I went with the EUR/USD here, trading from 2AM-8AM EST. It’s a bit longer than I can probably handle at this point, now that far more of my time is occupied as opposed to the summer months. But almost all charting software platforms these days have alerts that one can set when price comes to a certain point. That’s, of course, very convenient for a trading style that bases set-ups around support and resistance levels (i.e., specific prices) in the market.
1. Nothing set up at the pivot shortly before 4AM. Price made a twelve-pip move up to pivot on the 3:40 candle, which is pretty significant. The 3:45 was bearish, showing some sensitivity to the pivot, but there wasn’t a bounce at the pivot as I prefer so I passed on anything here. Price swiftly went about fifteen pips above pivot in the ten minutes following.
2. As can be seen from the above chart image, the market stalled in its move up right around 1.2936, where the tops of the bodies of candles formed (the part that excludes the wicks). This represented a clear market high thus far and indicated that this 35-pip move over the past 90 minutes had cooled off at least temporarily. I marked off this level with the horizontal line-drawing tool, as these can often come into play in the future for prospective trade set-ups.
3. The market stayed in the channel between the daily pivot and the high-of-day for roughly the next two hours. This is definitely emphasizes the point that it’s really unnecessary to look at a chart constantly. Very boring and easy to lose focus when price is moving at a very slow clip within a limited range. This is why it’s advisable to set alerts when applicable.
4. My first trade of the day would finally come about four hours into my trading session at the pivot.
The market made a move down to pivot just before 6AM, and upper wicks on the 6:00 and 6:05 candles provided evidence that buying had some oomph behind it.
The 6:15 candle represented the first touch of pivot on this down move. It closed right around the level with a lower wick going a couple pips underneath. I took a call option at the pivot right around the open of the 6:20 candle. This went against me initially, but I had a nice bounce back up on the 6:25 that put me ahead by 2-3 pips. But unfortunately, this wouldn’t hold and I lost this one by nearly three pips.
5. After nearly an hour below pivot, price came back up for another visit on the 7:10 candle. This was met with rejection, so I had the green light on a put option here.
I felt this conceivably had a better chance than the previous trade given that it was going with the downtrend of the past couple hours. And not only that, but the EUR/USD has been in a downtrend for several months as can be viewed on the higher time compressions, such as the daily chart.
As I’ve said previously regarding the entire debate over what a “trend” actually constitutes, for short-term trades, the trend relative to your timeframe matters most (in this case how the market has moved during the European market hours). The macroscopic trend mainly dictates what type of trades, in terms of direction, you’re more statistically likely to take. For instance, over the course of this four-month downtrend on the EUR/USD, you might find that 60% of your trades have been put options, instead of the 50-50 split you might expect in a more neutral, ranging market.
I did obtain the re-touch of pivot on the 6:20 candle, where I got into this put option. This worked out for about a three-pip winner.
6. There was another visit up to pivot on the 7:35 candle. But considering the fact that the retracement off pivot (from the previous move up) was rather weak – it only moved down by about three pips – no trade was taken. This indicated that selling influence was relatively weak, so I basically always bypass these types of opportunities. The 7:35 candle also represented more volume than had been seen on any candle in the past 25 minutes. So I passed on this opportunity and it turned out to be a good move, as the pivot didn’t hold anyhow.
Overall, not a profitable day at 1/2 ITM, but you just have to go with what the market gives.
And, of course, if you ever have questions please let me know. Also, if there is anything in particular you would want me to write about, please don’t hesitate and I’d definitely be willing to fulfill any request.