Choosing The Right Direction

The engulf is probably the one I think about the most and with good reason. In choosing the right direction in which to trade I rely on the engulf. No matter how good a supply or demand level might look, if there is no engulf then there is no trade. Here we have a few examples of where an engulf led the way. Last week I identified 3 potential trading opportunities and 2 of them came in with big pips. Last weeks' forecast is here. I'm going to run through the analysis so you can see what I did and why and engulf was a key factor.

AUDJPY

The idea was to trade short based on the fact that price had recently engulfed a significant decision point on the daily chart and there was profit potential below. There was a clear path for price to fall for profit.

Daily

A30 image 1 AJ Short D1

H1

After the engulf, I dropped to the H1 chart to look for a level to short from. The perfect level was found with an initial drop of over 150 pips. There were no opposing quality demand levels for a long way so a short trade was safe according to the plan. Price did retrace substantially but keeping to the plan, I stayed in the trade as there was no signal to exit.

A30 image 2 AJ Short H1

5m

When price reached the H1 supply it engulfed the nearest 3 demand levels quite quickly. I only require the engulf of the closest demand level to enter a trade so engulf of two more only increased the odds for me.

A30 image 3 AJ Short 5m v01

Result

After a few large retraces price finally reached the higher time frame demand level and signaled an exit with an engulf. This trade was good for almost 200 pips.

A30 image 4 AJ Short 5m v02

GBPJPY

GJ had a lot more pips on offer and it does tend to be one of the more volatile pairs which is great. After the daily demand engulf it was time to look for engulfs given how much profit was potentially on offer.

Daily

A30 image 5 GJ Short D1

H1

A supply level formed on the H1 giving an indication of the intended move down. The only thing left to do was wait for further confirmation on the 5m chart.

A30 image 6 GJ Short H1

5m

2 demand levels were engulfed on the 5m chart soon after the H1 supply was hit. The best entry was from the 5m supply.

A30 image 7 GJ Short 5m

Result

This was the larger trade of the two with over 300 pips on the table. These trades may not come along very often but when they do they are well worth it.

A30 image 8 GJ Short 5m v02

I hope you found this useful.

The video analysis runs through the same trades:

The supply and demand levels on the H1 and below are discussed in detail in the members area. If you would like access to this then please click the join us as we trade link below, for more details or contact me.

Happy Trading

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8 Comments

  1. Lamar on October 22, 2014 at 01:05

    Excellent job Jo

  2. Haji Zul on October 23, 2014 at 15:59

    Wow very crystal clear.. Hopeore video to come.. Really appreciate joe your knowledge.

    • Haji zul on October 23, 2014 at 16:00

      *hope more video to come

    • Joe Wright on October 23, 2014 at 17:34

      You’re welcome Haji

  3. Nader on November 14, 2014 at 22:55

    Hi

    Thank you for your articles, could you please publish an article about how to determine key S/D levels?

    Thanks

    • Roger on May 5, 2015 at 02:00

      You might consider signing up for Joe’s service, it’s all there and… It’s only $30/mo. vs. THOUSANDS from the other mentors out there. I’ve researched virtually all of them. Good Trading! Roger

  4. Ali Senejani on May 6, 2016 at 13:05

    Thanks Joe. Great video.

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