Emerging Butterfly Pattern – GBPAUD – H4 Timeframe

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A “potential” Butterfly pattern might be in the making.  Price has bounced off the lower trend line … point C retraced 61.8% of AB.The potential reversal zone is a confluence of – 127.2% of XA- 200 % FibPRoj of BC- 161.8% FibProj of ABWe also have a supply zone (resistance area) around those price levels, established in late Nov/early Dec 2010.
Suggested Entry
– Break of BC trend line (SL below C)
– A more conservative  entry would be a break above point B.   In that case a SL below C would not make sense from a risk/reward perspective.  Go to a lower timeframe to trade the move up to D if a price break above B is taken as the entry trigger.
Suggested Targets
– Eventual target would be around point D if the pattern completed.
– The recommendation would be to take profits at intermediate targets e.g. 61.8%/78.6% of XA.
This entry was posted in Butterfly, Forex, GBPAUD, Harmonic Pattern. Bookmark the permalink.

4 Responses to Emerging Butterfly Pattern – GBPAUD – H4 Timeframe

  1. One618 says:

    Price moved in the expected direction past 61.8% of XA (around 290 pips), before reversing. Currently around 38.2% of XA.

  2. One618 says:

    Price has retraced all the way below point C. The pattern didn’t materialize. However, if an aggressive entry bullish long trade was taken, then the 1st recommended intermediate target (61.8% of XA – 1.6052) would have yielded a profit of around 100 pips depending on where one entered. Price was close to the second intermediate target of 78.6% XA (1.6119), but didn’t quite make it there – retraced from 1.6108, 11 pips shy.
    Note: There would have been no trade triggered if the conservative entry approach mentioned in the original post was used, since the price never broke above point B (1.6112).

    As mentioned in one of the earlier posts, here is how I normally manage my trades …
    – Enter a trade with 3 positions simultaneously. The overall position size (i.e. # of lots) across all 3 should be based on one’s risk threshold.
    – All positions would start off with the same SL.
    – The 1st 2 positions would have intermediate profit targets. The 3rd position would generally have a final target or not have a target set, if I intend to trail the SL.
    – If the 1st target is hit, I would move the SL for the remaining 2 positions to BE.
    – If the 2nd target is hit, I would adjust the SL for the last position to either
    (a) A technical area, based off a SR/pivot/Fib based level etc.
    (b) At the 1st target level
    (c) A trailing SL, based off an ATR/38.2 Fib level etc.

  3. Trading strategies for non-professional traders is what I am investigating. Your site is very helpful in this area. I guess the whole point revolves around whether it is advisable for non-pro traders to attempt anything other than simply buying calls and puts. I suppose it all comes down to education – it may be better to go for a safe strategy with limited risks and returns, rather than a single trade which is easy to do but carries more risk.

    • One618 says:

      Thanks. I think in general keeping it simple is probably better. I do dabble in single leg options such as long calls/pus or short puts occasionally. However, for options I mostly try & utilize income generation type of strategies with limited downside (with or without a directional bias).

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