ForexTraderX

on a 1 min chart, EU and EC look like they are trading almost tick for tick. And this is a pretty unmistakeable reversal pattern. Mind you, anyone with a really large order offered at market will of course overcome the support here... but for now, there seems to be someone who is quite interested in acquiring euros at this price against USD and CAD... and i'm betting it's probably not just another fellow retail trader. Looks like the trade may work out after all.

Ok...now price action on the 1 min, 5 min, and 15 min is looking like this could be the bottom. Also, volume looks right also. darn discount shoppping hedge funds. Lets see...but between the magnitude of the move in asia, the fact we just tipped below 1.2900, price action is looking like it has some real support to speak of, and we have very little resistance in the way back up to where friday's close was (the only new and likely significant resistance would be the people who were getting long between the friday close price and 1.2900... like me. And it's not going to be very significant given the time the move occurred, and the relatively low volume it had during the drop.) So... i wasn't so sure before, but now I'm gonna say I think we've seen the low for the asian session...or darn close to it. Time will tell. FTX P.S. Also, EUR/CAD just came to the europe session highs lows, and is finding support as well, and making similar price action as EUR/USD. 2 correlated markets doing the same thing at around the same place... just that much more reason to see this could be the bottom for the asian session...maybe the day.

Well, I've gotta admit, i'm growing more and more skeptical of this EUR/USD working out with every passing minute. However, I've put my stops where I want them, and what happens, happens. And... as I type... it seems to be finding more support. Asia usually doesn't move like this, even during the start of a new week.... Liquidity is generally lower in asia than the other sessions, i'm wondering if larger institutions are taking advantage of the relatively low liquidity as the week is opening, and using it to push price down into stops on the cheap for them. This could allow them to get down to a price that they will find a large enough cluster of buy sell stops that it'll help them buy enough to cover their current selling efforts, and get net long (which was the idea in the first place). Just thinking outloud here... but, i'm always skeptical of moves like this that occur during some of the slowest market hours (1 hr of tokyo open, but on sunday... pretty thin markets) we'll see...

here's a 1 min chart of the EUR/USD futures... you can get a better idea of what to look for to signal the possible end of a swing... even on a 1 min TF

Well, stopped out on some of it, just took one small final entry at 1.2905... seems to have some interested buying interest at 1.2900. But this will be it. I have what I have now, for better or worse in the EUR/USD until we hit down to around 1.2850ish or lower.

if this EUR/USD doesn't hold around here, the next stop isnt' till around 1.2840-45ish...

Well, the EUR/USD is definately finding SOME support.... also, the price was the high of October 10th... but price action isn't looking like it needs to in order to get a bounce... I may take some loss on this one... still too early to tell, and maybe not the whole position, but looks like some loss is likely. Unless there is some significant bounce upwards in the next few candles... it'll be about reducing my exposure. Anyway i'm still optimistic that part of the position will work out for a profit. Just have to wait and see.

heres the chart... Hopefully this trade works out. 20 pips would be nice to take something, and reduce risk. I'm reallly looking for it to retrace to fridays close price, and then final target up around 1.3000

So, right now i'm scaling into a long EUR/USD position. because of where we are on the charts, and how price is reacting, I'm willing to take 10-15 pip stops, risking 1/20th or 1/10th of a percent per entry, I could get 50-100 pips on these...so even with such tiny risk, I could do quite well. And if not? well, I only took a tiny risk. I thnk 1.2910-1.2900 will be the IDEAL spot for a long...with a 10-25 pip stop. Guess we'll see.For now, i'm holding off getting any bigger until i see further evidence of this drop stabilizing.

EUR/USD is at this moment just under 1.2920. probably good for an easy 20 pips long right now. i'm long myself.

