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Supreme Combo | Fib Matrix TimeLanes Set Ups

Categories: Forex Training, Trading Set Ups
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Fib Matrix Timelanes | The Supreme Combo

The Fib Matrix TimeLanes offer a multitude of trading possibilities right through the trading day. A relatively new set up that has been developed is the Supreme Combo. It is a trade which combines key levels across the 1 min, 5 min and 15 min time frames and as a result has a very high trading success rate. This trade usually develops from a breakout of a tight range. As price retraces from the move the 1 min L7, 5 min L3 and the 15 min L1 box fall into a line as the same price point (you can allow up to 5 pip range for the set up still to be valid). The trade is taken when price reaches the Supreme Combo level and the target can either be the 1 min boxes or a set number of pips.

Live Trade Examples of Supreme Combos

You will see below that we have broughy together a series of live trade examples of the Supreme Combo set up being taken.

GBPUSD +7 2016-06-01 | Supreme Combo Trade

This is a supreme combo trade (multi time frame resistance). The 1 min R7, the 5 min R3 and the 15 min R1 are all in alignment as price tests the level. The One minute boxes are more than 12 pips below, indicating a sharp retrace from the move down. The trade worked out quickly giving a nice +7 pips.

Forex Price Action | GBPUSD +8 2016-05-26

This is a textbook Supreme Combo trade. Price has broken out to the upside and retraced back to the Supreme Combo level. This is circled in red and you will see that the 1 min S7, the 5 min S3 and the 15 min S1 are all within a couple of pips of each other and there is a gap of 10 pips back to the 1 min boxes. The trade is taken long at this level and produces a quick +8 pips

Forex Price Action | GBPUSD +6 pips 2016-02-29

Cable has moved up in early London trading to make a session high before retracing back to a block of support on the 5 min, 15 min and 1HR time frames with the 1 minute boxes over 15 pips away and the white zone had shrunk. The pattern shows the 1 min, boxes leading the 5 min boxes indicating the trend long is still strong. The trade produced +6 pips.

Forex Price Action | EURAUD +6 pips 2016-03-02

EUR/AUD moved up sharply shortly after New York open making new highs before retracing back to major multi time frame term support on the 1 min (L7), 5 min (L3) and the 15 min (L1) (Supreme Combo Level ). In addition the 1 min boxes led the 5 min boxes indicating a strong trend up remained with a 20 pip gap from price back to the 1 min boxes.

 

Fib Matrix Timelanes | Trading Extended Reversals

The Fib Matrix TimeLanes provide a wealth of trading opportunities throughout the trading day. One of the trades with the highest probability of success is the extended reversal trade. This trade set up produces a distinct pattern amongst the boxes on the individual time frames. If you look at the Fib Matrix you will notice that they align into a check mark (tick) shaped formation, with the point of the check mark being the lowest 5 min box (highest if the trade is a short). The trade is taken at a a support level below this box (above if it is a short trade), the level dependent upon the price action at the time.

Live Trade Examples of Extended Reversals

Below we have gathered together a series of live trade examples of this trade set up being executed. Pay attention to the position of the boxes and the pattern formed on the Fib Matrix.

GBPUSD +9 pips 2016-05-05 | Extended Reversal

This a nice example of an extended reversal on GBPUSD. This set up happens when a pair has been trending in one direction makes a new short term high or low and then retraces. As often happens the market often tries to retest the level. This creates the check mark pattern with the boxes. We look to take the 1 or 5 min level beyond the lowest 5 min box. This trade worked out very well producing a net +10 pips.

Forex Price Action | EURAUD +9 pips 2016-04-27

After a move up, EUR/AUD has broken to the short side. The grid pattern shows an extended reversal pattern, where the 1 min boxes are above the the lowest 5 min box (see red arrow) creating a checkmark pattern for the arrangement of the boxes. The trade initially goes against us but there is the opportunity to add at the the two column support on the 5 and 15min time frames. The add allows us to closed out our initial entry when it gets back to break even then take half at +7 and the balance at +11 giving us a net +9,

Forex Price Action | EURJPY +6 pips 2016-04-13

EURJPY is in a massively extended reversal the 5 min time frame. You can see the move has been quick because the 1 min boxes haven’t moved past the 5 min boxes yet price is over 40 pips away from the lead 5 min box.This is unusual and is largely because EURJPY had been pulled sharply higher by EURUSD. As always, when trading a cross pair it is important to check the parental pairs. In this case Euro has moved substantially away from its 1 min boxes and is now at resistance with EURJPY in a extended reversal pattern a short on EURJPY is taken which yields a quick +6 pips

