Trading the EURUSD with Candlestick Charts

Trading the EURUSD with Candlestick Charts

I normally don’t post about my Forex trading because I don’t do it to earn a living, I just do it to keep my market reading chops sharp.

When you trade Forex you usually get only price action and not volume, so it’s harder to divine which way to trade. The best thing to do is look at the long trends of a particular currency and go long or short on a pullback inside the long trend.

Sometimes it’s hard to figure out when the trend ends or changes, like in July 2020 for the EURUSD. I was trading off the daily charts and taking position trades (holding for greater than 1 day) going mostly short. The reason was that the trend was down and I could make money off the carry trade. I wasn’t the only one that had the same idea, it was quite profitable.

Then it all ended and I got clobbered, one of my biggest losses in a long time. I would’ve seen this coming if I only looked at the weekly charts.

Weekly Chart of EURUSD using candlesticks

The open over 1.14 on July 26, 2020, should’ve been where I changed my strategy and flipped to a long trend but I didn’t. Why? I was looking for a magical candlestick pattern to be printed, and it didn’t BUT the price action told me everything I needed. I thought it was it was just another pullback when I should’ve looked at the strong bullish candles coming out of the July low. That was the signal I needed to heed but didn’t.

Candlestick patterns are nice but I rarely see officially recognized ones get created. I just look at where support and resistance levels, what time of day, and trade accordingly to the trend. I now trade on 15 minute to 1 day time intervals and rarely hold overnight. I definitely don’t hold over the weekend and close out any trades on Friday mornings.

Then imagine my surprise when a rare hammer appeared on the weekly charts (see ) and if a candlestick pattern occurs, I listen. Right now there was a rare hammer pattern that happened the week of March 26. It was followed by a Bullish Engulfing candle and that was my queue to get long. That’s been very profitable.

Still, I struggle with risk management in Forex. My trading performance says I’m doing my Risk:Reward ratio of almost 1:3, so that’s great but it’s impossible to place stops when trading on a Market Maker. They just go stop hunting and take you out.

This is tough shit if you had to do it for a living. Seriously.

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