A breakdown of my EU entry showcasing how I analyse the market.I've annotated my charts for your convenience. Enjoy!
Eurusd-3
I Show You My Trading Strategy Applied On EURUSDHi, I decided to share my profitable trading strategy which is really simple by the way.
I use trend lines, supports and resistances. I don't use any other indicator. It is maybe not the best but for sure the best that fit my psychology and my lifestyle.
Hope this helps !
Trading - Expectations VS RealityHey Traders,
In this post we will aim to clear some of common misconceptions of trading and how we can help you go further in your trading career by giving you all the tools you need to better understand the market and kill the game.
____________________________________________________________
1. Trading is easy.
Trading is relatively easy IF you know the rules of the market and use certain analytical techniques. Once you have a full arsenal of technical tools, you can easily understand the market and figure out where it may go next.
2. Market moves in one direction.
That can be true to a certain extent where we have trending markets. However, within that trend there are various types of pullbacks. Once you understand the different market phases, you can make money whether it's a trending or ranging market. Opportunities are endless!
3. Buy when low. Sell when high.
If only things were that straight forward, right? Sometimes the lows aren't really the lows and the highs push higher and higher. This is when you need to understand the different patterns and structure of the market to help you figure out where the best possible place is to buy or sell.
Once we understand the market, we need a trading plan. How do we enter? Where do we enter? Where is the stop loss? This is where having rigid checklist really helps! You can tick things off the list and grade the trade setup from good to bad and then enter accordingly using various entry methods.
It may sound like a lot of but once broken down into little bits, you can learn this EASILY and know exactly how to analyse and enter trades!
____________________________________________________________
What we will be covering:
- Market structure: Impulse & Corrections
- Using Index charts to correlate your trades (Very important Topic!)
- Drawing a trendline and levels correctly – There’s a hack to it!
- Using Moving Averages Correctly
- Combining higher timeframe & lower timeframe
- Different patterns and how to trade them
- More topics to come!
Comment below on what other topics you would like to see!
I hope this post help clarify some of the misconceptions of trading and the different elements involved.
See the links below for information on how we can help you!
Trading - Expectations VS RealityHey Traders,
In this post we will aim to clear some of common misconceptions of trading and how we can help you go further in your trading career by giving you all the tools you need to better understand the market and kill the game.
____________________________________________________________
1. Trading is easy.
Trading is relatively easy IF you know the rules of the market and use certain analytical techniques. Once you have a full arsenal of technical tools, you can easily understand the market and figure out where it may go next.
2. Market moves in one direction.
That can be true to a certain extent where we have trending markets. However, within that trend there are various types of pullbacks. Once you understand the different market phases, you can make money whether it's a trending or ranging market. Opportunities are endless!
3. Buy when low. Sell when high.
If only things were that straight forward, right? Sometimes the lows aren't really the lows and the highs push higher and higher. This is when you need to understand the different patterns and structure of the market to help you figure out where the best possible place is to buy or sell.
Once we understand the market, we need a trading plan. How do we enter? Where do we enter? Where is the stop loss? This is where having rigid checklist really helps! You can tick things off the list and grade the trade setup from good to bad and then enter accordingly using various entry methods.
It may sound like a lot of but once broken down into little bits, you can learn this EASILY and know exactly how to analyse and enter trades!
____________________________________________________________
What we will be covering:
- Market structure: Impulse & Corrections
- Using Index charts to correlate your trades (Very important Topic!)
- Drawing a trendline and levels correctly – There’s a hack to it!
- Using Moving Averages Correctly
- Combining higher timeframe & lower timeframe
- Different patterns and how to trade them
- More topics to come!
Comment below on what other topics you would like to see!
I hope this post help clarify some of the misconceptions of trading and the different elements involved.
See the links below for information on how we can help you!
Price Action vs Indicators: Who wins?Happy Friday, ladies and gentlemen. The topic of our first educational post for the day is the following: Price Action vs Technical Indicators.
