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AUD/USD: First Time Back Strategy

AUD/USD: First Time Back Strategy

The AUD/USD currency pair has just presented an incredible opportunity to traders. This setup has at least a 70 percent chance of taking shape profitably. Based on the First Time Back (FTB) strategy, the opportunity takes shape as a textbook example. FTB essentially identifies reversal points of trades very accurately – as previously mentioned, 70% accurate. However, the probability of the setup unveiling profitably increases if the prediction provided is in line with the overall trend. In other words, it’s extremely effective at identifying the turn of retracements to trend continuation.

Specifically with AUD/USD, the main timeframe to look at is H1. First looking at higher time frames (daily and H4), the overall trend appears to be strongly downwards. This develops that the general expectation is to get an opportunity in line with a downward move (in other words, a sell). A strong support zone developed and was continuously tested and tried. The thick blue line along 0.72018 is highly representative of the zone as can be seen in the chart captured.

A very strong break in line with the trend follows. Two hours later, it appears to have bottomed out and a resistance zone panning out. This can be seen at 0.71739 as marked by the blue line. In addition to this, one notice a mini double bottom below the level outlined. A sort of arc is being formed as I have tried depicting with the red triangle.

The broken blue line shows the expected move up towards the previous support. The expectation is a quick retest of the support but the support should hold (70% of the time). This up-move gives us the opportunity to come in. The earliest point of entry should be the level indicated by 0.71967. The main reason for this level is that it is approximately 5 pips from, on the reward side, from the support zone. From experience, there are many potential trades that don’t actually reach the zone.

So to reasonably capture a good number that doesn’t reach the zone without grossly abandoning risk reward (RR) sense, the 5 pips makes sense. Also, the 5 pips is developed from experience of watching the trade setups and not just an arbitrary number.

The risk reward (without excluding transaction costs) is roughly 1:1 (exactly 24.1 pips on the risk side versus 23 pips on the reward side). A sensible RR. A plus side to this is that the RR can be improved further by letting a portion of the trade run in line with the overall trend of the market past the resistance level. Have a pipfull blast of a time!

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