Short position re-established. The ASX is down 6% at the moment, DOW futures look horrible and its not difficult to see what will happen after a 3 day break tonight. The outside bars are a sufficient invitation as the stoch turns down from inside the 78.6 area.
So far so good. Might normally lighten up as we approach the support level but going to let the whole thing run⌠Stop at break even and just check in occasionally. The ASX has been creamed down 10% in 2 days and nearly 25% off our Nov 1 highs, this in a strong economy. Suggests more downside tonight
Most of the major/minor levels on the currency charts harbour stop activity Josh.
Above & below the big swing levels, previous big weekly/monthly high-lows & key Round Numbers, hide the majority of the larger players protective & compound entry stops.
As intraday activity begins to threaten these major swing levels, price will become whippy as the market starts to work through & absorb the two-way traffic which house the various stops. It�s part of the reason why you witness sharp, erratic price moves as these levels come into focus.
Not only is there protective stop-loss activity lurking in there, but also fresh (new) entry orders residing from the differing timeframe trading community.
It�s all part of the bigger supply & demand battle. Whoever carries the biggest clout wins the day!
Usually, as price breaks thru a key level it will butt up against counter stop activity lurking beyond that level. This will cause turbulance until the bulls or the bears overcome the obstacles & re-assert their dominance.
As an example, take a look at USDJPY around the key 114.0 level. It was strongly rejected in 2nd Quarter 04 & slowly made inroads back up to the level during summer 05.
It got repelled during that summer & finally broke thru early into 4th Quarter of 05. There was obviously a large build up of buy stop activity beyond there, as it hadn�t been actively traded for 2 years.
The strength of the buying (stop activity) accelerated thru the level & journeyed 7 handles (up to 121.0) before popping back quite aggressively to re-test the level late into 4th Quarter 05. A good percentage of that early penetration thru 114.0 was down to (buy) stop build up & momentum.
But if you were to drill down into an intraday timeframe, around the time it broke thru 114.0 you�d also have witnessed lower timeframe stop activity unfolding. Both Tess & myself traded the level back then & I recall quite fierce intraday movement as it worked itself out.
The fast money are only intent on capturing small profit targets, therefore their window of opportunity is fleeting. But they�ll still be very aware of the price levels which harbour strong stops.
It�s these levels where they make their money. Which is why the professionals know their marketplace inside out. They understand the mechanics of a price level & the limitations of their game. They also know where the likely mine fields lie & who is also likely to become ensnared in it�s traps!!!
The answer really is that [B]ALL [/B]the different timeframe players contribute to the price moves which affect breakouts, retraces & rejections of key levels.
Take a look at this level (114.0) since late 2005. It�s a magnet for pivotal 2 way trade, especially since last summer. An awful lot of stop action resides around this key fulcrum.
If you use that example of how differing players influence a level by their aims & expectations, then you�ll begin to realize why & how these zones heat up constantly during the trading week.
Large & small players have very, very different aims & expectations up & down the price chart. But they all work the same levels as they come into focus & play them for their own aims.
Just sit back when one of these levels begins to hot up & try think about who wants what from it & why?
If we�re in a strong downtrend, who might want to play at a new low & why? Where would the shorts want to get onboard with their compound entries.
Where would the longs prefer to engage to test the resolve & stamina of the shorts?
What would need to occur in a strong trend for a counter move to assert itself?
And if such a move begins to materialize, where would the likely �stops� begin building to take advantage of this activity?!
Now this is a post of some substance,Iâve never come across this information elsewhere.
Any idea on how to print out individual posts?
I did say that the point of my posts this week was to show trading that is less than optimal. I did not expect to have such a big error to show. It is important to have an open mind and strategies available that allow you to respond to what you see. I became âcertainâ of further downside action last night - big error. Double bottom, divergence, doji, down tails are all telling you that the downmove may reverse. In addition as I pointed out we are at a major level on the weekly and Jocelyn has given a good description of why it can be so choppy at major levels (I read it Jocelyn and now have learnt what it means!). I stayed short as I posted last night so was duly stopped out at break even. However just prior to the fed cut there is a host of information allowing a further long posiiton to be taken. Resistance becomes support, there is a James IB entry, no significant retracement on the huge H1 bull candle that has signalled the turnaround and I sat idly by and did nothing. No doubt this all strikes a chord with many out there. Onto another day!
Yes I did tony,I came out of it with 36 pips.I had to leave and did not want to leave it open! LOL,maybe that is a newbie thing but I thought take what I have and go!..I think I may be getting the hang of this.thanks to you guys.I am 4.9% on my capital in 2 days.
