Trading congestion on the Euro this morning nets 16 ticks per contract. The Trend ATR plots the congestion dot when price fails to flip (meaning the ATR goes from one color to another) with conviction. When the congestion dots are plotted, traders know to trade “back to the ATR” provided there is enough room for profits.
Trading Congestion Using the Trend ATR on Euro Currency Futures
This morning the 45 minute Euro Currency Futures chart showed that a congestion area had developed on the Euro. The top of the congestion area was 1.1195 and the bottom was at 1.1153 (blue ATR). Since price had flipped the ATR from red to blue but failed to do so with conviction, a test of the new blue ATR was anticipated.
Traders can zero down to the three minute chart to verify or confirm the entry. In this case, because we are expecting a downward movement to the ATR, the three minute chart should show a red ATR and we need price to test this are to ensure there is resistance to prevent price from going against us. Since we are entering the trade at the ATR stop, we know we have identified the lowest point of risk. Either we will be right and the market will move down or we will immediately be stopped out. However, remember we have the power of the 45 minute chart fueling the move down.
Entry was at 1.1187. Price does move down in our favor and the Aggressive Stop algorithm kicks in. The exit was generated at 1.1171, resulting in a gain of 16 pips.
This morning has been very active as we have also had 3 trades on Crude, from about 5am to 6:30 am, for a total reward of 42 cents, as well as an ADX retracement trade that is in progress on the Dow. However, for those that were trading Crude at the London opening, there was an ADX retracement trade that netted over $1 around 3:50 am.
Really nice quick trades this morning using a combination of the ADX and Trend ATR indicators by TradersHelpDesk.