To begin with, each and every traders has his or her own strategy. Some of them would prefer using only indicators to open trades, some would use indicators as confluences, some of them do not use indicators at all and so forth. The truth is, indicators deceive a lot of new beginner traders into thinking that they are the key to successful trading and investing. Right after hoping on the charts, beginners tend to saturate their graphics with tons of indicators which contradict to each other. One indicator shows a buy signal, another one shows a sell signal, which makes it harder for traders to make decisions on the markets. Of course, using some spesific indicators as confluences to open positions is not bad at all. If it fits your strategy, you may add some technical indicators to backup your analysis. But at the end of the day, using several indicators and saturating your beautiful graphs with them will never lead you to success.
All in all, as it has been stated above, everyone has his or her own strategy. Therefore, if indicators work for you, go ahead and implement them in your analyses! At the end of the day, it is all about making money, isn’t it?
Have an amazing Friday and a brilliant upcoming weekend, everyone!
EURCHF - How To Trade This BreakoutEURCHF is within a descending channel of an ascending channel... pretty confusing I know but have a look at the chart and you can see which way price will be heading. What we need to do now is find the best entry which is safe and clean.
From the diagram in the chart, you can see that our entry will only be after the break of the descending channel and after a bullish correction such as a bull flag. We need to make sure that price has the momentum to move up so we will be waiting for a breakout of the bullflag before entering with stops below the correction.
Goodluck and trade safe!
EURCHF - How To Trade This BreakoutEURCHF is within a descending channel of an ascending channel... pretty confusing I know but have a look at the chart and you can see which way price will be heading. What we need to do now is find the best entry which is safe and clean.
From the diagram in the chart, you can see that our entry will only be after the break of the descending channel and after a bullish correction such as a bull flag. We need to make sure that price has the momentum to move up so we will be waiting for a breakout of the bullflag before entering with stops below the correction.
Goodluck and trade safe!
EMAS ARE YOUR BEST TRADING FRIEND TRADE TIPAlthough EMAs lagg but every trader at every level needs to have a combination of several that they use
they are a vital tool for every trader and a must have
the right EMA after the right market move can be your crystal ball to the next few weeks direction of a pair or as in this case Bitcoin
in this chart you will see a cross of our 2 favorite emas after a few bearish 8 hour sessions
this was a signal to us to short and this gave us 24,000 Bitcoin monkey nuts
Its all about finding the right pair the right time frame and the right ema crossing
this is especially important in Crypto currency trading where have little confluentual history to go on
have a great trading week
The Importance of Yearly Open / CloseAs you see, yearly open (usually its the same as yearly close) is crucial for determining the price bias during the year.
For euro to continue bullish, it needs to close ABOVE yearly open on weekly. But even if it does, there will be struggle at this level.
Then, as you see, yearly pivots usually serve as yearly tops and bottoms.
We saw price reversal at yearly pivot this year. Also during previous years price always stops or reverses at yearly pivots. Watch them!
Keep an eye on yearly opens!
For educational purposes only.
Currency Correlations: The unspoken truthHappy Friday, ladies and gents, and welcome on our another educational post for the day. Today, we are gonna talk about positive currency correlations and examine how they impact our trading. But to begin with, what is currency correlation? Currency correlations are a statistical measure of the extent that currency pairs are related in value and will move together. If two currency pairs go up at the same time, this represents a positive correlation, while if one appreciates and the other depreciates, this is a negative correlation.
As it can be clearly inferred from the graph, the charts of EUR/USD and GBP/USD have been chosen to be scrutinised. These two currency pairs are highly correlated and are moving in the same direction. As we can see, 2 major similarities have been identified on the Daily timeframe charts of both currency pairs. However, there are a lot more than just 2. As it can be inferred from Similarity #1, the price managed to leave a long wick in late February 2020 for both pairs. Looking at Similarity #2, we can observe that the price is forming a top for both pairs and preparing to reverse and continue its move to the downside.
