These are my thoughts on the Euro and how it has played out last week.
Daily time frame showing the significant demand at the bottom of the chart. We have punched into the area to over 50% of its historic orders and there is room for a further push if the bulls wish to take this higher. Such a move would be touted as bearish and nothing more than a continuation, but do keep in mind the view of the herd who blindly follow price when it moves in jumps. We know this is a place where pro money will want to take it long and have to keep an open mind for this.
The lower red line is the lowest price made and there is still more more left if they wish to try again and a second dip into or beyond the blue box is possible.
4hr chart.
Starting from the bottom right and working up I can see there was a second attempt to push lower and this resulted in a higher close on what looks to be long bearish candle. This was a test to see were more sellers willing to take it, clearly there were none. Given that the sellers have been removed it now made an easy unobstructed path for price to rise with great ease. The last 4 candles show just how easy price has risen and nailed near term supply to the top of the small range formation. The last candle shows no major sell off.
The two horizontal lines are the two areas most likely to hold price up on its journey. Breaking the lower will be good to see being later tested to see will it hold. The upper line is where we have to wait and see what strength is left in the bulls. The targets I marked up are candles, it is the range of these candles is where the bulk of the profit will be. The lower one has a small bullish candle with a long tail, clearly lots of buyers came in and there are trapped and will only be wishing and hoping for price to come back to them in order to get out at break even or for a small profit, expect a reaction there.
1hr chart.
A few things to point out here. At the bottom of the chart on the left is a long bearish candle which is in reality bullish, we know this based on the tail, reaction and close of the subsequent candles and the same candle range being tested later on. To further seal the deal the test candle was tested, a clear sign pro money want to know if all sellers are worn out or taken out before they go about their real task.
The last few hours really tell the story, a strong move up and beyond near term supply and price being held and all shorts being bought into. Timing is everything and given Asia and Europe will open first next week, dont expect the near term make up of the market to be maintained, it often drifts off until London opens and this is where the major worlds trading is conducted.
And for a last look at where we are, here is the weekly chart. Normally you would look at this time frame first and I have it here so that you can see where the major swings have happened in the past. There are more pockets of demand further down in price, but if we go down, we first must rise and vice versa.
Thanks for your continued education Doc, by far best place to learn...
ReplyDeleteLooking at the H1 chart we see strong selling and several bearish candles
left with tails, is this already a warning sign of pro money buyng ? not tryng to guess the markets just thinking to myself ( Doc said pros buys in strong moves down so tails happen in a área of their interest we can smell their presence, and start looking for bullish PA )
Hi Luis,
ReplyDeleteStrong selling into demand is ideal and just what pro money want you to see i.e price falling like a stone and better to get in now rather than miss the boat. Of course the likely outcome is they are buying into this selling soon after. The 1hr shows on the 7th and 8th plenty buying and if the market were truly bearish, now come it came to a halt so suddenly. And yes, a few days to stop a bear run is sudden.
It smells of covert plans are afoot and breaking the top I have shown will be a key sign of intentions.
Hi Doc,
ReplyDeleteThinking out loud, and tryng to make sense to all of this, remembering some of your words and then relating that to my own experience with the markets.
So for example i hear you sayng buyng/selling by promoney, cycles within cyles etc...
On my demo apprentice i´m starting to realising that buyng/selling can come on different Time Frames and this is where i think that cycles within cycles migth come
to the puzzle.
For example we migth be in a downtrend on Daily for quite some time leaving importants lvls (resistance) where sellers will be willing to charge to continue this
cycle on this especific TF, now at some point on LTF like 15min ou 1h we can see
the firsts signs of buyng, simple because we watch momentum increasing up fast and bigger bars going against prior selling, only big Money can stop price like that.
Thus this means that price will go to the moon now, of course not and going long here is considered counter trade so being too greedy here expecting many points is not advised, the daily still shows selling and the buyng on h1 only made a DAILY pb at WEEKLY demand
we now want to see a good impulse by buyers on daily to see buyng too.
Now imagine that the daily PB ( created by buyng on h1 inicialy) had follow througth
next day and a few sellers levels (res) had been broken, so it seems buyng is coming to this TF too. So where i think cycles within cycles come together is when they confirm each other, which in this case we saw first buyng on h1 and only a few days later revealed on daily. Daily is climbing now but it can´t go up forever, and at some point
it will retrace before continue up again and is at the end of this retrace that seeing
buyng on LTF makes more sense cause now all time frames are aligned (d, h1, 15m) and a bigger move as more chances to come in our way...