John... A+ post man. To this day, I can't honestly say much about "discipline" in my trading other than my own personal "discipline" comes in the form of always listening very carefully to my feelings, my mental state, my stress level, as I interact with the market. And, whatever I feel like doing (which sometimes is not trade at all, and others is wait for a single setup, and others, it's making 50 trades in a day)... my discipline comes in listening to what my subconcious is telling me, and not trying to trade in some other way or fashion or time frame unless that inner voice changes. I'm a horrible example of a disciplined trader. I have no hard rules on money management anymore, no hard rules on trading with or against trends. I scale in, and out, I usually trade around my positions very often. I watch monthly charts and 1 minute charts. Today, i'm currently in 8 different currency pairs, many are correlated, (although I do my my max loss should evertyhing stop out will be less than 2.5%)... sometimes I hold trades for minutes, othertimes, days, even weeks. I have absolutely no limits on anything anymore.... except... I have only 2 rules: Rule 1: Trade what I want, when I want, how I want, as I want, and only if I want. If I don't, then don't. Rule 2: Don't blow up. Any double digit drawdown in a day is "blowing up". If at any time i'm trading I become uncomfortable with my open positions, or risk amount, or realized losses for the day/week/etc... then I close whatever I have to in order to smile and feel happy, and then I quit trading for the rest of that day. After this, I refer back to rule 1. That's it man. These are my two rules. I know all to well the points you make in your post, because it wasn't until this last few months that I've decided to throw away all my rules, my trading plan, everything... to focus on 2 most basic, most important things: trade only when it feels right, feels good.... and if losses or potential losses make trading feel bad, then close positions down until the bad feeling goes away, and never let it get over 10% in a day. So what about the rest??? At this point, it feels i've forgotten more viable forms of market analysis than most would be traders will ever know. I've watched charts full time for 4 years, part time for a decade. I've traded every major asset class in existence. At this point, I don't need a dictionary to decode the words... I just know how the book reads, and know what the story is telling me. Then, If I feel up to it, I trade it. If I start to get stressed because it isn't working out for me, I reduce my position. I don't have any rules really, or any setup type, or any discipline, or even any patience. I just make decisions based on my intuition, experience, and my emotions. And i've never felt so good about my develooping of my trading career as I have this last few months of this year. Good post. Sorry for the ramble. Just felt compelled. FTX

nice to see some COT discussion. One of my old favorites...and still the best thing i've found to act as an "indicator" of impending trend reversals... not just retracements. Wanted to post up a link to the CAD futures COT chart here... i'm kinda thinking... maybe it's not a really good idea to get sooperlong the XXX/CAD markets. Here's the link... I'd be interested to hear any thoughts on the chart...one way or the other: http://www.upperman.com/mprof/p17.gif FTX. DISCLAIMER: "in the interest of full legal disclosure, the accounts of ForexTraderX are currently short the CAD against several other G8 currencies. This disclosure is offered to prevent confusion or hurt feelings in the extremely likely event that ForexTraderX dumps his position in CAD short just as your long CAD stop is hit. The accounts of ForexTraderX and the family of ForexTraderX thank you in advance."

Well, it's not every day I take positions in 6 different currency pairs, and have all 6 be sitting in profit at the same time... but as I said, shorting the comdolls and going long the EUR or USD should be a very straightforward, very simple, worthwhile trading opportunity. I hope i'm not speaking too soon, or counting eggs as chickens, or whatever, but so far i've taken over 0.25% profit at market open from trades I held over the weekend, and now am sitting almost on 0.5% unrealized profits.... I only hope this continues into london, because it will likely allow me to hit some targets or reduce risk on some positions, be it moving up stops or whatever. Anyway, a good start so far. The risk is acceptable...considering if everything stops out i'll be down about 2%, give or take. Now is the hard part for me.... time to watch a movie with the family, eat a bowl of ice cream, and try not to think about how to micro manage these trades. Well, at least the family and ice cream eating is easy.

