There is a guideline that filmmakers bear in mind to better entertain their audiences: “give the audience what they expect, but in an unexpected way”. I often suspect that the markets follow the same guideline, and it is because of this that the FLD trading strategy makes three trades for each trading opportunity. One of those trades keeps us in the game if the market gives us what we expect, but goes that extra distance and exceeds our expectations. That is what has happened in the EURUSD trade I have been discussing here over the past two weeks.
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The target generated by the price cross of the FLD (the T2 target) is where we take some profits and we adjust the stop exit on the third trade to a breakeven level, and start to implement a 3-bar trailing stop. Here is where that stop is now for our EURUSD trade:
The 3-bar trailing stop does not count “inside bars” which is why it was not triggered on Monday 19 May (Monday, Wednesday and Friday of the previous week were inside bars). One of the reasons that we have this third trade is because despite our best efforts it is not always possible to know exactly where we are in each cycle’s phase. The advantage of trading with a strategy like the FLD strategy is that even when you are wrong you are often trading in the right direction anyway. The uncertainty with this trade has to do with the 40-day cycle trough. Has it happened already? Perhaps on 30 April?
Fortunately it doesn’t really matter to us because our trade has worked out well, but it does influence our thinking about the next trade: note the highlighted comment at the top of the chart that we should beware a G category interaction between price and the FLD. That would occur if this move down is not approaching a 40-day cycle trough, but is heading straight for the 80-day cycle trough expected in June.
And speaking of troughs in June, the US markets are showing a mixed picture as they bounce out of their 40-day cycle troughs and approach the last move into the 20-week cycle trough expected in June. The S&P 500 made new highs as seen here:
The Dow Jones Industrial Average has failed so far to reach new highs, although the cyclic picture is very similar:
Our current trades in the US markets are long E-category trades as can be seen from these charts. And of course, new highs or not, the next trade will be a short F-category trade, usually a very profitable trade.
Do you like our new color scheme on Hurst Signals? I think it is more legible, but perhaps I’ve spent too many hours (or years) staring at screens.
Have a great week and profitable trading.