Now that we have talked about the basics, let's move on and talk about some problems faced by currency correlations. Most of the time, new traders do not pay attention to this basic concept and make false decisions without noticing. I have seen hundreds if not thousands of traders that ignore the rule of currency correlations and make irrational conclusions like the following: opening Buy positions on EUR/USD and opening Sell positions on GBP/USD. Of course, you can do that as well, depending on the timeframe that you are trading and depending on how long you are planning on keeping the trades open. However, on the longer term trading, you won't be able to succeed. Furthermore, most of the new traders open buy or sell positions for both of the trades, which results in increasing their risks. If you open BUY or SELL positions for both trades at the same time, and the price moves in the opposite direction of your bias, you are gonna lose both of the trades. Again, not in all cases, but 80-90% of the time, as the two pairs are highly correlated.
What can be done to avoid being the victim of the highly correlative pairs and keep it safe? There are two strict rules that we follow, which have always worked for us:
-Open positions for the trade with the better setup
or
-Open positions for both trades but cut the lot sizes by half
So in the first case, we compare the two setups that we have, in our case it's either EUR/USD or GBP/USD. For instance, let's say that EUR/USD gives us more confluences for opening a transaction. Therefore, what we do is, we ignore GBP/USD and trade EUR/USD. For the second case, let's say that we use 1.0 lot size to open transactions. What we can implement, is using 0.5 for each trade and opening positions for both EUR/USD and GBP/USD.
I hope you liked this educational post, family! If you have any suggestions on what we should post next as an educational post, feel free to let us know in the comment section below. Have an awesome upcoming weekend, everyone!
Trend Continuation Patterns with Real-Time ExamplesGood morning, Traders! Today we will make an educational post about the most used corrective patterns. There are numerous patterns, even more complex, such as Elliott counts where each internal wave of corrections is explored, but the reality is that it is not 100% necessary to apply it in the market.
The idea of this information is to provide a simplified, useful and applicable overview. For this, we will explain the corrective patterns and then we will show real-time examples that are being presented in the market at the moment or that have happened recently.
The examples will be in high temporalities so that the charts are valid for a few days/weeks.
One concept that encompasses all the corrective patterns that we are going to talk about is that they are all trend continuation patterns. That is to say, it is a correction that is formed and then continues to the previous trend. That said, in all cases, it is necessary that prior to the pattern, there is an impulse in that direction, that is, if we see a triangle, for it to have an upward resolution it is necessary that the previous trend be upward. While there are some cases where the patterns can go in both directions depending on the context, we won't get into them.
Keep in mind that we ALWAYS have to analyze the context of the pattern correctly. For example, if we see a bullish continuation pattern forming near a major resistance or trend line that could interrupt the price movement, it is clearly not the place to put your money. You should always look for the correct pattern + the appropriate scenario for the trade, where the risk-benefit ratio that we obtain is appropriate.
🔸Pennant Pattern: is a type of continuation pattern formed when there is a large movement in a security, known as the flagpole, followed by a consolidation period with converging trend lines—the pennant—followed by a breakout movement in the same direction as the initial large movement, which represents the second half of the flagpole.
🔸Ascending Triangle: it is created by price moves that allow a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows. The two lines form a triangle. Traders often watch for breakouts from triangle patterns.
🔸Flag Pattern: when price moves counter to the prevailing price trend observed in a longer time frame on a price chart. It is named because of the way it reminds the viewer of a flag on a flagpole. The flag pattern is used to identify the possible continuation of a previous trend from a point at which price has drifted against that same trend. Should the trend resume, the price increase could be rapid, making trade timing advantageous by noticing the flag pattern.
🔸Descending Wedge: The wedge pattern is a continuation pattern formed when the price bounces between two downward slopings, converging trendlines. It is considered a bullish chart formation but can indicate both reversal and continuation patterns – depending on where it appears in the trend.
🔸Rectangle: is when the price reaches the same horizontal support and resistance levels multiple times. The price is confined to moving between the two horizontal levels, creating a rectangle.
Real-Time examples:
AUD/USD Descending Wedge:
EUR/GBP Rectangle:
EUR/NZD Rectangle:
GBP/USD Flag:
NZD/USD Flag:
USD/JPY Flag:
Understanding the NFP EU PumpHere are some questions I put out to my community group the other day followed by the answers. The reasoning being the move has been annotated on the chart.