This is a chart of the COT report net positions for both speculators and commercials. http://www.upperman.com/mprof/p17.gif Large commercials (the ones that matter, hedge funds, big money, etc) are in black. The commercials are in red. This is a 5 year history of net positions for both. Never in the last 5 years have we had so many hedge funds, large specs, etc holding a net long position in the CAD. This essentially means right now, sentiment is at historical bearish extreme for the USD/CAD. With the large specs holding such a large net long CAD position, it would only take a hedge fund or two to decide to cover their positions, and take their profits. The imbalance between those who will need to sell CAD to either get short, or take profits on a long, will far outweigh those who are looking to buy CAD when it is at significant highs compared to many major currency counterparts. In other words, just like real estate in 2007... this is the "top of the market" for the CAD for now. Combine this with the monthly price action of the USD/CAD, and the significant lows between current price and the september low, and you really only have about 4 levels between 10-40 pips each that will be the likely turning point for the USD/CAD... What makes this time special is this turning point likely wouldn't just be a bounce, or a retracement or something, but the probability would be better for it to be a significant swing low until price retests well above parity... I'm thinking 1.01-1.02 at least.. probably higher. So even if a person were to get long at all 4 of those possible turning points between 9800 and 9620.. unless the USD/CAD is about to completely fall apart (very unlikely, given the downward bias on crude oil, and the overwhelmingly influential circumstance of anyone of any size in the market who would be likely to go long the CAD...well, is probably already long and needing to take profits soon!) this bottom, whichever level it turns at between 9800 and 9620... will probably be the bottom up through parity and higher. So, this is a situation where one could risk 20-40 pips per entry, on 4 different entries, and would only need 1 entry to work out in order to make a 5:1 reward to risk, and therefore could actually afford to have a few entries (or even 3 out of 4) stop out, because as soon as price did turn, it will likely provide enough profit to justify the multiple entries taken. ANd of course, if one watches smaller time frame charts as price approaches such levels, and considers the sentiment of the day, recent impact of news releases on the USD and CAD...etc... one could probably narrow down to 1 or 2 entry points, with stops less than 20 pips each.... and easily aim for pairty...which would be over 200 pips, or over a 10:1 reward to risk ratio. If that's the only trade a person makes in a month, it's probably a good month. FTX

So, we are in a bit of an interesting place for a few different markets... something along the lines of retracements that need to occur or finish before the larger trend plays itself out. For example, right now the daily candle on the EUR/GBP shows a nice bearish pinbar for friday. Thus, I expect the EUR to drop in value to the GBP. However, if you asked me where I expect the EUR/GBP to be in the next 5-10 business days, i'd say it'll test 0.8150 at least...maybe push as high as 0.8250-60. We could see a drop down as low as 8000-7950ish, but I expect further upward movement by the end of the week, next week at the latest. I also think the AUD will be stronger than the CAD in the coming week or two, but for today/tomorrow, AUD/CAD may drop a bit. The one market that I'm NOT questioning is the CAD for a bearish play. Monthly price action, historical monthly/yearly highs and lows, correlated markets like crude that are indicating further drops in price, and an unprecedented net long position held by large speculators (hedge funds, institutional investors, etc) has set the stage for a breathtaking drop in the CAD against pretty much every other currency (except maybe the other comdolls) Personally, I think THE TRADE this week will be either EUR/CAD long, EUR/NZD long, possibly GBP/NZD or GBP/CAD long, and my choice to show is USD/CAD long. Basically, i'm looking to get long the EUR, possibly the GBP or the USD... and get short the CAD, or possibly the NZD or AUD. As of this moment, I have some small initial positions already on, with preset orders to get in more at other price points, and of course my regular improv entries and exits if the situation warrents it. I am going to work on a plan to reduce my overall trade activity, as well as focus on holding my trades for greater pip moves as well as longer periods of time. This week I have other business to attend to, so a less involved approach will be a nice change of pace for me.

