The AUD/USD daily set up that I had posted last week is a good example of what I like to do here at BabyPips: Post ideas as they are happening to make for some great learning charts.
By the way, I don’t like to teach backwards because it does two things: First, it allows for the “well chosen example” and second, it takes YOU the reader or student out of the equation. I would rather teach forwards because it demands and depends on YOU and your willingness to set up the trade and see what happens as it all unfolds in real time. Now I know that sometimes there is no getting around teaching backwards, sometime a completed entry or trade is the only way to show an example, but I think there is far too much reliance on that.
So that brings me to — well really back to — the daily AUD/USD. It wasn’t fun to sit through but there was a reason to wait out the pullback into the Wave on the daily chart. In fact there was also a reason to expect a deeper correction as well. Hopefully I pointed all this out well enough in the aforementioned post.
The patience part was the waiting. Swing trading demands patience because you are waiting for a trend correction. The validity is all about making sure you know where the line in the sand is…where the trend CORRECTION may turn into a REVERSAL For swings — the way I do it — it all comes down to the Wave and specifically in swing buys, it’s the 34ema low.
The validity in this set up was indeed tested but the difference between discomfort and denial may be a fine line but it’s two entirely difference places on the chart.
Looking at upside targets on this bounce, for this example, I used the Fibonacci Expansion tool. Other considerations are past and near term highs (resistance) and major psychological levels like the 0.9200 and 0.9250 levels.
Near term obstacle will include the October 21st like the 0.9327 high and 0.9300. Minor levels to watch would be the 0.9280 psychological level.