3-Wave Rule Denies Traders Sharp Gains on GBP CAD



After starting what appeared to be a strong Bearish breakout from its Consolidation setup this week, this pair has now started to pull back sharply Bullish, much to the chagrin of Currency Traders. As surprising as this may have been to some, there was a key Technical Factor at work that was always going to have a hand in this reversal that my traders were aware of - the 3-Wave Rule of trends in the Currency Market.

 There are generally two types of trends that are seen in this market. They will either be sharp and fast with very few pullbacks or slow and steady with waves of U-Turns along the way. Whenever they take the form of waves as was the case in this Range breakout, they will usually pullback and reverse after 3 of these waves are completed. Following this, the pair will either take a break before resuming the trend or start a new trend in the opposite direction (Section 9 - “Consolidation Trading on the Forex Market - A Complete System for Illiquid Market Conditions”).

 As we see in the chart below, this is exactly what has taken place following the start of the downtrend at Resistance.



  DAILY CHART - GBP CAD






















The size of the Range, the three strong waves of bearish signals and the breakout at Support, should have meant the start of large Pip gains for short traders in the days that followed. However, as with the other Technical Factors that lead to False Breakouts in this market (Section 6), the 3-Wave Rule would not be denied. After a few days, the currency pair started to pullback with Bullish Candles to deny me and my clients valuable additions to our growing trade results.


 DAILY CHART- GBP CAD




















Spotting these pullback areas is key to choosing the currencies that can be traded successfully and side-stepping those that will lead to losses. From this point, we could have two alternate scenarios playing out in the days ahead. In the first, this pullback could only be temporary, giving way to a strong U-Turn after testing the Support of the Range.
DAILY CHART- TEST OF SUPPORT
























In the second scenario, this pullback could actually be the start of a Bullish reversal, supported by what would be the formation of Double Bottoms below this Range.
DAILY CHART- DOUBLE BOTTOMS & BULLISH REVERSAL





















We would then see the pair rally sharply back inside the Range to the Resistance boundary, over 300 Pips away.

 Setups and scenarios like these can be seen across the currency market on all pairs and on all time frames with Japanese Candlesticks. False Breakouts are a common occurrence and the 3-Wave Rule is one of the main reasons that they take place to surprise the unprepared trader. Once these and other important factors are incorporated into a comprehensive trading plan, more gains than losses will be realized, providing you with  profitable trading results each month.


___________________________________________________________



RECENT EMAIL FROM CLIENT


________________________________________


________________________________________

Duane Shepherd
(M.Sc. Economics, B.Sc. Management and Economics)
Currency Analyst/Trader
Contact: shepherdduane@gmail.com
Twitter: @WorldWide876
Facebook: DRFXTRADING
Website: www.drfxswingtrading.com

Comments

  1. BloggerSeptember 9, 2016 at 12:27 AM

    Hey Ya'll,

    Below is a list of the most recommended forex brokers:
    1. Best Forex Broker
    2. eToro - $50 min. deposit.

    Here is a list of money making forex instruments:
    1. ForexTrendy - Recommended Odds Software.
    2. EA Builder - Custom Strategies Autotrading.
    3. Fast FX Profit - Secret Forex Strategy.

    I hope you find these lists helpful.

    ReplyDelete

Post a Comment

Popular posts from this blog

SHARP GBP USD RALLY PREDICTED 7 DAYS AGO

Image
As predicted several days ago, the GBP has rallied sharply above major Support area of 1,2000 to start an uptrend that will take it up to the 1,2750 area by Wednesday January 25th, 2017. This is all part of the predicted  formation of a Consolidation Setup on the Daily Chart. In the screen shot of the Private Video Tutorials sent to DRFX Subscribers (www.drfxswingtrading.com), you can see the blue line used to indicate where I expected the rally. PRIVATE VIDEO LESSON - JANUARY 10, 2017 In the screenshot and Youtube Video below of January 18, you can see that the rally took the form of a strong Bull Candle - exactly where I predicted. PRIVATE VIDEO LESSON JANUARY 18, 2017 This projected Consolidation is based on the type of bullish and bearish waves on the Daily Chart. From the Trading Manual, you will see that there are certain types of waves that tell us when the market will form a Consolidation.
Read more

STRATEGY NOW UP BY 23.78% WITH RECENT 2.00% USD CHF TRADE

Image
This trade involved trading the False Breakout Reversal Setup that was taking place on the Daily and 4 Hour Charts last week, amidst the period of risk aversion across markets in reaction to the on going Coronavirus outbreak. This quick and aggressive trade took just 4 Hours in providing me with a 2.00% Rate of Return, just ahead of the Bullish Reversal that took place at Support. With this result, the new strategy is now up by 23.78% from just 14 trades, pushing me closer to the next major target of a 30% Rate of Return. As long as we carefully and patiently wait to only trade the setups with a High Probability of Success, large Rates of Return are possible for us in this difficult market.  VIDEO HIGHLIGHT OF THE USD CHF TRADE The main factors related to this trade that you'll seen in the Manual and in the more detailed Video Analysis available only to my subscribers were: 1. Accurately Identifying Consolidation
Read more

GBP CAD PROVIDES A 140-PIP TRADING GAIN FROM FALSE CONSOLIDATION BREAKOUT REVERSAL

Image
This successful trade took advantage of the sharp False Breakout Reversal from the Pennant Consolidation on the Daily Chart that started on December 3, 2015. As with all of these types of setups, the initial breakout attempt was quickly taken out by a strong, opposing signal that led to a breakout at the other end of the Consolidation. Given that this setup was in sync with the theory of False Breakouts that is outlined on Page 54 of the Trading Manual, the trade provided a strong gain of 140 Pips. The graph below shows one of the examples of False Breakouts that are explained in detail in the Manual. FALSE BREAKOUT SETUPS As you can see from the Daily Chart of the GBP CAD below, the setup was almost exactly the same as the one above.  DAILY CHART FALSE BREAKOUT PENNANT SETUP (FXCM Charts used to provide Entry Signals based on the New York Candle Close of the Daily Chart) Following the Bear Candle that attempted a breakout at Support, the bulls
Read more