We take a look at 1 hour chart of USD/CAD pair in today’s chart of the day analysis. We will be doing a comparison to see how new chart is better than the old one and how it can help traders stay on right side of the market (avoid bad trades)
Let’s take a look at the old chart first
Chart shows a line going down toward 0.5000 fib level (1.0558) and then a line going up to new highs above 1.0707 peak. Traders with good understanding of Elliott Wave theory can understand that trend on 1 hour time frame is still up and pair is in a corrective wave B pull back before it turns higher in wave C so they only need to be looking for buying opportunities at the end of wave B.
There would be many traders who don’t fully understand this concept and would try to trade the swing going down when they see line going down on the chart. As the trend is up so, sell trade has a very low probability of success considering corrections can get complex taking many different forms.
To help traders stay on right side of the market and to avoid bad trades, we have introduced a new system of shaded areas on the charts
Red = Sell Zone (where sellers are expected to appear and traders can look for short positions)
Green = Buy Zone (where buyers are expected to appear and traders can look for long positions)
Orange = Take profit / Reaction zone (Not a buy / sell zone but a reaction zone and traders already in trades can book profits)
New chart shows pair has completed wave A in the orange zone (where traders who were already long should have booked profits) and is currently in wave B pull back. As there is no red box on the chart, we should NOT be selling the pair for a test of 1.0558. There is a green box between 1.0523 – 1.0558 so we would be looking for long positions in this area for the next leg higher according to the chart.
If the pivot at 1.0412 gives up in our system before 1.0523 – 1.0559 area is reached, green box will be changed to orange and will let members know that we should still expect a reaction from 1.0523 – 1.0559 zone but pair is not a buy any more and we should stand aside.
Green Zone produces a rally to new highs
Following this system, not every trade will be a winner as there would be losses too but this would help traders take trades with the trend and avoid counter trend trades and increase the overall accuracy and trading results.