Why did price slowly decline prior to NFP?
- Price had to decline slightly before NFP to mitigate the impulsive move created earlier in the day.
- Price had to stop out break and re-test buyers with a tight stop loss
- Price had to lure sellers into the market before NFP
Why did price reject the exact box marked before skyrocketing?
- Price skyrocketed because it had gathered enough liquidity from stopping out the buyers.
- It utilised the previous order block to skyrocket to take out the impulsive sellers before NFP.
📚Easiest and most accurate way to trade EUR/USDHi traders!
I have long wanted to share the simplest trading strategy, which is suitable for both experienced and beginners.
The easiest way to trade EURUSD is to trade channels + support and resistance lines.
1. How to find a channel.
As you can see from the chart, over the past 6 years (immediately after Brexit), the price has always been in a channel.
You need to build channels on the D1 timeframe.
I have provided you with the existing channels on the chart, now the price is in a growing channel.
To build a new channel, 4 points are enough (2 above and 2 below). Although for more advanced traders, 3 points will be enough.
Examples.
2. Once you have built the channel, you can trade.
3. With the entrances sorted out. Everything is simple here. It will be more difficult to choose SL and Tp
To make it simple and easy to remember (especially for beginners) always set SL 3 times less than TP (Risk to reward ratio 1 to 3)
It remains to decide on the TP.
Strong support and resistance lines will help us a lot.
It is better to close the trade when the price reaches strong lines. In fact, there are few important lines, so they are not difficult to find (otherwise, they are most likely not important lines).
Example:
4. Important notes.
1) It is better to trade with the trend (open buy trades in an upward channel and sell trades in a falling channel)
2) Better not to enter a trade during very important events (like Covid-19)
3) False breakouts occur at times, but the price quickly returns to the channel, so after the price quickly returns, you can open a trade.
4) If the price is both on the channel line and + on the strong line, then you can open a deal with 2 times larger volume
5) If the price touches the channel line twice in a short period of time, then it's okay if you open two trades + you can double the stop loss in this case.
5. Output
In total for the last 2.5. of the year there were 15 entries, 14 of them in plus 1 in minus (Accuracy 93% !!)
Average risk to reward ratio of 1 to 3 (although entries are so accurate that experienced traders can make a risk to reward ratio of 1 to 5)
If you take the risk for trade 1% of the deposit (although you can take 2% with such accuracy) then:
Profit 14 * 3 = 42%, and loss 1%
The total profit is 41% for 2.5 years, that is, 16.4% + RISK-FREE profit per year, only for EURUSD.
experienced traders know these are great numbers.
Find 2-3 more such strategies and you will be an excellent trader
Like and comment if you like the idea
This will be my motivation to create posts like this.
📚Easiest and most accurate way to trade EURUSDHi traders!
I have long wanted to share the simplest trading strategy, which is suitable for both experienced and beginners.
The easiest way to trade EURUSD is to trade channels + support and resistance lines.
1. How to find a channel.
As you can see from the chart, over the past 6 years (immediately after Brexit), the price has always been in a channel.
You need to build channels on the D1 timeframe.
I have provided you with the existing channels on the chart, now the price is in a growing channel.
To build a new channel, 4 points are enough (2 above and 2 below). Although for more advanced traders, 3 points will be enough.
Examples.
2. Once you have built the channel, you can trade.
3. With the entrances sorted out. Everything is simple here. It will be more difficult to choose SL and Tp
To make it simple and easy to remember (especially for beginners) always set SL 3 times less than TP (Risk to reward ratio 1 to 3)
It remains to decide on the TP.
Strong support and resistance lines will help us a lot.
It is better to close the trade when the price reaches strong lines. In fact, there are few important lines, so they are not difficult to find (otherwise, they are most likely not important lines).
Example:
4. Important notes.
1) It is better to trade with the trend (open buy trades in an upward channel and sell trades in a falling channel)
2) Better not to enter a trade during very important events (like Covid-19)
3) False breakouts occur at times, but the price quickly returns to the channel, so after the price quickly returns, you can open a trade.
