Writers are often advised to read widely. The idea is that the greater the input, and the range of the input, the better the output. The same is true for traders. The more and varied sources of market information, the more potential trades.
The challenge is that there are so many markets – more than 5,000 on any decent trading platform. Experienced traders still read the news, check their charts, study central bank statements and talk to their trading peers. However most will also use a variety of tools to help sort through the sheer volume of markets to short cut the trade identification process.
That’s why I run a pattern recognition scanner as part of my trading routine. Not only does it find trades I haven’t, it can influence the way I think about a market. AUD/JPY is a case in point. This morning, the scanner identified a double bottom (in red). Adding the Bollinger Bands shows AUD/JPY could be forming a W reversal:
This surprised (me) because AUD is in a downtrend against most currencies. Yet here we have a potential strong turning point indicator. Note how the first trough of the W falls outside the lower band, while the second trough is within. All that is required now is trading up through the peak at 80.67 to complete the W.
If it does, it will trigger my stop entry buy order at 80.80, with a stop loss at 79.90. The conservative target is 83.85, the stretch target is 86.05.