Your patience would have been rewarded on Sept. 7 when price pulled back into the 13-day SMA with its intraday high setting a pivot high and then entering on Sept. 8 as price traded below the previous day’s intraday low at 92.69 (see “Closer view”). The MACD doesn’t confirm with a downward crossover, but it is apparent that it is trending downward in the direction of your trade at the point of entry. You place your stop point just over the intraday high set on Sept. 7.
As the trade progresses, you observe that as price approaches its downward channel that the MACD is also flat at its bottom, revealing an oversold condition where you could have exited the trade at a low of 88.92 for a potential 377 pips in profit.
Volatility & risk
The forex market represents the best of what trading has to offer: high leverage, strong price movement and huge profit potential. The Forex Slingshot setup takes advantage of all of these attributes if you understand how to use volatility to profit and control your risk.
The nature of forex is predicated on volatility within its price action where price can accelerate in one direction and then jerk back in the opposite direction, which causes other traders to get shaken out of their position. Using this setup, you enter just as the other traders are torn loose from their positions, while profiting as the trend resumes its move.
More important, you know your risk as you enter the trade where you place a stop just above the previous price bar’s intraday high. Knowing this number, you can then adjust your trade position to define your risk, while putting yourself in the best possible position to succeed.
Billy Williams is a 20-year veteran trader specializing in momentum trading in both stocks and options. Read his market commentary at www.StockOptionSystem.com.