4) If the price is both on the channel line and + on the strong line, then you can open a deal with 2 times larger volume
5) If the price touches the channel line twice in a short period of time, then it's okay if you open two trades + you can double the stop loss in this case.
5. Output
In total for the last 2.5. of the year there were 15 entries, 14 of them in plus 1 in minus (Accuracy 93% !!)
Average risk to reward ratio of 1 to 3 (although entries are so accurate that experienced traders can make a risk to reward ratio of 1 to 5)
If you take the risk for trade 1% of the deposit (although you can take 2% with such accuracy) then:
Profit 14 * 3 = 42%, and loss 1%
The total profit is 41% for 2.5 years, that is, 16.4% + RISK-FREE profit per year, only for EURUSD.
experienced traders know these are great numbers.
Find 2-3 more such strategies and you will be an excellent trader
Like and comment if you like the idea
This will be my motivation to create posts like this.
How To Trade a P-Shaped Volume Profile (EUR/AUD Analysis)Hello guys,
in today’s day trading analysis I would like to show you how to trade the P – shaped profile on a nice example that has formed on EUR/AUD.
Price Action Analysis
If you look at the EUR/AUD (60 Minute chart) then you can see, that last week the price went down, then up, and then there was a rotation.
This tells us that the price tested the lower prices, but Buyers pushed the price upwards again – back into a rotation which is considered a current “Fair Value” area.
Fair Value – that’s where most of the trading takes place. Market participants consider the price to be fair there. At least for now.
Volume Profile Analysis
If you look at the Weekly Volume Profile, then you can see that it is the thickest at the place where the rotation (Fair Value) was. This makes sense, because most trading took place there.
But, there is one more important place in the P – shaped profile . It is the little “bump” in the lower part of it.
This little “bump” is called a “Volume Cluster“. In this case, it points to a place where strong Buyers placed their aggressive ( Market Orders ) to turn the price upwards again. Back into the “Fair Value” area.
Even though this Volume Cluster can’t match the volumes traded in the Fair Value area, it is really significant. The reason is that it points to a place where strong and aggressive Buyers were active.
When the price comes back into this area, then it is likely that those Buyers will become active again and that they will want to push the price upwards again.
This is why this Volume Cluster represents a Support (around 1.5494). When the price makes it there at some point in the future, then I expect there will be a reaction to it.
How To Trade The P-Shaped Profile
The way to trade this would be to hold the Long trade from 1.5494 until it reaches the Fair Value area again. Ideally its Point Of Control (POC) . In this case it’s at 1.5574.
This is a long way, right? So, what I prefer instead is to split the trade in two halves. Bank the first profit soon (30 pips max). And then secure your position by moving SL and trail the 2nd half towards the POC.
I hope you guys liked today’s analysis! Let me know what you think in the comments below!
Happy trading,
-Dale
📚 Understanding Price Action - Impulsive & Corrective Moves 📚For every currency pair, all the price action can be broken down into 2 different waves. Impulse waves and corrective waves.
Both of these waves have the same patterns within them such as flags, ascending/descending corrections, channels etc.
The tip to finding out what phase we're in is to zoom out to a bigger timeframe and look at price action as a whole and ask yourself "is this impulsive or is this corrective". Once you understand that, you can more often than not understand where price will be going next.
For CADJPY, we are in a flat ABC triangle and we are approaching the upper limits of the triangle. We also are in an ABC correction. On the smaller timeframe, if things line up, we can get in at the very top of the impulse and ride this back down!
Try spotting corrections and impulses and watch how your chart game levels up!
📚 Understanding Price Action - Impulsive & Corrective Moves 📚For every currency pair, all the price action can be broken down into 2 different waves. Impulse waves and corrective waves.
Both of these waves have the same patterns within them such as flags, ascending/descending corrections, channels etc.
The tip to finding out what phase we're in is to zoom out to a bigger timeframe and look at price action as a whole and ask yourself "is this impulsive or is this corrective". Once you understand that, you can more often than not understand where price will be going next.
