Last night in the Forex Overview webinar, I anticipated trading the USDJPY (actually any of the Yen pairs) because the Stochastics oversold conditions on the higher time frames. However, it is important to look at the lower time frames for entry.
The chart below shows the 6 hour, 1 hour and 15 minute time frame. At Point A, the Stochastics is indicating an oversold market. At Point B, the Stochastics had been oversold and is indicating bullish divergence. Point C shows that both the RSI and ADX are also oversold.
As I repeatedly tell traders, in order for price to go up, price needs to form a support area. The 15 minute chart shows the support area. First, at Point D, there is bullish divergence that breaks through the moving averages and the red congestion dot. Then a test for support occurs at the ATR (blue plus sign), forming a bullish candlestick pattern.
Long USDJPY After Stochastics Oversold
With the potential for price to move up to the ATR on the 6 hour chart, I enter a Nadex Touch Bracket that has $38 of risk per contract. When price returns to the ATR, I opt to add a Nadex Binary Option with a risk of $36.25 per contract. The next three bars move in my direction and my target at $82 was filled on the binary option providing a profit of $45.75 per contract or a risk to reward of 1 : 1.26.
The touch bracket remains and since the ATR is now moving up with price, if price were to close below the ATR then I would consider exiting or if the resistance at at 108.40 holds, I would also consider exiting. Either way, the trade is profitable.
Additionally, due to the Stochastics oversold status, trades came in on the AUDJPY, GBPJPY and EURJPY, which I also traded using the daily 7am binary options and have achieved their profit targets. Plus, one on the emini Nasdaq to the upside.
While I typically trade on Tuesday, Wednesday and Thursday, this week is an exception because of the market reports we have at the end of the week. Market reports can interfere with the setups and sometimes traders have to modify their schedules accordingly.
You can learn the same techniques used in this trade example by subscribing to the Live Market Analysis and Coaching sessions. Although it is not required, it is recommended that you have the one of the trading packages for either TradingView, Multicharts, NinjaTrader or TradeStation.