June AUD/USD Russian Doll Gartley Patterns - Exit

At 15:38 ET I Tweeted:

"The 2nd Target we were waiting for was .7201 on the Gartley AUDUSD trade. When I checked it I saw it reversed at .7202! So I sold it at the market at .7217. Details later."

Because I had a Stop and a Limit order working, I didn't need to check on this trade very often. When I did check, I was shocked but not surprised price had dropped to within 1 pip of our Target and then reversed up. That's so close that I needed to assume that was the swing bottom, and I better get out immediately. Unfortunately, the Ask was .7217, but it didn't matter. If we did establish the swing bottom, then the odds are price will continue upward. It doesn't make sense to hang on, hoping it might dip down.

But, of course, the trading gods love to add insult to injury, so soon as I covered the trade, price headed back down to a low of the day at .71955:

Had I not checked on the chart at all, it would have hit our 2nd Target and then some.

With regard to the yellow range Gartley pattern, the first 3 targets were hit. The 4th target is very seldom ever hit.

So, bottom line:

Target 2:

Enter .7372

Exit: .7217

.7372 - .7217 = 155 pips * $1.00/pip = $155. If we used the full sized contract, it would have been $1,550.

Target 1 profit: $68

Target 2 profit: $155

Total: $223

June AUD/USD Russian Doll Gartley Patterns - Update 1

1 Hr Chart

15 Minute Chart

You can see on the 1 hour and 15 minute charts above, in the purple, that a 3rd Gartley pattern developed over night last night. I tried trading it but after the D point, price only got up to .73425, which is less than even the .5AD level. Then it meandered downward and broke the X point.

I admit it was weird trading a Bullish pattern when the other bigger patterns were Bearish. But you can see a nice up leg when the C point formed. So it was very reasonable to anticipate we could hit the .618AD of the purple range. 

And, I have learned that when you have a methodology with a proven edge, then you must take every set up, because you never know which individual trade will fail. The Gartley has a proven win rate of about 75%. So, even though this 3rd pattern was in the opposite direction of the core trade, I had to take it.

Now for the good news. The Target for the yellow range was .7304, as described in the previous post. We hit that at exactly 15:00 ET. So the first of the 2 planned trades has completed, and we have the other one still working.

Since the 3rd pattern that developed overnight, and failed, was not a planned aspect of this trade, I'm going to leave out the P&L from that separate trade.

The profit from the 1st half of the trade is:

.7372 - .7304 = 68 pips * $1.00/pip = $68. If we used the full sized contract, it would have been $680.

June AUD/USD Russian Doll Gartley Patterns

This is going to be a crazy trade. I was setting up the Gartley pattern on the AUD/USD 60 minute chart above and when I was finished, I noticed there's another smaller Gartley pattern inside the first.

The bigger Gartley, let's call it the 1 hour (1h) Gartley, is still establishing its C point. I was going to wait for the D point before entering a trade. But the smaller Gartley, let's call it the 15 minute (15m) Gartley, is establishing its D point. 

The 1h Gartley has white comments and green Fibonacci's. The 15m Gartley has yellow comments and yellow Fibonacci's.

So, we can enter the 15m Gartley, but instead of using the usual .618AD Target, we can go for a bigger Target of the 1h Gartley D point. However, I want to be conservative and trade each pattern separately.

I got 2 AUD June futures using mini-contracts because the risk is 85 pips. If I used 2 full contracts I'd be risking $1,700.

I bought the 2 futures at .7372. The Stop for both is just over the X,A point at .7457. The first Target is the .618AD of the 15m Gartley. Using the current D value of .73775, the Target is:

.73775-.618(.73775-.72555)=0.7302104

The second Target is the 78.6% Fibonacci of the 1h Gartley XA leg, which is .71797. Also, using the current C point, the calculated D point is:

.73775-(.7455-.72555)=.7178, which is amazingly close to the .71797 Fib.

We'll shade the second Target a bit because on the way there, we'll encounter the .7200 level, which is a round number. You might point out we'll also be encountering the .7300 level, but that's nowhere close to the Target. Also, there is some possible support from a gap down and swing low from late February. This adds to desire to shade the second Target up to the .7200 level.

Now, here's more craziness. There's a speaking engagement in Australia by RBA Govenor Lowe at 17:15 ET, while the FX market is closed between 17:00 - 18:00. So, come 18:00 this evening, we may get a gap open but there's no telling in which direction. I could have waited until after 18:00 to enter, but I decided I can handle the risk.

Bottom Line:

Trade 1

Enter: .7372

Stop: .7457

Target: .7304

Risk: .7372 -. 7457 = -85 pips.

Reward: .7372 - .7304 = 68 pips.

R:R : 68/85 = 1:0.8 This looks bad but remember the Gartley pattern has a 75% Win Rate, which means you could have a R:R of 1:0.3 and still break even. Plus we have the 1h Gartley that may pull down price further than usual.

Trade 2

Enter: .7372

Stop: .7457

Target: .7201

Risk: .7372 - .7304 = 68 pips.

Reward: .7372 - .7201 = 171 pips.

R:R = 171/68 = 1:2.5 which is great.