For CADJPY, we are in a flat ABC triangle and we are approaching the upper limits of the triangle. We also are in an ABC correction. On the smaller timeframe, if things line up, we can get in at the very top of the impulse and ride this back down!
Try spotting corrections and impulses and watch how your chart game levels up!
📚 Impulsive & Corrective Breaks - How To Identify & Trade Them 📚What is an Impulse?
An impulse is defined as a strong move whereby the market moves quite strongly or heavily in one direction, covering a great distance in a short period of time.
Typically, when there's a trend reversal occurring, we require an impulse in the opposite direction of the trend, indicating to us that there's a possible trend reversal. The question we face now is "What does an impulse need to look like for there to be a trend reversal?". Throughout my years in trading, I've found that if a significant level is broken during the impulse, we can expect a follow through of that impulse after a brief correction or a retest.
In the Impulse diagrams, you can see that I've marked out a recent significant level where price reacted. When there was an impulse, I kept an eye on the level to see if it breaks. If it did not break, I can assume that the impulse wasn't strong enough to create a trend reversal and it is merely a bigger more aggressive correction.
However, if the level did break along with the trendline, we can assume that there is a trend reversal taking place and we should keep our focus on the key level and price action for corrections such as flags, pennants , channels etc.
Please see chart updates for examples of Impulsive Breaks and how to trade them.
What is a Correction?
A correction is defined as a relatively short-term movement of the market in the direction opposite to the main trend.
To identify whether a break of a trendline is an impulsive break of corrective break, we must also identify the key level by looking at a significant level where price reacts. If the impulse that breaks the trendline does NOT break the level, we can assume that the trend isn't ready to reverse yet and it is a corrective break. Often a corrective break ends up with an impulse breaking the significant level, at which time we can look for a correction to take our trade.
See chart updates below for examples of corrective breaks and how to trade them.
Please leave a like and comment what you think!
As always, Goodluck and trade safe!
Mr Wick.
📚 Impulsive & Corrective Breaks - How To Identify & Trade Them 📚What is an Impulse?
An impulse is defined as a strong move whereby the market moves quite strongly or heavily in one direction, covering a great distance in a short period of time.
Typically, when there's a trend reversal occurring, we require an impulse in the opposite direction of the trend, indicating to us that there's a possible trend reversal. The question we face now is "What does an impulse need to look like for there to be a trend reversal?". Throughout my years in trading, I've found that if a significant level is broken during the impulse, we can expect a follow through of that impulse after a brief correction or a retest.
In the Impulse diagrams, you can see that I've marked out a recent significant level where price reacted. When there was an impulse, I kept an eye on the level to see if it breaks. If it did not break , I can assume that the impulse wasn't strong enough to create a trend reversal and it is merely a bigger more aggressive correction.
However, if the level did break along with the trendline, we can assume that there is a trend reversal taking place and we should keep our focus on the key level and price action for corrections such as flags, pennants, channels etc.
Please see chart updates for examples of Impulsive Breaks and how to trade them.
What is a Correction?
A correction is defined as a relatively short-term movement of the market in the direction opposite to the main trend.
To identify whether a break of a trendline is an impulsive break of corrective break, we must also identify the key level by looking at a significant level where price reacts. If the impulse that breaks the trendline does NOT break the level, we can assume that the trend isn't ready to reverse yet and it is a corrective break. Often a corrective break ends up with an impulse breaking the significant level, at which time we can look for a correction to take our trade.
See chart updates below for examples of corrective breaks and how to trade them.
Please leave a like and comment what you think!
As always, Goodluck and trade safe!
Mr Wick.
Stop Loss Hunting – Are You The Hunter 🤠 Or The Prey 🍖 ? Hello guys,
In today’s article, I am not going to tell you which type of order to use, because that was the main message of the previous one. Today, I will focus on another interesting phenomenon related to this topic – Stop Loss Hunting.