Forex Price Action | EURAUD +6 pips 2016-04-05

EUR/AUD is just in an extended reversal setup. You can see this in the way the 1 min boxes are below the lead 5 min box and price is at a resistance level on the 1 min time frame.. Generally you would like to see a larger gap between the 1 min boxes and the lead 5 min box so the trade was taken with some caution in mind. +6 pips

See on a live chart how cross currency correlations work in real time

The best way to understand the concepts that we covered in the first two parts of this course is to actually see what is going on in a live market environment in real time. This  does just that

In part one of this series on forex crosses and cross currency correlations we saw how currency pairs are constructed, the mechanics of what happens when trading an individual pair and finally the importance of understanding the difference between majors and crosses.

In part two we then looked at how pairs acted within triumvirates (pairs grouped in threes) and how this impacts upon your trading, particularly if you are scalping (short term trading). The segment goes over the main symbiotic groupings in the market and shows you when to and when not to trade a particular pair and the reasons for this.

Cross Currency Correlations In Real Time


In the video above we look at the price action from yesterday morning London session. We are concentrate on the three main pairs EUR/USD, EUR/JPY and USD/JPY

The video is particularly interesting as it show three different ways in which the three pairs interact as a triumvirate of pairs. Initially, we have a move up on USD/JPY and a corresponding move down on EUR/USD, yet if we watch EUR/JPY it is stuck in the same place and this is precisely because of the interrelationship between these three pairs. As time moves on EUR/USD stops falling and this releases EUR/JPY , allowing it to move up with  USD/JPY . Finally, EUR/USD starts to move up as well creating a perfect storm situation. This means that EUR/JPY shackels are now of and it moves up at an exponential rate compared to both EUR/USD and USD/JPY.

All of this can be clearly used to your advantage particularly with regard to the time of your trades and which particular pair to take. If you spend time analysing the support and resistance areas of each pair in a particular group then you can pre empt some of the moves particularly the “perfect storm” set ups.

One additional thing to bear in mind is the time of day as this has considerable bearing on moves. In the London session for instance the controlling pair is more likely to be  EUR/GBP. Whereas in the New York session USD/JPY becomes the dominant player. This of course is not a hard and fast rule and news plays a huge roll in deciding the dominant pair. It is always useful to try to identify this as the sessions go on and watch for changes.

How to trade cross currency correlations

Categories: Cross Currencies, Forex Training
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Once you understand how currency pairs are put together, the next step is to look at how to trade cross currency correlations. 

You view how forex pairs are put together here

Key is your awareness of how Forex crosses are traded by the main Banks and the interrelationship between specific pairs. Once understood how you should trade these pairs, and use the correlations to your own advantage, particularly in terms of short term trading / scalping, needs to be made.

In this video we look at the symbiotic relationship between groups of currency pairs and how this relationship affects the movement of the pairs in the open market and, by extension, you chance of making a successful trade.

The importance of cross currency correlations in scalping

Particularly if you are scalping the effect that one interlinked pair can have on another is considerable. Each pair is part of a triumvirate of pairs whose movement impacts on each other. If you are in a short term trade, entering the market for just a few minutes, looking for 7-15 pips, then the effect can be considerable.

fxcross

How to trade cross currency correlations

For example, if you were to look to trade USD/JPY short and both EUR/USD and EUR/JPY were at resistance then there is a good chance that USD/JPY will remain flat making it difficult to make any profit. If on the other hand you wanted to trade EUR/JPY long and both EUR/USD and USD/JPY were moving up without any resistance then EUR/JPY would fly up, the reason being that EUR is being bought and JPY is being sold in the parental pairs movement.

The video shows a map of how the interrelationship between three different triumvirates can play out in the market. When you are initially getting to grips with how this relationship works it can be useful to have this in front of you (you can download the PDF below, we suggest you pint it out and keep it close to your trading monitor).

Assessing other cross currency correlations

Of course this is only three sets of triumvirate pairs, although probably the most important to know. There are obviously many more such as AUD/USD, EUR/USD and EUR/AUD.

One thing to bear in mind though is that obviously volume will play a role. On less heavily traded crosses one of parental pairs can tend to dominate and skew the effect.