Sorry for my ramblings Doc, just wanted to show you what is going on my head
and looking for your feedback, just to see if i´m on the right track.
Regards
Luis Gomes
So we got the close below 1.3309 on the daily so I'm looking for a retest at that level (the 4hr decision point that caused the break) to ride this all the way down to 1.3107 area. Not the bullish reaction I was anticipating but no foul no harm since we never got daily bullish confirmation (close above most recent resistance at 1.3413) anyway. If the 4hr DP at 1.3309 fails, we have the DP at 1.3354 that caused the break of the 4hr box range (thus creating a new daily DP) and we also have the 4hr supply at 1.3383 which is the top of the 4hr range within the new daily DP. So if the bulls want to run with this any time soon, the have some hard work ahead of them i.e. its not likely... So my question to you Doctor is did you catch any of this bearish action live? I was looking at this in real time but I just couldn't bring myself to pull the trigger to short this on LTF PA before I got my daily close to confirm bearish continuation..
ReplyDeleteHey Doc, many times I ve heard that retail forex traders can only make money short term but in the long term all of them eventually will lose their money. Is that true ? And why so many profitable hedge funds lose their shirt one day? Thanks in advance
ReplyDeleteWelcome back, Doc;)
ReplyDeleteSummer volatility is so low, even for forex. Its wise to hold long-term positions instead. Thanks again for the educational posts. Stay good!
Blacky
Howard, the move down went further than I had envisioned and put an end to a bullish move I had looked at to test older highs. This move down brought in new supply and now we will have to see how the retest of the break will work out.
ReplyDeleteI had a few great days prior to the break taking entries off the bottom of the range on the hourly time frame. The bulls lost in the end with no additional fuel to get price higher. After the break down I waited on lower time frames for shorting opportunities because there was nothing there for the bulls to buy off of and no support for a long way. The amount of supply over head will take some chipping away, getting orders to go against this wont be easy and price action could get real choppy or large rapid swings to pull in stops etc.
Victor, I know day traders who trade the 5min time frame and make a living. A lesser number trade the daily because of the time funds are tied up and the time it takes to get the right setup. Forex is so volatile that trading lower time frames profitably is achievable. The main thing is not to look for daily price ranges off a 5min chart. That is greedy and will soon end a guys account. There are good hedge funds out there, and there are some that follow after the fact. A little like those who still think gold will increase beyond the old high. I see gold at 1000 usd within a year and a potential 800. Successful trading is helped if you take the contrary view and look for reasons why the herd moved. I could post pages of news paper and online articles that all push you in a direction without stating outright to go long gold etc. The media is not and never will be your friend for market advice, your eyes and brain give you the truth once you learn how to connect both logically.
Blacky, my recess was unplanned and as you see once again my charting is on MT4. The web platform did not do it for me. I would watch the next few months carefully, something may be coming that will fire up the markets and if it works, the fed will be what kicks it off.
Hey Doc,
ReplyDeleteI wanted to ask you a question not specifically regarding the charts, but just about trading in general. Out of curiosity, I want to ask what was the darkest time you ever experienced in your trading career(excluding the beginning days because those are dark for every one)? One always hears of every great trader detail a time when he or she lost their footing in the market and questioned themselves even after great success. So what is the longest losing streak you ever experienced? Was there a time when the markets just chewed you up and spit you out for an extended period even after you developed solid footing in your methodology? For me, my longest losing streak was 22 losses in a row (I think) and the market still chews me up more than I'd like to admit these days but I'm still 'relatively' new at it.. When I use to do my testing in forex tester 2, I did notice that 2009-2011 seemed to be particularly crazy. Zones would over shoot, price would seemingly turn from the middle of nowhere sometimes, and you would periodically get chopped to bits even with conservative stops and decent analysis(or maybe I was just rushing since it was back testing..) Just makes me wonder how on Earth could anyone have traded that back then..??
Furthermore, do you think my observation (though it may be ill perceived through my novice eyes) is due to the lack of retail traders involved in the market? When I think about it logically, if the market had a greater ratio of pro/ institutional order flow back then, the competition must have been so fierce as it is akin to a bunch of super powers battling each other for the slightest edge. This could also, perhaps, explain the success of macro fundamental currency funds such as George Soros Quantum Fund since they had wider stops and longer holding periods, but I digress. The influx of retail traders must have provided easy food they could all dine on, thus more liquidity and better fills. I am looking forward to your answers!
The most frustrating time was during periods of consolidation where the charts wind themselves up into tighter ranges and no direction chosen and no way to know which way they will break and continue. When this happens even now, I lighten up dramatically when I have trades in the market.