“My Broker Is Hunting My Stop Loss”
A typical thing beginner traders say: “My broker is hunting my SL, he knows exactly where it is and he always makes the price go exactly there.” Or “I am the most unlucky person ever – the price always hits my SL and then turns the way I predicted.”
Sure, having a reliable broker is crucial but in this case, it’s very often the fault of the beginner trader. Well, in fact this is not just beginners. Even advanced traders have such problems…
Let’s now talk about what is the reason of this “SL hunting” and let’s use a recent example.
Heavy Volume Zones On DAX
A couple of days ago I wrote an analysis on DAX. In this analysis, I showed a strong volume-based swing Support around 14.600.
As a reaction to this I received a couple of emails from people asking me why not the higher area, around 15.250? Both are heavy volume zones , so why not trade both?
Lets talk about the 15.250 zone now.
Those heavy volumes you see there were accumulated in a rotation area around 15.250 (marked in red). That rotation area though, had a very “weak low“.
The Weak Low
There were so many little reactions to the low of the price channel, but not a single big and strong rejection.
What many traders do is that they have their SL orders below the rotation channel. This is usually traders who trade breakout strategies, or traders who are trailing the trend.
The picture below shows this rotation zone more in detail and it shows all those small and weak rejections. Below such rejections, many people place their SL orders.
I call the areas where people place a lot of their SL orders “SL Clusters“. What usually happens is that the price goes there and “consumes”all those SL orders there.
Who is doing this? Not the “evil broker”. It’s the BIG trading institutions who manipulate the price to go there. Then they take all that free liquidity there (liquidity from those SL orders). Big guys need liquidity. They need it to enter their trades. They actively manipulate the price and look for places with liquidity like the one I showed you.
BOOM! – Everybody Out!
A phenomenon worth noticing with such “SL hunting” is that the price usually shoots rapidly through such zones. BOOM! Everybody is out 🙂 Often with slippage.
Why does the price shoot so fast through such areas? Because STOP LOSS order is a MARKET ORDER. This is important!
Stop Loss Order = Market Order
If you read the previous part of this article then you know that a Market Order means that you are able to quit (or enter) your trader NOW. The downside is that you may get a slippage, because NOW there might not be a big enough counter-party (exactly at your desired price level) to Buy what you Sell, or to Sell what you Buy.
Stop Loss Hunting
When there is a SL run, then all those people whose SL get hit enter a Market Order to quit their position. Market Orders are sort of catalyst that move the market. Those are aggressive orders.
This is the reason the price shoots fast past SL Cluster areas. SL clusters are catalysts and people often get slippage when their SL gets hit there.
Now, lets get back to that 15.250 level on DAX.
Stop Loss Hunting On DAX – EXAMPLE
Below this heavy volume area, there was a SL cluster. For this reason it was not a good idea to go Long from 15.250, because the SL cluster was right below it.
As you can see, the institutions recognized this SL cluster and they moved the price towards it. When the price hit this area it was quick. Whoosh! All those SL orders got hit. The fact that SL orders are Market Orders helped the price to shoot past this area fast.
Remember – Market Order means – I want in (or out) NOW!
So, that’s exactly why I don’t like trading Longs when there is such SL cluster below the potential Long entry level – when there is the “weak low“
You guys liked this article? I hope you did! Let me know your thoughts in the comments below.
Have a GREAT weekend and happy trading!
-Dale
How to trade wedge patterns? An example based on EURUSD chartWedge Patterns are a type of chart pattern that is formed by converging two trend lines.
Wedge patterns can indicate both continuation of the trend as well as reversal.
Rising Wedge- On the left upper side of the chart, you can see a rising wedge.
Rising wedges usually form during an uptrend and it is denoted by the formation higher highs(HHs) and Higher Lows(HLs).
This pattern gives traders the opportunity to take short positions in the market.
When price breaks out of the lower Trend Line(TL) of the wedge, a trader can execute a short position.
Falling Wedge - On the left lower side of the chart, you can see a falling wedge.
Falling wedges when formed during a downtrend is a reversal pattern and it denoted by the formation of lower lows(LLs)
and lower highs(LHs).
