Looking Back on EURUSD Trade 1

The first trade under the new Exclusive Membership was closed last evening, and I thought readers of this blog would love to see how we handled it. I am aware that a few thousand people visit this blog regularly with a view to learning from the numerous real-life examples of using Elliott Waves. So this update is specially for you, folks.

It is important for one to be humble if one is to succeed in the markets. Being aware that NO ONE can tell the future is the first step in that direction. I have been involved with the markets since the early 1980s and even now I freely acknowledge that I do get things wrong. However, because of the time I spend on each chart, the amount that is risked on any trade is usually very small compared to the profit potential. Secondly, I am willing to forget the past. Because I made a superb call yesterday it does not mean my next trade will also be great. At the same time, just because the markets changed after I made a call, it does not mean I have to be running scared of the markets! Every trade is different, more importantly, every trade is NEW. Having a deep understanding of the markets certainly helps. Sometimes the charts ‘speak’ to you. Just by looking at the way a certain move is unfolding is enough to alert you that you have to make some adjustments. This is what happened to our recent EURUSD trade idea.

On 8 November 2012, I sent out an email to all members of the exclusive club that the EURUSD was getting ready for a decent move. The common currency had already come off sharply from 1.2875 to 1.2735 and was trading near 1.2750. I identified three possible levels where a turn could happen. These were 1.2704, 1.2692 and 1.2665. So I suggested buying 30% of one’s usual position size at 1.2705 and 70% at 1.2675. The stop was placed at 1.2650. The risk was thus 34 pips and I was looking for 136 pips in profits, a decent reward/risk ratio.

This is what happened afterwards. The EURUSD came down to 1.2716 and rallied directly to 1.2789! Opps, have we missed it? Patience is a virtue. After a while (on 9 Nov), it came down to 1.2688 and we were long our 30%. The Euro rallied to 1.2739. I observed that whereas the prior rally from 1.2716 to 1.2789 took 16 hours, this recovery from 1.2688 to 1.2739 took over 20 hours. This was not exactly what I had in mind! Little surprise then that the currency started coming off again. This time it broke below the 1.2690 area support and went down to 1.2660. I have no doubt that many of the members were worried sick! This is a normal human emotion. However, our protective stop was clearly in place at 1.2650 and having been willing to lost the 34 pips before the market moved to our levels, there should be no qualms of losing that AFTER the order was filled! This is the subtle difference between doing a paper trade and a real trade. Those who do paper trades are really happy to say I am willing to risk $xy on a trade. But when real money is involved, the heart starts beating faster, and as the market approaches the stop loss level, some traders can actually start hearing their heart beats! Trading is really not for these people. One needs to have steadier nerves in order to be successful. Fortunately for our members, the market stopped right there and started moving up. I am fairly sure that smart money moved in at the same time, because the EURUSD went from 1.2660 to 1.2724 in under two hours! Now we are in business, I said to myself. However, life is never so easy! Over the next two hours, the EURO almost gave back all of its gains, and it was back at 1.2670. But in the following two hours it recovered back to 1.2723 and then settled down in a sideways movement for a loooong time. I suggested to the members to exit 50% of their position at 1.2710 so that they could buy it back if it dips again to 1.2670. It was clear to me that we are in a complex correction and a new set of tactics had to be employed. I told members to sell the remaining position at 1.2740 and 1.2760. There was a decent resistance around 1.2770 and we should just take some profits and move on.. We did not get a second dip to 1.2670, but many traders sold their first 50% well above 1.2710 because the move happened overnight. The Euro climbed to 1.2757 and came off! So are we going to miss the 1.2760 level after all! It took considerable time, but eventually there was a dash to 1.2778 at which time everyone got out and the EURO has since come down to a low of 1.2715.

The key lesson here: You can’t enter into a position and forget it. You have got to monitor it and make changes as required. Another lesson: Some people think if I write an article in Forbes that such and such a move will happen, and if it doesn’t, it is a reflection of my being right or wrong. As readers of this blog I want you to know that NO ONE can predict the future. However, one can have a trade idea based on Elliott Waves (or any other model). After that, it all boils down to execution of the trade. This is completely different from making armchair forecasts. Thirdly, the position size that you trade is important. Can you afford to lose some real money? How much can you lose on any one trade? How many losses can you sustain, and still continue to trade? These are the really important questions you should ask yourself. It is because most traders don’t think through these issues well enough that a majority of them lose.

Here are two charts I posted for the members of the Exclusive Club. Enjoy! (By the way I will not be able to write such detailed comments every time we have a trade because it takes away so much of my time. But every once in a while I will try and do so. I do recommend that you regularly revise my book “Five Waves to Financial Freedom“. Doing so will help you navigate the markets much better. Good luck.)




30 Comments

  • Ajoy

    Thanks Ramki,

    You left some juice for academic guys like me to make some profit for extended fifth wave from wave 4 (1.278).

  • jayesh

    very transparent. I can’t help but fall in awe of you.

  • ScrittiTrader

    Can you just clarify where you placed your initial stop? I think you made a typo – Is it $1.2750 or $1.2650?

    I always enjoy reading about your trades – thanks Ramki!

  • Andy

    Dear Ramkiji,

    Happy Diwali to you. Thank you for your insights on Euro. May I request you to let us know of your long term count of EUR. Say a weekly chart count from the highs seen in July 2008 (it would seem that a 5 wave pattern topped out there). Since then the correction seems complex especially since the top of 2nd May 2011. It would be really helpful to see how the present move fits in the bigger wave count.

    Thanks a lot,
    Andy

  • ziad

    Hi Ramki,

    i just want to thank you for the great trade on EURUSD we had.

    Weldone Ramki.