Agreed. depending on the situation and market, i'll watch price and volume on a 1 minute chart and pull the trigger off of that (usually several times), to try to get a 10-20 pip stop on at least a portion of my position. Yea, i'd say that 4hr previous resistance point around may 2,3,4 was the price level that obviously attracted enough offers and not enough bidders to keep price moving up. Of course, price and patterns and such helped clearly illustrate the order imbalance, but why they were there in the first place? IMO it is most likely the may 2,3,4 resistance at that price that was the catalyst for the disproportionate amount of offers right around there. Yep. Believe me, I'm far from "mastering" my own trading. I second guess more than I should, I completely overtrade, I scale in on losing positions, I exit too early, I get in again after price has made it's move, I trade too many markets at a time, occassionally my risk builds up to a psychologically uncomfortable level (anything more than 2% drawdown in open positions is uncomfortable for me...) I get in too early, sometimes several times too early, and I pay too much for my transactions in spot forex. And I still manage to average between 4%-8% per month, over the course of a year. I do have some losing months, and I have maybe 2 or 3 that I do 10%+ in a month when the year is all wrapped up. What I do right is my analysis, my self observation and self monitoring to keep fully aware of how any psych issues may be affecting me at any given moment, and my complete lack of loyalty to any preconcived market notion or bias I may have. I don't have much of a problem with being 100% convinced that a market is going up, only to get short just minutes later, and long in the next session with the anticipation of eventually getting short and trying to hold on until we reach last weeks low because I'm now 100% convinced we are in fact going to move down instead of up. (I had a GBP/USD trade that was very much like this last week in fact). This type of trading requires experience, independent thought, a good working understanding of market microstructure and price action, as well as a lot of desire to literally watch price as it develops for a good portion of the day. It's not mechanical, nor is it for everyone, but it can be one of the most profitable approaches to the markets because it essentially is combining the most basic, fundamental and constant principles of how capital markets and market participants operate, with a highly adaptive "filter" that adjusts for changes in sentiment, order flow, etc... all the while aiming to create incredibly favorable reward:risk ratios by identifying the most likely market turning points. Anyway, glad we understand each other... and thanks for the participation. I've been toying with the idea of just letting the thread die off because it sometimes feels like i'm giving a lecture to an empty lecture hall, lol. But this type of discussion keeps it interesting for me too, so for now, i'm sticking around.

Ok ART... I'm now not so sure myself, but I THINK I'm following you, for the most part. It does seem we are more or less agreeing. If you want to talk purely about advanced level identification, without regard to price action, etc... yes, then I would not have seen a level that I felt was worthy of placing an order (either a short entry, or closing out a long) until after the close on that friday (the 14th) However, if you look at the chart pics that I included, it does show that there is a very good 4hr level, it just doesn't show up on the daily charts. good enough for pre-emptive order placement? No...not in my book. I think here we agree. good enough to pay attention to when price is getting close, and see what statistically valid patterns, price action, correlated markets, etc, are doing to tip the scales one way or another? absolutely. And, if you could just confirm that the essence of your question was strictly regarding advanced/early resistance level identification itself, not whether one could have gotten out before the 300+ pip pullback was underway... just so I know we're talking levels in a more academic sense, than trading off of levels in a more practical sense... FTX

