Today we are looking at the AUD/CHF chart, we believe that we have a good opportunity for a trade now, looking at the chart below we see that we had 5 motive waves up than followed by 3 waves down in a bearish way. We are expecting 5 more waves up, we believe the second wave in those 5 waves is done we could be in a start of wave 3 or wave C. As we know wave 3 is very fast and decisive, if you want to know how to trade wave 3 you can check the post on trading wave 3 here.
Using the chart above we see that we had leading diagonal wave 1 on the wave 3 or wave C, where the invalidation line is located. As we know about Elliot wave rules, wave 2 must not go below wave 1. That why we have our invalidation line there, if the price goes below it we will know that we are wrong and we will double check our counting. The more experienced you are in the counting you get few of those that go against you. Looking at this trade the risk to reward ratio is good because we are closer to the invalidation point if you didn’t go through the course invalidation point is where you place your stop loss. A stop loss must be placed where it tells you, you were wrong and protect you. Placing a take profit and stop loss is an art on its own because you can be a good trader but you can’t manage your stop loss and take profit, your account is going to go down. Back to the chart, after the leading diagonal which ended at 0.75793, 3 waves down followed which is what we believe ended at 0.72726. Currently, we are at the start of wave 3 of wave C or wave 3. We expecting 5 waves up as I said, so we should be looking for bullish trades for the next few weeks on this pair. Good luck in your trading guys, don’t forget good money management will take you far in forex trading.