Today we’ll talk about a pattern that occurs many times in the forex market, on most of the pairs and on any time frame. We will describe the parabolic price structure and how you could use it for trading. However, we must begin by saying there are many forms of patterns that occur over and over in the markets. You just need concentration and pattern recognition skills in order to be able to spot them. You don’t need to apply the basics of fundamental analysis, although you could have a higher edge by combining both.

Parabolic structure – a common pattern in the forex market

In order to help you understand better what we are talking about, let’s take an actual example. Below you can see the GBPUSD on the 5 minutes chart. We’ve spotted a parabolic structure yesterday, March 30^th 2018.

Source: dailyfx.com

Let’s describe the actual context. If you zoom out to the daily chart, you will see that Cable had been under pressure for a few days in a row. However, as the end of the month was near, some profit taking might have been in play. That is why we see the leg up on the left of our screenshot.

After a few hours of buying, the price ran into a resistance level, located at 1.4060 and then started to consolidate. What stands out is the shift in the price relationship with the 20 EMA.

We’ve used the 20 EMA to help us spot a change in the market mood and you can see that sellers were showing signs of strength once the price action had begun to treat the 20 EMA as resistance, not as support.

There were a few rejections off the EMA, which is good news for sellers, as they could enter the market at a better price. What resulted is a nice parabolic-shaped price formation which can be used efficiently especially for with-trend trading.

Hope you will manage to spot formations like this one in the future and maybe you will be able to spot other kinds of formations as well. This type of recurring formations happen all the time, you just need the experience to see them unfolding.

Our GBPUSD buy signal made +95 pips profit:

From: Dave Hughe <plainfx@gmail.com>
Date: Tue, Oct 31, 2017 at 8:50 AM
Subject: Oct. 31
To: 
GBPUSD Buy 1.3224 SL 1.3189 P1= 1.3244 P2= 1.3274

This signal reached both profit targets. The stop-loss order for the remaining 3rd unit had been upgraded and later triggered at 1.3249 for the total profit of +95 pips.

From: Dave Hughe <plainfx@gmail.com>
Date: Tue, Oct 31, 2017 at 11:28 PM
Subject: GBPUSD SL 1.3249
To: 

On the chart this trade looked like this:

We sent out the following Forex signal today:

From: Dave Hughe <plainfx@gmail.com>
Date: Tue, Oct 31, 2017 at 8:50 AM
Subject: Oct. 31
To: 
GBPUSD Buy 1.3224 SL 1.3189 P1= 1.3244 P2= 1.3274

So far, this signal has reached its first profit target making +20 pips profit. Now we updated stop-loss orders to the break even price:

From: Dave Hughe <plainfx@gmail.com>
Date: Tue, Oct 31, 2017 at 9:07 AM
Subject: GBPUSD P1 reaches, SL BE
To: 

We sent out the signal to short USDJPY today:

From: Dave Hughe <plainfx@gmail.com>
Date: Mon, Oct 30, 2017 at 9:12 AM
Subject: New order
To: 
USDJPY Sell 113.49 SL 113.70 P1= 113.26 P2= 113.12

Later we updated the stop-loss to 113.55:

From: Dave Hughe <plainfx@gmail.com>
Date: Mon, Oct 30, 2017 at 9:20 AM
Subject: USDJPY SL 113.55
To: 

This week our signals made the total profit of +227 pips.

Our last unit from the USDCAD long trade opened on Friday hit the trailing stop today at 1.2668 for the total profit of 167 pips.

The original signal sent out was:

From: Dave Hughe <plainfx@gmail.com>
Date: Fri, Oct 20, 2017 at 8:26 AM
Subject: New order
To: 
USDCAD Buy 1.2501 SL 1.2479 P1= 1.2521 P2= 1.2541

The trailing stop-loss order for the last unit had been updated this morning. This stop got triggered by the wild down-swing on the news bringing in a net profit of +167 pips. On the chart this trade looked as shown below:

Our GPBUSD signal made +60 pips profit

As we explained in the previous post, the original signal sent out was:

From: Dave Hughe <plainfx@gmail.com>
Date: Tue, Oct 24, 2017 at 8:34 AM
Subject: Oct. 24
To: 
GBPUSD Sell 1.3155 SL 1.3230 P1= 1.3125 P2= 1.3105

This signal reached its first profit target and the stop-loss orders for the remaining 2 units were updated and triggered at 1.3140:

From: Dave Hughe <plainfx@gmail.com>
Date: Tue, Oct 24, 2017 at 4:31 PM
Subject: GBPUSD SL 1.3140
To: 

Therefore the total result for this Forex signal is +60 pips profit. On the chart this trade looked as shown below:

Our signal was not triggered yesterday. This morning we sent out the following Forex signal:

From: Dave Hughe <plainfx@gmail.com>
Date: Tue, Oct 24, 2017 at 8:34 AM
Subject: Oct. 24
To: 
GBPUSD Sell 1.3155 SL 1.3230 P1= 1.3125 P2= 1.3105

So far this signal has reached its first profit target and made +30 pips of profit. Two more units are still open with stop-loss orders at the break even price (see our trade update email below):

From: Dave Hughe <plainfx@gmail.com>
Date: Tue, Oct 24, 2017 at 10:53 AM
Subject: GBPUSD P1 reached SL BE
To: 

Our today’s Forex signal made +60 pips profit and one unit is still open with the stop-loss at additional +98 pips of profit.

The actual Forex signal sent out was this:

From: Dave Hughe <plainfx@gmail.com>
Date: Fri, Oct 20, 2017 at 8:26 AM
Subject: New order
To: 
USDCAD Buy 1.2501 SL 1.2479 P1= 1.2521 P2= 1.2541

Later we sent out the following updates:

From: Dave Hughe <plainfx@gmail.com>
Date: Fri, Oct 20, 2017 at 8:32 AM
Subject: USDCAD P1 & P2 reached, SL 1.2539
To:

From: Dave Hughe <plainfx@gmail.com>
Date: Fri, Oct 20, 2017 at 8:34 AM
Subject: USDCAD SL 1.2549
To:

From: Dave Hughe <plainfx@gmail.com>
Date: Fri, Oct 20, 2017 at 10:24 AM
Subject: USDCAD SL 1.2579
To:

From: Dave Hughe <plainfx@gmail.com>
Date: Fri, Oct 20, 2017 at 1:35 PM
Subject: USDCAD SL 1.2599
To:

On the chart this trade looked like this:

Our Forex signals made +80 pips this week.

One unit from our USDCAD trade is still open with the current stop at +140 pips profit now (see the previous post).