Ok ART, I'm gonna go ahead and do my best to give you three things here. A variation on the analysis itself that you've presented, as well as some conceptual viewpoints that I think would have made a good bit of difference here. And maybe most importantly, a direct rebuttal to some of your statement above... and not because I'm an asshole, but really because I want you to understand how important it is to consider everything unless you have compelling reason to discount it. You see, it's really entirely too alluring for many would be traders to read about 100 different ways to measure the markets... then pick 3-5 that they are comfortable with, and forget the rest. When a person does this, they have literally made a decision to set themselves at a permanent disadvantage to just about anyone who is willing to use more than just 3-5 "tools". It is much easier that way, less confusing, more straightforward... and of course, it's much more likely to produce disappointing results. I may be off base with this line of thinking, but I get the feeling from your post that this is a potential vulnerability for you (as it is most), and I want to first start off addressing that. You mention something critical here IMO...but I think you've overlooked the implication of it. You mention price tested the 200 MA, and "found barely any sellers". Well, I agree with you! But, your not considering the bigger picture. Remember, this lack of obvious aggressive selling is occuring not 75 pips off a swing low, but after about 900+ pips off of a swing low. After any such move that has many hundreds of pips, you have to consider that at least some traders are going to want to close their positions for a profit. They can only do this by selling. Since you saw little evidence of selling, it most likely means that the vast majority of "would be sellers" are holding on for higher ground... but conversely, the higher we go, the greater the profit realized on current open long positions, and LESS traders are still being hurt by a short squeeze (because they probably already closed out their losing shorts, therefore reducing the total "pool" of would be buyers), and therefore, the odds are increasing nearly every pip that we have a stall and a retracement. Had you seen a good deal of selling (thus producing a retracement earlier), it would be more reasonable to conclude that some of the "pressure" has been relieved of anxious EUR/USD longs, as they took profits, thus reducing the total number of open long positions (less open longs = less likely profit taking be large enough in volume to stop the trend). This would have made it more likely that we see 1.3300 before a retracement... but that was not the case. Now, this is not really as important in a 150 pip ranging market... or 48 pips off of a low or high... but nearly 1000 pips into a move? Particularly a move that is increasing in velocity the further it goes? Yes, in this case, it DOES matter because the move is unsustainable (parabolic moves always are), and the further it goes without a retracement, the more likley it is to run into trouble. I could go deeper here, but I want to move on to get to the next point. This looks like it's gonna be a long post... Your making some pretty significant assumptions here. Define "everyone". Define "sophisticated". Define "trading strategies". First off, keep in mind that the forex market is primarily used for hedging, not speculation. If a bank in europe needs to exchange euros for dollars, and they have determined the exchange rate they need to do this at is $1.30, or else they reduce their profits on some of their international business dealings... they are going to sell EUR/USD at $1.30, sophisticated strategies be damned. Remember, they are participating in the market to be able to conduct their core business while maintaining an acceptable profit margin. This is one example of a great many I could give, but I think it makes the point. Neither you nor I usually will have any idea what the motivation or method of analysis is being used by other market participants, and to completely disregard a potential tool because "you feel" is simply not a viable reason to do so. Now, tell me that you've looked at the last 5 years of eur/usd, and found that round numbers were touched 2,743 times, and of those times, only 173 times produced a reaction any greater than 20 pips. NOW... you have a justified reason to dismiss round numbers as a possible tool for S/R. Such empirical evidence is not completely necessary, but whatever your reasoning, it would need to be much more logical and rational than "I feel everyone is using more sophisticated trading strategies". I personally feel that facebook stock is worth about $3 a share.... but my feeling it doesn't make it true. And this brings me to what I believe is the meat of the technical picture that you've overlooked. As far as april 27th goes, I was just saying that the low of april 27th was where price stalled. The days that actually made this level matter were may 2nd- may 4th. I have included charts that show why they mattered... but to just summarize it here, that level was really the 4th or 5th most significant level of resistance from 1.3000-1.3500. Of course, It wasn't obvious on a daily chart... as those that are comprise the top 3 most significant levels of resistance for that 500 pip range. But, just because it didn't make the top 3 doesn't mean it isn't significant enough to tilt the supply/demand imbalance more heavily to the supply side, thus creating resistance and then the subsequent retracement. But, these are not the only factors worth mentioning that warned of an impending retracement. A lesser known but high probability chart pattern had developed that has about a 67% chance of creating a downward retracement. Essentially, the EUR/USD daily chart on Sept 14th was what can be called a "tall candle day". A tall candle is a daily candle with a range that exceeds 146% of the average range of the previous 22 trading days. Here's a link for all the details of how this came to be: http://www.thepatternsite.com/MinorHiLow.html#MHL2 Furthermore, the WEEKLY candle that ended on sept 14th is ALSO a tall candle as per bulkowski's definition. Granted, we are talking forex market and not stock market as his study does, but the extremely large, and diverse sample size he uses to get his statistically significant results is enough for me to use it on a regular basis (with good results) in the forex markets. So, combine the confluence of both a weekly and daily chart producing a valid tall candle pattern, with both the overbought EUR/USD as it pushed past 1.3000, and into 1 of the 5 most significant possible resistance prices, and then made the reversal candle price action we saw on the 4 hr charts.... I'm gonna stop with my evidence here. There are more reasons I could give as well. From the opinions of other informed traders (as well as some losing traders who seemed convinced the euro would break out without the need for a retracement and got long after 1.3000 was breached), to correlated markets reaching critical levels (as you've already pointed out in some ways), to fundamental data and headlines that altered the overall tone of market sentiment at that time. The point is... if a person had enough exposure using a wide variety of tools and metrics to conduct an analysis of the market, and they also have enough practice with each tool to be able to determine the most appropriate tools to correctly analyze this particular situation, they would have found a large body of evidence that pointed to a very high probability of a downward retracement on the week that followed Sept 14th. Now a wise approach to the final phase in validating such an analysis is to conduct the same analysis for the EUR/USD, except use all the reasons it should go UP, rather than down. Other than recently crossing the 200 SMA, and the overall trend now being bullish, I see no other reason that these two that would have possibly justified holding a long position once those 4 hr pinbars were seen at the 1.3175 level. However, the parabolic nature of the 1000+ pip swing actually increases the likelyhood of a similar steep bearish response once that ever increasing slope starts to decrease, so due to the situation and circumstance surrounding the "bullish trend", I see such a move actually increasing a likelyhood of a retracement, rather than increasing the likelyhood of a further push upward. I would appreciate if you could point out all the reasons (besides the bull trend and the 200 MA being broken through) for being bullish...? I'd give more, but frankly i'm tired of typing this out for now. I think we will both see a bearish bias is the more logical outlook as price stalled out around 1.3175.