    Cheers

  • Jete

    Hi Ramki,

    Happy Diwali to you ramki, can you also write about gold and aud?
    Thank’s

  • RS

    Thanks Ramki !!!!
    BTW, when is ur second book coming out ???

  • KB

    Hi Ramki,
    Another possibility, on a daily chart,

    14/09 label as 3
    28/09 label as a
    17/10 label as b
    from the 17th of October, we have just completed 5 down for c, now label as 4. These labels at this level, show little detail of the construction of this correction, “drill down” to 360 & 60 min charts to connect all the waves that make up all the a’s and b’s and c’s.

    From this count, we must now see another 5 up for wave 5 which be labelled as (2) this could take eurusd back to the 131240 level.(triple top)

    And this is the important part with Elliott, this wave could truncate, it could extend, it could end with a wave count of 5 or 9 or 13, even 17 (the last “c” wave down has a count of 13) (there was a wave 3 within that at a lower degree which had a count of 17)

    Wave ii, (we are in it now) could take 2 days, 3 days, you dont know, And it is impossible to know beforehand how the market will construct this expected 5 wave move.
    If you are aware of this, you are far better prepared to handle the waves/corrections as they unfold.
    Wave 2 could consist of a zig zag/flat/triangle, or it could just be a simple expanded correction, you simply do not know in advance.

    It is this, which makes trading so very tough, as the corrections build, waves extend, people change their views from long, to short and back again. Stand back and let the market unfold,

    keep up the great work, (have a look at the labels above though)

    • Hi KB, Thanks for the detailed post. May I offer one suggestion. At any point in time there are multiple counts that are valid. Stick to any ONE count until proved wrong. It is OK to be wrong. There are some who like to point out the wrong counts of others, That is just being silly. The sole aim of a wave count is to figure out three things (a) where will be proved wrong (b) what is the target for the move (c) where should we enter the trade. (maybe the order is wrong, but all three points are important). Good luck

  • mu-mu

    hello!
    thank you for your posts. I had read your book, and I have one question about irregular b.
    In your book, you showed a example ” usd/jpy”.
    in my view, from this summer ,usd/jpy also makes irregular b (76 yen) and now is the wave C.
    my question is “irregular B” can be appeared so often in same pair? or Do I have a mistake of count?

    thank you.

    • Hi mu_mu, Thanks for writing. I have a feeling that your count may not be accurate, but I don’t want you to be discouraged. Be aware that many of my own counts will be proved wrong at some point, sooner or later, but that is not the key thing. I always maintain that we should pursue EWP not because it will give us all the answers but because it allows us to trade confidently and enter into low-risk positions. SO go back to the book and read it again with that in mind, i.e “How can I use this new found knowledge to enter and exit the markets effectively” Good luck

  • amin

    Dear Ramki I’m working as producer in one of the Arab channels, and I want to Hosted you as ” studio guest” or by phone to comment on the markets movements, If you do not mind, If you are interested please send your contact information to my personal E-mail

  • Raveman

    Dear Ramki,
    In my learning where we have wave I , II , III have wave IV and wave V where Wave IV not going to wave I area, is this right? 🙂

  • Vincent

    Hi Mr. Ramki,

    Now EU price already reach 1.2890 & keep pushing upside, will you place a sell trade somewhere around and a stop limit above 1.2920? However Wave 4 really looks complicated for me… Can i have a little advice from you?

    EW newbie here. :))

    Regards.

    • Hi Vncent, I am not looking to sell as of now. Remember, our first trade was to buy, which we did 10 pips above the low. The Exclusive Membership will come up with low risk ideas..and these don’t happen frequently

    • Ted P

      Can i suggest we had a ‘truncated’ 5th wave to complete the 5w ‘C’. Wave 4 retraced exactly to the 61.8% (or retraced 38.2%) level of wave 3, after which we had a clear 5w move short, this however did not make a fresh low…

      Not sure how to post a chart!

  • Tom Jarzabek

    Hi Mr.Ramki,
    The E/U penetrated (and actually what is more important closed) above 1.2880 (one can argue that this was the end of potential Wave 1) and 1.2920 (yours scenario) so it broke the cardinal rule that wave IV cannot move back into wave 1 territory. It looks to me that it was actually ABC correction (end of wave 2) and now we’re in wave 3 (looks like we did 1-2-i-ii and currently iii). The other possibility is that that ABC correction is a part of some more complex correction.However looking at how the current trend behave it tells me that it’s actually impulsive wave. What do you think ?

    Regards from Poland,
    Tom Jarzabek

  • Raveman

    Dear Ramki,

    Any other technic you use this analysis or only EW?

    thank you
    Raveman

  • lilly

    hello.ramki.

    I guess you are very busy.. are you fine?

    I am keeping study EWP in real chart.

    then, It is difficult to distinguish between leading diagonal and ending diagonal.
    I know the differences of thoes two which are innerwaves 5-3-5-3-5 and 3-3-3-3-3.
    However,in real chart, sometimes its unclear.

    for example, weekly chart of Eur/Jpy, I can see a large wedge which might be completed.
    It seems like a leading diagonal triangle because it has 5-3-5-3-5 wave structure ,then I guess this is 1st wave of big C wave and recently up rally is just correction.

    But some proffesional analysts of EWP said this is ED,and down trend is changing.

    SO,I am really confuse:(
    Maybe, I took some mistakes of count….

    • Lilly, Thanks for your comments. I dont see a diagonal trinagle at all( neither ending nor leading) ANyway, you should know that the trebnd for JPY is strongly down, which means EURJPY will go up. Dont play from short side against the trend, you will get killed.

  • maddox

    Hi Mr Ramki, its been quite a while since the last update. Love your book and learn a lot about EW from it. Would love to know your opinion about EUR/USD as right now i think that the pair is on correction wave (2). Thanks and happy new year to you. EW trader from Malaysia.

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