At the end of the day nothing can beat experience. It is useful to group the triumvirates together on your platform (something that can be easily done with the TimeLanes) and just spend some time watching what is happening and seeing the relationships play out in a live market.

In the third part of this series on Forex cross pairs we will look at this relationship in real time as well as consider other factors such as time of day that can influence how these pairs react with each other.

Download here the map of the relationships between various currency pairs.

Forex Cross Currency Pairs

Categories: Cross Currencies, Forex Training
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What are forex cross currency pairs?

This might appear an odd question to ask a forex trader ….yet, in a recent survey we conducted amongst traders 69% of themyep…69% couldn’t tell us why a cross currency pair was different from a major pair! And many of these been trading for some years.

Digging a bit it became apparent that the basic issue was that a lot of traders don’t really understand the concept of pairs in the first place. The problem issue is that relatively few realise that when the take a trade there are  infact TWO transactions were taking place.

How Forex Pairs Work

The best way to look at is is to use an example. Let us say that you are going long on GBP/USD. …What is actually happening is that you are buying GBP and selling USD. It is actually very logical but few realise that this is happening.

The problem is,  not all currency pairs are the same.

Why is it important to understand this you may ask? After all you make a profit on if a pair goes up or down, the way it is constituted is surely irrelevant?  This is not true as the way the pairs are constituted has a big bearing on how they move.

The reason for this is is that not all pairs are the same, cross pairs are traded differently.

This all goes back to traditional currency conventions.

Currency Conventions

In order to understand why forex cross currency pairs are different, you first have to know the quoting conventions for currency pairs in the spot forex market.

Forex Cross Currency Pairs

Each currency pair consists of a ‘base’ currency (the currency on the left) and a ‘quote’ currency (on the right).

Traditionally, the base currency was always the larger of the two and despite the fact that relative currency values have changed,  the conventions have pretty much remained the same, except for the addition of the Euro in 2000.

The conventional order of currencies starts with the Euro (EUR). The EUR is always the base currency in any pair it is a part of ie it is always on the left hand side.

Next comes the British Pound (GBP). The GBP is always the base currency except for when paired with the EUR.

The full conventional order of priorities for the base currency (with respect to major and minor currencies) is:

  1. Euro (EUR)
  2. British pound (GBP)
  3. Australian dollar (AUD)
  4. New Zealand dollar (NZD)
  5. US dollar (USD)
  6. Canadian dollar (CAD)
  7. Swiss franc (CHF)
  8. Japanese yen (JPY)

The Major Pairs!!

From this list a series of pairs, known as “Majors” are created and  traded.

  • EUR/USD
  • GBP/USD
  • AUD/USD
  • NZD/USD
  • USD/CAD
  • USD/CHF
  • USD/JPY

Any other pair is a cross pair (So the majority of traded pairs are forex cross currency pairs of one sort or another)

So why just these as Majors? Again here tradition again rears its head.

Somebody has to make the market and pretty much 80% of Forex volume ends with just few major banks, Deutsche Bank , UBS, Barclays Capital, and Citigroup being the principle ones.

Forex Cross Currency Pairs

Now these major banks only trade the majors. If you wanted to trade a cross pair the trade would be legged. This meant that two major pairs would be traded to create the cross.

How does that work?

For example let’s say you wanted to trade EUR/JPY cross. A Bank would Buy EUR/USD and Buy USD/JPY.

Now remember we talker of two transactions per trade, well with a cross there are effectively four.

So, in the example of the EUR/JPY

You are buying EUR, selling USD, (in the first part of the leg) then buying USD and selling JPY (In the second part of the leg). The two USD transactions cancel themselves out leaving you buying EUR and selling JPY, thus long on EUR/JPY

This animation in the video at the top of the page should make this clearer.

First you have your the two pairs, Euro Dollar  and Dollar Yen. To go long on them both you are buying Euro and selling dollar and buying dollar and selling yen. The dollar trades cancel each other out. leaving you with buying euro and selling yen. Thus you are long on EUR/JPY.

How does this impact on your trading:

Basically, if you were trading EUR/JPY  you should be spending as much time analysing EUR/USD and USD/JPY charts as you do looking at the EUR/JPY chart. It is particularly important when you are scalping.

In the next training, we will go through how to utilise this information to better trade the most important cross pairs.

 
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