channel 80 06:53.510 --> 06:57.650 so I can choose a take profit near the top of the channel. 81 06:57.740 --> 07:03.590 I don't really like to have the take profit at the top of the channel because remember that the trend 82 07:03.590 --> 07:09.740 lines, like support and resistance, are areas not just lines that the price hits 83 07:09.740 --> 07:11.540 and then comes back. 84 07:11.540 --> 07:18.470 So I'm not expecting the price to hit the line every time but I expect the price to reach an area near 85 07:18.470 --> 07:28.220 the top of this up-channel. So I can place my take profit around here at 1.1435 and 86 07:28.280 --> 07:30.010 I'm going to fix the price 87 07:30.080 --> 07:36.780 and I'm also changing the color of the line with a green color because this is my take profit. 88 07:36.890 --> 07:44.750 So, at this point, I will have a risk, in terms of pips, that is 70 pips. But I will have a potential reward 89 07:44.750 --> 07:47.690 that is 270 pips, 90 07:47.690 --> 07:52.310 so a bit less than a 1:4 as a risk to reward. 91 07:52.310 --> 07:54.940 So let's check how this trade was going. 92 07:55.190 --> 08:00.770 I go back to my normal chart so we can better analyze the candlesticks. 93 08:00.770 --> 08:02.820 I can zoom in maybe. 94 08:02.930 --> 08:08.930 No actually I think it is fine like this, otherwise we will lose the view of the big picture on the market. 95 08:09.680 --> 08:11.240 At the beginning of the trade, 96 08:11.240 --> 08:12.860 everything seems fine, 97 08:12.890 --> 08:19.280 I have a small red candle after the bullish engulfing pattern, but then I have a strong green candle 98 08:19.280 --> 08:24.850 that confirms that my trade is correct. Then I can see that the price goes back 99 08:25.010 --> 08:32.810 and here I can start to be a bit worried even because this red candle goes below my last low so I'm 100 08:32.810 --> 08:38.980 not very happy at this point of the trade but I can't expect that every trade starts well, 101 08:39.170 --> 08:43.520 otherwise there's no need to set a stop loss. Going on, 102 08:43.520 --> 08:45.930 I can see that the trade went up again, 103 08:46.040 --> 08:51.760 but honestly I wouldn't be too happy about that because, ok my trade is going up again, 104 08:51.890 --> 08:55.050 it is near my entry level and this is good, 105 08:55.310 --> 09:00.940 but you can see that it is outside of the uptrend channel and this is not very good. 106 09:01.460 --> 09:07.860 I don't expect the price to be 100% of the times in my channels. When I draw a channel, 107 09:07.880 --> 09:13.970 I try to include 90-95 percent of the time that the price has spent in that level. 108 09:14.030 --> 09:20.390 So it's still fine if the price is out of the channel for a while but then I need it to go back to the 109 09:20.390 --> 09:21.320 channel. 110 09:21.320 --> 09:26.290 Otherwise I can start to think that the price has broken the channel. 111 09:26.510 --> 09:28.880 So for now I'm not losing the trade, 112 09:28.970 --> 09:29.940 it is even, 113 09:29.960 --> 09:32.900 but I'm a bit worried. Going on, 114 09:32.900 --> 09:39.170 I can see that the price goes back to the channel, first of all. There's this first candle that is almost 115 09:39.170 --> 09:45.590 a marubozu and it is very important because it pushes the price back to the channel. Then I 116 09:45.590 --> 09:49.090 have a second candle that is almost a marubozu again. 117 09:49.310 --> 09:56.300 So after these two candles, I'm very confident that my analysis of the market was correct and the Eurodollar 118 09:56.300 --> 10:01.600 is following this uptrend. Then from here, everything becomes easy. 119 10:01.640 --> 10:04.610 I could be a bit scared by this candle. 120 10:04.610 --> 10:07.600 Probably it was a news that pushed the price down. 121 10:07.790 --> 10:10.100 But then it closes near the open 122 10:10.130 --> 10:17.210 and actually this is another confirmation for me that buyers are strong on the market. Then the price 123 10:17.210 --> 10:18.660 continues to go higher 124 10:18.680 --> 10:19.780 and hits my take 125 10:19.780 --> 10:27.410 profit at 1.1435, giving me a reward that is almost four times my risk. 126 10:27.440 --> 10:29.770 So the trade has been successful. 127 10:29.810 --> 10:34.020 We haven't used any magic trick to analyze the market. 128 10:34.040 --> 10:37.670 We only used the chart and our brain, I would say.