I do, but not nearly as much as I do other currencies... bonds would be secondary, world equity markets 3rd, and other markets like metals, oils and gas, etc...those would be 4th

Also, yea, your on to something... the DX hit major support, and the aussie just ran into major resistance... risk markets tend to move together, and the DX hitting support, all help increase the odds of a eur/usd stall. Also, considering the move, it ran from nearly 1.2000 up to 1.31... over 1K pips... and it crossed the critical 1.30 barrier without so much as a single selloff day. Once it hit 1.30 and failed to retrace, one really should start looking for ANY sign of a stall, since it was 1000+ pips up from the low and just moved past the most significant area of possible resistance... it would have taken a great deal of buy orders to cross 1.3000 as it did...and this is even more surprising considering how far the move had already come (900ish+ pips?) Basically, the swing up was so exhausted that even a small speedbump would be enough to stall it out. that small speedbump was the low of april 27th. Also, look at the 4 hr chart i included. The two significant, nearly textbook perfect pinbars should have been a real clue that something was about to change... also, consider that the last part of this 1000+ pip swing went parabolic as it ascended. Parabolic moves are wildly unsustainable, and a good living can be made just identifing them and fading them as they start to break. There were many clues as to what could happen here. The lower SR line I drew on the chart is where I would expected even the mildest retracement to hit. As it turns out, we dropped quite a bit more than that.

Hello, thanks for the questions...glad you have found this thread helpful (at least the first page anyway). The DX (dollar index) is actually made up of 6 currencies: U.S. Dollar Index - Wikipedia, the free encyclopedia Fact is, one can make a weighted basket of currencies using really any weightings or inclusions in the basket as one desires. I believe it was the october 2010 issue of "technical analysis of stocks and commodities" magazine that I first read a breakdown of this, but it turns out the company LiteForex has a meta trader demo that includes their own weight basket of currencies as a tradeable market. I dont' trade it, but I use it regularly these days, since it gives me more clarity in understanding how each currency is performing overall against the other majors. as far as the DX providing reason for an E/U move, i find that if the EU and the DX are both approaching a significant level simultaniously, the odds of a bounce are more likely than if just one or the other is approachign an S/R level.

I really need to work on holding my trades for a longer period of time, considering this played out pretty much exactly as I'd originally figured, but I was not along for very much (if any) of the ride.

Henry, just realized you made a few posts that I never saw! I think they took a while to get "approval", and I don't generally look back at the thread after i've put it up. So sorry it took forever to answer you. 1 The red and green I don't pay much attention to. The size of the bar, I do. It's essentially showing the amount of volume that is made up by bids executed at market (green) or offers executed at market (red)... 2. I am trading out of arizona, so pacific time. 3. ninjatrader is what you seeing, though I often use think or swim's TPO profile indicator when trading spot due to the fact that it shows a pretty decent MP estimate without volume.

Ok, here's some charts and some explanations of how I would view "trend" in context. These pics are of the GBP/USD daily. I may post more later, but this should give you a basic idea of what I look for in terms of trading "with the trend" or "against the trend" Please let me know if this helps. It's a difficult concept to explain well for me, so any feedback you can give will help me, help you better FTX

Well, I've reduced my open orders and positions to the point where a loss today (from where I currently stand) would cost about 0.64%, and a profit would be about 0.80% or more. Considering I'm up 2.43% this week so far, a 0.64% loss would result with a net profit of about 1.75% for the week. For me, this is acceptable. So, looks like this is it for the week. I won't do any worse than 1.75% profit, or any better than about 3.25% profit. Time to slow things down, and look forward to the weekend. Hope next week provides such nice opportunities as this week has. FTX