If you notice this pattern during a downtrend, it usually indicates that the downtrend is losing momentum and buyers
are stepping into the market gradually.
When price breaks out of the upper TL, one can execute a buy trade.
On the right side, you can see the recent EUR/USD chart. The wedge pattern in this particular chart is the Broadening Wedge
Traders can trade this pattern by taking short positions whenever bearish price action takes place in the upper TL of the wedge.
On the other hand, buy trades can be executed on the lower trend line of the wedge.
🎓 EDU 5 of 20: FUNDAMENTALS ARE THE HOLY GRAIL OF TRADINGHello traders! In the previous Educational Post (4 of 20) we learned what FIST (Fundamentals, Intermarket, Sentiment, Technicals) is about and why you need to use this trading framework in your trading. I strongly believe that incorporating a range of analytical disciplines returns better trading results than focusing only on one tool. This is how big players play the market, and this is how you should trade too - if you want to become a consistently profitable trader.
Most retail traders put too much emphasis on technical analysis. The majority of traders even trade solely with technical tools. In an earlier post, we have covered why you shouldn't trade only on technicals , so this might be a good time to revisit that lesson and read it if you haven't already.
Most retail traders will wait for a signal like a pullback, MA crossover, overbought/oversold RSI conditions, MACD, and follow candlestick patterns and chart patterns to enter into a trade. Guess what? That's an easy way to blow your trading account! If you look at your broker's homepage, you'll see a sentence stating how many retail traders lose money. I have yet to find a retail broker where less than 20-30% of traders are profitable. The rest, 70-80% of clients, lose money on a consistent basis. I bet that, of those who lose money, the majority use technical strategies and/or have poor risk management skills.
Institutional traders don't open a trade based on MA crossovers or extreme RSI levels. They follow a range of fundamental signals, analyze correlations between different asset classes, and follow the general market sentiment. Technical analysis accounts for 5% of their work. Technical levels are only used to determine entry and exit points - ONLY after they already know in which direction they want to trade.
Fundamental Analysis
Unlike technical analysis which is based on the premise that history repeats itself, markets like to trend, and all available news is instantly discounted in the price, the fundamental analysis aims to explore the underlying factors of why a market is going up or down. Technical analysis is all about charts. Technicians are not interested in the reasons behind price movements, which often creates an environment where technicals alone produce fake signals. I bet many of you have seen that: a failed triangle breakout, a failed trendline breakout, or the RSI remaining in oversold conditions as the price continues to trade lower.
Fundamental analysis can be grouped into two groups: macro fundamentals, and micro fundamentals.
In trading, macro fundamentals refer to the bigger picture fundamentals: interest rates, economic growth, inflation rates, and labor market conditions.
Micro fundamentals are more subtle, but can also have a large influence on the price. Those are comments by central bankers, news, market indicators (PMIs, CPIs...), political developments in a country, etc.
Central Bank Meetings
My students often ask me whether they should follow central bank meetings and press conferences. My answer: If you want to make money trading, then yes! Nothing has such a large impact on prices as central bank meetings and interest rate decisions. And if you do your homework, you can profit from those meetings most of the time. Follow press conferences that are scheduled shortly after the meeting and listen to the Q&A session, and read the entire meeting report once it's out. You'll find it astonishing how much you can learn from those reports - and how easy it can be to make money in the markets.
There are eight major central banks in FX: US Federal Reserve (Fed), Bank of Canada (BoC), Bank of England (BoE), European Central Bank (ECB), Bank of Japan (BoJ), Reserve Bank of Australia (RBA), and Reserve Bank of New Zealand (RBNZ). Create a bookmark for each of those central bank websites, and read their reports and articles at least once a week. I like to do it on weekends.
You can even have very profitable trades after the Central Bank meeting is over and the market has already reacted to the news. Commercial banks and other sell-side institutions will often drain liquidity in the markets to purchase a currency at discount after a major news report or interest rate decision. If you know how to identify this liquidity drain, you'll be able to catch amazing trades in the future.
Thanks for reading and stay tuned for Part 6: What Market Indicators do I Need to Follow?
