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EUR/CAD Trade Plan off a Harmonic Butterfly

EUR/CAD Trade Plan off a Harmonic Butterfly
Thursday, January 7th, 2010 @ 10:51 am by Chris Hall

About Chris Hall:

Chris Hall Chris holds a BA in Information Technology, and before becoming active in the forex sector he worked for 6 years running his own internet services company. Chris' true passion was in trading, which he began on the stock market, but shortly thereafter moved on to forex trading. Learning from some of the best traders out there, he quickly saw how important statistics and probability play in the market, and with that playing harmonic patterns were the way to go and were like second nature to Chris' trading style and personality.

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Here’s a decent little harmonic play for those not wanting to stare at the charts every day to watch this move.  Its on a daily chart and it took pretty much 6 months to be formed.  The good thing is that the more candle sticks it takes to form, typically you get better structure out of the pattern which can lead to a more probable trade.  So lets get right down to it an analyze this trade:

EUR/CAD Daily Butterfly Pattern

Stop: 1.4420

Entry:  1.4813, 1.4713, 1.4555  (avg, 1.4706)

Targets:  1.5206, 1.5974, 1.6069

Risk vs Reward:  1:2

Holding Period:  ~3 months

So we have this nice little butterfly with a pretty long prz.  Be sure to adjust your risk based on the height of this prz.  We are currently moving around just outside of the area of highest probability of a reversal so we’ll have to see at this point if we can get some sort of indication that we will be reversing.  But with that being said, ivar (hurst exponent) has tanked and were now seeing some anti-persistence in price.  We are also seeing this potential reversal zone line up with support and resistance which gives us added confidence that we have a statistically higher probability of this trade working out then it not working out.

The only thing you have control over in the forex are your losses, and every trade you place you should assume that its a losing trade before you place it.  Reason being, you need to accept that trade mentally as a loss so that you don’t get so emotionally caught up.  This trade plan are for people who don’t care if they see about -200 pips on their statement to see an expected payout of over +800 … but it will take some time to get there and we’ll have to let it work itself out.  At the point that it would hit our stop would also give us valuable information which is why our stop will go there to start.  But this pattern also agree’s on the weekly time frame which we are still within the boundaries of the prz.  You could try to time this buy looking for harmonics on 1H and 4H timeframes as well to try to increase your chances of a reversal.

Over all, not a bad trade setup for a daily timeframe!  Want to get alerted to more of these patterns, you can join us in the trading room here:

One Response to “EUR/CAD Trade Plan off a Harmonic Butterfly”

  1. […] Blog Article: EUR/CAD Trade Plan off a Harmonic Butterfly […]

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