Hi Tony,
Is it correct to say that your preference in trading is too focus on getting into trades after the retrace to the 78.6? Any paricular reason why this such a favorite?
Yes it is Erica. I have been looking to reduce the number of trades that I do and increase their profit potential. The 78.6 retracement provides a high probability turn area with a high profit potential since it is likely to at least move back to the 38 level if not (as yesterday) much lower. My ultimate aim is to try and enter about 3 trades per week. I find that if you use all the fib levels what you are really saying is that after the 38.2 retracement you will take any signal since you are always going to be close to the 50, 62 or 78 so it no longer really has any discriminatory value. For me this is all still a work in progress as I slowly adapt my trading ideas
I am watching eur/jyp closely tonymand.It is wanting to break support I think around 158.00.I have a 5 min chart up,15,min,1 hour,And I have glanced at the 3 hour and daily also.1 hour stochs are not overbought but look as if they are going to cross and head back down.divergence also on the 1 hour.I wish I knew how to post up charts with Oanda but I donât I got some help from DD but it has not worked.But anyways just a few ords of what I see just wanting to know if I am seeing this right.Also what MA is that on your chart tony?And how can you explain the process of price bouncing off these?thanks againâŚgoodtrading!!!josh:)P.SâŚI like the 5 minute to pinpoint my entries and exits is this something you guys do? I think I remeber tony using itâŚ
Deep breath Josh! Do you really want to trade within the SR zone? I wouldnt as there is far too much chaos in there. However a break and retest in either direction would be worth a look. You might get an obvious candle pattern like the pin bar last night or perhaps a dramatic break driven by news with a hesitation/retracement allowing you in. My approach is not to try and predict the market. The âit wants to go downâ scenario probably means I would be tempted to take a contrary long. If everyone is seeing down it is sure to go the other way! Seriously though let the market tell you what to do and dont try to pre-empt it. If you have a better than 50/50 shot at predicting trade direction from the price action and one of your trusted triggers occurs then and only then pull the trigger
Thank you,
I appreciate the post.I have a juornal I keep and in almost every trade I get in I tell myself it is to early.But this one here isnât the case.I just flat out was going to jump in a trade in the middle of S&R.I guess I was looking at the 1 hour chart seeing it had allready hit the 158.50 3 times in the past 9 hours.But this is not such a strong signal at all,now that I look at it with your words of wisdom.Thanks for the guidence tony.I feel I am getting this down somewhat,but then come up with some stupid analysis like I just did.I got the knowlecgeâŚI have probably read 1000 hour in the past 8 months.I just need to get the feel now,on the rythem of the market.I am 27 trades into my live account with, 22 wins 5 lossesâŚtime will seeâŚthanks again
Hello,
I just wanted to post up a couple pics here.It looks like this pair is going to retrace a bit and hopefully fall back down.It may be approaching your fib level Tony of 78.6,and finding resistance at the 158.50.Is this what you are seeing or is there more to this story?
I got in that trade also.I seen it going bad, but fell in love with the trade and should have got out earlier.Oâwell,that is how you learn I guess. Been beating myself up all day about it.(that emotional tie to money)But at least I am using very small lots.YTou can learn a lot from just a couple of dollars.What is your take on the EUR/JYP anyone?
Hi Tess & Jocelyn
Youâve mentioned earlier on this thread the advantages of compounding when the move goes your way. If possible, would you be able to suggest how you might do it with the current down move of the EURJPY or GBPJPY?
When you compound, do you place on the same amount as your earlier trade or reduce the amount?
The reason Iâm asking is that compounding makes sense to me when you find youâre in a strong move but I wouldnât know how or when to compound!
Thanks
Hello volatility,
Sure, no problem.
We go thru the same preparation & analysis for compounding a position as we do for the initial entry.
It has to stack up & stand on it�s own two feet, therefore the conditions are no different to those in any other potential trade.
We have slightly different criteria for each pair according to the aims of the original trade & the unique personality of the pair we�re engaged in, but the generics are very similar.
Tess & her little gang work primarily off the Daily & 240min timeframes. Those are their template workstations, therefore the guts of the analysis & prep emanate from there.
Basically, we look to engage on & around area�s of supply & demand which are highlighted on those references.
By that I mean we�re seeking a value entry on a test and/or failure of a previous level which attracted decent attention.
As an example, if you look at your Daily chart of EURJPY you�ll see that the recent zone @ 159.60 highlighted a prev area of busy activity stretching back to 1st quarter of 2007?