ReplyDeleteEverybody will loose some trades and dont take any of the whizz kids nonsense online as reality. There are times when I take hits one after another even after all analysis says I have got my logic correct. When that happens the only cure is to take time off because the market is not acting as you would have expected and it is pointless continuing. It takes a strong mind to pull the plug and say, tomorrow is another day and just accept what small loss you took.
Early last week I had 8 trades and of those 3 failed. Still up on the deal and thats all that counts. Then on Friday I placed 38 entries (scaling) all of which are in profit and still going. But when the market shows what I see as normal behaviour there is more than enough profit to recover from many losses because you can scale in and out of positions. It is vital a person recognises when the time has come to not trade. Being in the market wont make you money all the time, but being out when it shows odd behaviour means you cant loose money either. There comes a time when we all have to say, enough.
One of the reasons I mention starting off on higher time frames for entry signals is to get rid of the chop when it sets in. Unless the range is clearly defined and price reacting as expected, let a trade go. If an area is broken it is safest to wait for it to be tested, this test is where pro money will load up once the opposite side has all been absorbed.
The sharp turns you see sound like they will only become obvious when you draw lines for higher time frame supply and demand. Price always reacts in places where pockets of orders sit, the more orders there are the greater the reaction will be.
Last weeks euro as we both pointed out was setting up for a good potential long. However history has just shown us a major lack of demand and the price fell off sharply. This is a time when we all have to be able to switch our view and trade what we see and not what we think. The signs are for more bearish moves and we prepare for this and wait for lack of demand.
The markets are only moved by pro money, retailers are nothing more than Cannon fodder. There are funds out there which are slow to react and tend to chase price, these are nothing more than Cannon fodder to the big players too. Trading for professionals is very simple and involves looking for enough points to justify a move and in a direction where the least difficulty will be seen against them, this is the low cost option and where the herd will follow helping to keep momentum running with them.
The old and proven way to place trades was to use small funds on high time frames and let it ride for a long time. On Forex we get perhaps ten times the speed and thus ten times shorter and a lot more liquidity and you need to think different to stock traders. We dont have a finite amount of dollars etc that we can see traded from a poll of x each day and cant judge in the same way as a stock trader tends to.
Instead my preference is to use the daily and 4hr as my highest time frames for areas to watch when price gets into historic areas, then drop down to lower time frames and wait for price to react and if it does so in my direction based upon my analysis, thats when I want to see the move tested and if the herd are being traded against which shows a change in direction by pro money. A change in direction comes about from buying into a falling market and selling into a rising market, that does not change. Thats a short and sweet version but the basis of how it works. In reality there is a lot of chart time to see it happening in real time which is where the money is. We all see the move after the fact and say there is nothing to this trading thing, seeing it as it unfolds in real time is key.
I too detest those 'whizz kids' who seem to posses psychic powers and never speak of losing. They are, in fact, a real determent to the newcomers in this game due to the fact that they build up unrealistic expectations and illusions of holy grail grandeur. They are probably a big reason why a lot of people who are new to trading completely give up on pursuing one of the most rewarding/ freeing occupations in the world after a string of losses. That's why I have always had much respect for those that keep it real regarding this business and put their necks out to call a move BEFORE it happens. You can't fake that and I try to model my own trading/ life after that very mindset.
ReplyDeleteThe internet is ripe with those selling secret techniques, indicators and subscription sites. Great, why not go make money from what they claim to know rather than try sell it to others where less money can me made?
ReplyDeleteClearly if what they are using the lure of easy money as a vehicle to extract money from others.
Reality tells us that every trader will loose some trades at some point, nobody is exceptional.
What makes some traders better than others is the discipline to set stops and profit targets and stick to them. Its ok it loose a little, but when you win, be sure you are letting it hit a reasonable target on your chosen time frame.
There are some trading sites out there that I can see are being used to earn money for the owner to invest in tangible asset businesses. I can see one who once a year blasts out emails for new customers to further his business in investing in property in Asia. If you do the research some of these snake oil salesmen reveal their true intentions towards you as easy prey.
I still think back to the unfortunate guy in Australia who came to see me some years ago with a DVD under his arm. He was a wealthy man and spent 8999USD on this magic DVD which claimed it would let him pin point winning entries and make him a fortune. At first I was surprised someone of his background could get taken in, but the lure of easy money was strong and so was his greed. It was some let down after sitting through a few hours of junk talk and nonsensical presentations on the DVD that my conclusion was, there is no magic formula or proof to backup their claims.