How to turn endless Median/Andrews Line's into a trade.ie The Anatomy of a ML Trade EURGBP

Its all very well putting up endless charts with scores of ML's across them but i thought i would devote a posting to the process of turning all these ML's and price activity into a trade. I am going to take an ongoing trade from last Friday 12th February 2010 and illustrate how i choose my entry point and what my objective is and what my process was before i made the trade.

EurGbp is a market i follow extremely closely. I chart both Euros(cents) per Pound and Pounds(& pence) per Euro and remembering that Sterling is one of those exceptional quotation currencies (as opposed to say the US$) where the leading ('base' or 'denomination') currency in any cross rate (Pounds Sterling) is 'the strong or dominant' currency as we were taught. The reason for charting both is simple. I can see Median lines in one chart that sometimes are not possible to see in another and i find it is also more objective even though both rates are inter-convertable..

Here is a long term cash/spot FX GBPEURwhere price is expressed as Euros per each pound sterling
Long term Medium term



Here below is the Metatrader inverse (EURGBP) but it is expressed as Euro cents per Pound Sterling. This is the format that the IMM CME futures are traded in (code RP #) but due to intermittent and fluctuating volume this chart is best viewed only as a daily (but is not shown here).
Anyway. Friday morning 13 Feb 2010 we had several new up sloping MLs (shown here in red & slate blue on the Metatrader charts) and also corresponding down sloping ML's in the above e-signal chart (remember they are mirror images of the same market). Price had fallen sharply on Friday and my Median Line was the most obvious up sloping support from the most important swing highs and lows from the last 6 months ( back to June 2009). I also had a smaller green ascending ML on the 1 and 4 hr charts that followed the same trajectory. Personally i would be surprised if price gets to the centre line of the my new red/slate blue ML, but it may do but regardless of what happens in the future this line is of significant importance as support. Now price had been rising since the 28th Jan 10 and fell to our new lower MLP which was BANG on


the 78.6% Fib retracement. If you look at a clean daily chart of EurGbp you will also see that .8650 is a horizontal multi pivot line going back several years plus i can see that we have a big 'mountain' created by price activity over the last few weeks to fill.
By now i was interested especially as we were also on the centre line of the down sloping dotted magenta centre line. This ascending chart formation also looked as though price was going to hold and form a new swing low and just below this area of price was previously tested up sloping ML's already tested which had supported price ( yellow and mauve/blue). If price breaks here on the downside then the whole ballgame has changed.


We had serious divergence on both the 1hr RSI and several 1hr Stochastic's ( one double smoothed stoch and one normal 9,3,3 stoch ) where price was making a lower low and yet the stochastic was not. All pointed to a reversal and i also had two other 1 x EA and 1 x custom indicator) confirmations. I draw my lines with great care going right down to smaller time frames like 15mins to make sure they are anchored correctly and cross reference them with the e-signal charts (where this was a corner trade on the upper MLP in a descending ML set- see above) to confirm a nice tight entry level and stop level. One problem with Metatrader is the feed and this data feed can be very different for each broker. E-signal has better composite feeds and again this helps. I went long 1 x EurGbp @.86599 which must have been pretty much near the low of the day which my brokers data feed shows as .86576. The market rallied to.8715 but at the time of writing has drifted back to .8675 BUT no worries as i moved my initial stop up before the close on Friday from 5 pips to break even so now whatever happens i am risk free on this trade plus because i am trading long on a up sloping median line i have the upward angle of incline working for me as long as my much vaunted lower median line parallel holds. In the meantime we have the Bolly Bands(shown) and Fib bands(shown) squeezing together tighter and tighter for a forthcoming breakout in one or other direction but am not expecting much today as we have a US market holiday plus the Chinese New Year so low volume and quiet range trading.