It was hustled last summer (from underneath) & again during the fall (from above). It�s what we like to term as a flip zone. A fulcrum which is likely to once again welcome the attention of both Bulls & Bears.
Drilling down to the 240min reference, will offer a closer view of the activity playing out at this junction. You can see from the action (Nov thru Dec) that it was testing demand & forming a solid base.
The move up toward 166.0 during late Dec was labored & lacked intent (the small, close knit bar prints). But look at the bearish bar prints on the way back down after Xmas. Sure, this was on the back of light volumes, but the negative Fundamentals were playing their part too.
Again, we were back at the much visited supply-demand camp. This time the overwhelming fundamental flows were favoring the downside & the Euro Bulls were unable to overcome the strong supply building during early Janusry.
These are typical scenario�s we look for when planning to compound positions. Low(er) risk, reasonable reward opportunities where we can place our emergency exits at clear, defineable technical junctures & compute our upside potential to the left of the chart.
At the end of the day, it�s an ass covering exercise. We don�t know how successful the move is going to be, neither do we know how far prices are going are going to travel. What we do know however, & have absolutely full control over, is our risk!!
You gotta know your exposure to risk at every step of the way. Get that part in the can & the profits become that much simpler to manage.
We did add again at 156.80 (chart attached) on the 18th Jan off the pullback thru 156.50, but got stopped out on the 24th as prices hustled back up.
Same thing occurring again at current levelsďż˝âŚnotice the drawn out activity underneath 159.0??ďż˝âŚwhat does it tell you?ďż˝whereďż˝s the low(er) risk punt ďż˝ buy or sell (the break)??
Is this level being bid or offered?? Where are the near-term hiccups waiting & what would you expect to happen as prices begin threatening these zones?
Always plan for every possible eventuality�.cover the bases. Half the battle is not getting caught with your pants down. If you get surprised by a price action move, then you haven�t planned adequately or justified your entry (position).
Hi Jocelyn
Thank you very much for your reply. Really appreciated and reminding me of some of the things I learned earlier but have let slip.
One other question?
I think it was Tess who mentioned earlier in the thread about squeezing a few pips out of the market mid week in that period between the NY close and the Tokyo open.
Iâve often gazed despairingly at the screen during this time thinking âthereâs a reasonable move going on here and I donât know how to trade it!â
For example there was an immediate 70 pip drop in the EURJPY at todayâs NY close.
What do you/Tess look for when considering a quick trade during this time?
Youâre welcome.
Hmmm, canât say I can recall to what relevance that comment was relating to?! I donât dispute the reference, just canât fathom in what context it might have been mentioned - could you maybe locate it & haul it up here as a tagged quote?
Weâre not usually too active in the âdoldrumsâ to be honest. The lag between NY & Tokyo can suffer awfully insipid volumes at times, & you need to be very careful price doesnât lull you in & bite you on the ass.
Once Tokyo fires up (especially on the Yen instruments), thatâs a different ball game, & if opps show themselves, then sure weâll have a sniff where appropriate.
I wouldnât have traded that little shimmy you mentioned to be honest. It would have taken me/us by surprise sprinting out of the traps the way it did.
The pullback would have presented a playable opportunity however. Particularly as it hustled the prev floor of that mini consol range @ 156.15/20.
Theyâre key set ups which reveal themselves with consistant regularity as prices begin getting bullied around inside & outsdie these supply-demand zones.
You have everything lining up in your favor (dominant trendâŚclear range boundariesâŚconfirmatory price action etc) for a low risk-higher reward trigger.
Those are the babies you need to keep close quarters on 
On a sidenote; If I were you, & youâre just beginning to get to grips with these instruments? Iâd stick to trading the higher volume shifts. London & the overlap to New York are your high energy timezones to engage on the majors & popular pairs!
Keep life simple, donât complicate things unecessarily.
Hello everyone,
Have a question,maybe you guys could help. I have a problem with getting into trades to early,or jumping in false break throughs of S&R.I seen your post tess and I watch this pair quite a bit.So I pulled up a couple charts.The hour is looking good. Stochs are heading down, resistance level looks as it is holding price back.My 15 min. chart shows stochs down, price at the support level"With 2 previous bounces off this area".Are we getting ready to retrace a small bit then shoot threw?And if so would you wait till you fall threw the next low I have circled to enter?My timing in getting in isnât so great.What do you guys think?Is there a trade here?( think so) but where would you jump in at? Thank you much.good trading!..josh
