08-12-2017 Dax Technical Analysis

Good morning traders, this one will be short and sweet as the Premium webinar went on for longer than expected today. In addition to setups and bar-by-bar reading on the Dax, we spent some time discussing the importance of discipline with our trade management and money management. It is essential to understand our win rate! It is also essential to understand what our reward to risk ratio is, so we can calculate our ‘required win rate’ (this is the minimum win rate needed to break even). When we compare those two numbers, we know whether we are profitable. But win rates are only valid if the trades have not been tampered with. Do not take profits early! It will dilute your win rate.

So there are no levels at the bottom of the article today and I will unlikely be trading around NFP or the rest of the session as it’s the end of a strange week in terms of price action.

Price Action Summary

Regarding the Dax bar-by-bar read, let’s summarise that using the chart above. We start the day with a gap higher followed by a gap close attempt (which didn’t quite get there the first time around). This initial daily low is the ‘a’ point of my fork. The morning high and the morning low complete the ‘b’ and ‘c’ points of the fork. The move from ‘b’ to ‘c’ was an interesting intra-day trend, placing lower lows and lower highs allowing fork traders an opportunity to practice their lines.

I like how the lower median line parallel (LMLH) contained price action very well and you can see a new trend develop from point ‘c’. Alan Andrews says that price will likely move towards the median line. From here it will either reverse or gap/zoom through it. In our case, it is the latter. After breaking through a median line, price action will often come back to test the median line. You can see price did this as well.

In actual fact, we have gapped through the top of the upper median line parallel this morning: Bullish!

08-12-2017 Dax Outlook

  • Strong gap higher and a continuation towards the range extreme (highs)
  • We need to break through the 13213 with strength to signal that this minor swing B is broken
  • Look at the shaded area, it’s a perfect example of fork line confluence!
    • Bullish fork from points (9, F, 0) – The quartile line is also there
    • Bearish fork from points (D, E, F) – There is a switchback of the upper median line parallel
    • Bullish fork from points (0, 1, 2) – We bounced from the lower median line parallel

08-12-2017 Daily Chart

  • The range is on the verge of a break, around the major fork median line
  • We are still at a range extreme, but it’s NFP Friday – anything can happen

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