EURUSD, wedge/diagonal patterns and why most traders lose
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All over the internet you see posts about the dollar crosses and their wedge/diagonal patterns.
But understanding the structure keeps you out of most losing trades. Some free advise when dealing with these patterns. (I'm not posting a textbook example but a real time example so let's follow this pair and see how it unfolds). Diagonal patterns come 90% of the time together with zig-zag (abc) corrections (you can test it yourself and please share your findings in this post). I'm not saying something can't happen because nothing has a 100% probability. But the first leg lower after the last high looks like a 3 wave pattern. So this means the bearish move will most likely be corrective. This corrective move might break out of the wedge pattern, BUT it will most likely make another high first. This is why diagonal waves extend so often. Nevertheless a short trade seems to be next. I will trade that short but manage the position closely keeping the possible structures in mind. There are several corrective patterns possible of larger degree. If we break lower I consider this diagonal pattern to be a leading diagonal and not an ending diagonal. Meaning another bullish leg will be next once the correction is over.
Safe trades and updates will follow.
But understanding the structure keeps you out of most losing trades. Some free advise when dealing with these patterns. (I'm not posting a textbook example but a real time example so let's follow this pair and see how it unfolds). Diagonal patterns come 90% of the time together with zig-zag (abc) corrections (you can test it yourself and please share your findings in this post). I'm not saying something can't happen because nothing has a 100% probability. But the first leg lower after the last high looks like a 3 wave pattern. So this means the bearish move will most likely be corrective. This corrective move might break out of the wedge pattern, BUT it will most likely make another high first. This is why diagonal waves extend so often. Nevertheless a short trade seems to be next. I will trade that short but manage the position closely keeping the possible structures in mind. There are several corrective patterns possible of larger degree. If we break lower I consider this diagonal pattern to be a leading diagonal and not an ending diagonal. Meaning another bullish leg will be next once the correction is over.
Safe trades and updates will follow.
Commento
Extended scenario for another high in this ending diagonal:Leading diagonal scenario for a bearish break and new high:
AND
the possible combination:
all lines and arrows are indicative
Commento
Crucial area for bullish reversal or sell continuation trade set-up!Commento
I mentioned that the first move lower from the highs 01-24 were considered corrective to me. Therefore my bias was more upside. Now that has been confirmed by means of a bullish break I will start looking for either another push higher or alternatively a reversal all together. The minimum requirements for a reversal are in place. FOMC is on the agenda later today and that most likely is going to have an impact but since I don't see a trade set-up just yet I have to be patience and will update once things start to become more clear in terms of the next trade set-up
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