How could I have taken advantage of the massive drop in the EURUSD last night?

I’m not saying that fundamental analysis is not a useful tool. The question was if there had been a way to know ahead of time that the EUR/USD was going to drop yesterday. The answer is yes there was via technical analysis.

I’m still trying to get up to speed posting charts, but there was a tip-off for those who follow the Commercials Euro (short) positions on COT, the dollar index gave a small clue on a 4h chart with market structure creating a high on 2/6 that eclipsed the high on 2/4, and a more obvious indication on a 4H EUR/USD when market structure on 2/4 turned bullish by eclipsing the low made on 1/31. I’d wager there are more indications on the bond market that I have not checked, but the high on 2/5 vs the low on 2/6 created a near text book opportunity for the Fib retracement on 2/7 of just over 79% leading to the huge move down. Now if you look at this and also have extensions on your Fib tool, there is a thing of beauty which is the profit target is met at both 127% and 161% depending upon which high you use for the retracement. I’m not even mentioning everything like the false move up that set up the move yesterday.

By the way, I’m getting fed up with the spelling features, because retracement should be a word.

And, if you’d looked at the BP tools, you would have been expecting increased liquidity in the markets due to the announcements yesterday, meaning that some action was likely.

Lastly, not everybody has to trade this way. This is one of five or six ways that I enjoy looking at the market and am mad at myself for not catching this. In the morning yesterday I had things to do, and was not in front of the charts, but regardless. There are many ways to look at the market, but in my opinion, this is one way one could have caught the move.

my comments was more of “this is a real move. how can identify it and capitalize on it”, since the OP was already in the move, he wanted ideas on how to spot strength.

Not saying that we could predict news to predict “oh eur/usd is going to go down”. thats a whole different issue.

I did misunderstand, I should have read better. I thought it was how do I recognize this move is going to happen, versus this move is happening, how do I make the most of it - sorry.

I do think that the answer is Fib extensions as a projection. depending on the high (on say a four hour chart) that you start from, this move was manipulated to be in the range of 127.2 / 161.8

What is his trading plan? Is it defined? Was the intent to take pips when he did?

News isn’t the answer. For I’ve seen dozens of people argue against trading during news events.

Two units isn’t the solution, as that requires more sophistication in risk. Most that employ such a strategy have more at risk then reward.

He could have simply stayed in the trade until price indicated any measure of price action methods proved the impression that the move was complete.

I’m favoring Hogarste’s idea of extensions however, adding to it that it would merely be an area of observation to see how price reacted, rather than just drawing a hard lined order to take profit.

Watch for Climax bars on the 15 minute, and the price action after. Usually it’ll give you a hint of whether you should shift stops.

The order flow explanation is simple, just thought that I’d elaborate a bit.

Two groups of prop/institution traders basically,

There are those that trade by entering on a momentum break, exit 2/3 of position when price hits a support/resistance zone and look to add on a pullback.

Then there are groups that buy at support and sell at resistance - so the simultaneous profit taking and opening of new orders will create a initial spurt that causes price to temporarily recover that is of no significance whatsoever. The next thing to see is if there’s a continuation of momentum or a reversal out of the ‘box’ that price was balancing in. In this case, it’s the green candles that you see, that represent a balancing of orders.

So a good trader, would have added to his positions each time price broke down during again in those ‘momentum balancing’ areas, and exited when price reversed.

Ofcourse the best will have a trade plan before hand, identify the levels, take partial profit at each level, and add size when price retraces to a mini-level, and rinse and repeat for all levels OR if they were looking to trade the bounce, they would place limit orders beforehand at the key areas AND NOT WAIT FOR CONFIRMATION, and look to add all the way up.

Good luck.

You just describe guessing and gambling and justified it by saying that’s what’s a “good trader” would do.

Define good trader.

It’s not guessing or gambling, you can open up a 15 min chart and go test for yourself what are the odds of this simple method working.

Gambling is when you do something without knowing you have the edge. A good trader is someone who exploits the edges and is consistent in doing so with discipline.

Haha, I took a look at your thread and trading methodology. It reminds me of the “Equity Millipede” Thread in FFactory. Basically what is needed for these methods is an entry edge, and I agree with the threadstarter there that anyone can develop an entry edge if you spend 6 months observing price and price alone across all pairs.

But trading is all about skillset development. For a day trader you simply need a wider range of skillsets to succeed, chart reading to identifying support/resistance zones accurate is one of them but that’s just one. More complications come into play - i.e. how to do you exit, how do you add size, how and when do you flip a sell into a buy within seconds? each skill needs about 6 months to develop if you are starting from scratch and doing it alone and can’t spend 6 hours in front of your computer everyday, and I can easily count 4-5 core skills that you need to start trading like a world class day trader.

Ofcourse, if you apply and join a prop trading programme, they might streamline your learning curve and get everything done within a month, but it is not usually after 3-4 months that you master trading with bigger sizes, and it’s usually in an environment where you have pro-traders mentoring you and giving you tips/hints over the comms device to tell you when to add size and when to exit.

So being an independent day trader is tough, it’s much easier to position trade because all you really need is to develop an entry edge and just keep entering trades and putting trades to breakeven after a certain point and let the market decide which trades survive… It’s very profitable but not what most traders are looking for.

Most traders aren’t looking to be very profitable? That’s odd of you to say. I would think most if not all are looking to be very profitable.

Gambling is the wagering of money or something of material value (referred to as “the stakes”) on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods.
[I]Source: Wikipedia
[B]Is Trading Gambling ?[/B] :33:

Yup according to wikipedia’s definition it is, but we all know wikipedia is unreliable source lol.

The world’s collective knowledge is unreliable? Do tell.

gam·ble (gmbl)
v. gam·bled, gam·bling, gam·bles
a. To bet on an [B]uncertain[/B] outcome, as of a contest.
b. To play a game of chance for stakes.

  1. A bet, wager, or other gambling venture.
  2. An act or undertaking of [B]uncertain[/B] outcome; a risk: [B]I took a gamble that stock prices would rise.[/B]



gam·ble verb \ˈgam-bəl

Definition of GAMBLE

intransitive verb
a : to play a game for money or property
b : to bet on an [B]uncertain[/B] outcome
: to stake something on a contingency : take a chance



gambling - definition

  1. an activity in which you risk money in the hope of winning more money if you are [B]lucky[/B] or if you [B]guess[/B] something correctly
  2. a situation in which you take a risk on something that can give you important benefits: [I][B]gambling on the stock market[/B][/I]



Gambling is putting money at risk by betting on an [B]uncertain[/B] outcome with the hope that you might win money.



[B]Join the dark side…[/B]

Trading is not gambling. Traders provide at least three services to the market:

  1. We provide liquidity
  2. We act as a counter-party for those who wish to hedge or outsource their risk
  3. We punish unwarranted speculation, hysteria and panic and bring the market to equilibrium

This pretty much describes business in general. Is setting up a shop gambling? Is asking a woman out gambling? Everything is uncertain. I would only describe something as “gambling” if you have a negative edge. :slight_smile:

Hi Kevin

Unfortunately that does not refute the statement “Trading is Gambling”. It’s more like a counter argument that you would say to a person who states that: “ALL TRADERS ARE PARASITES WHO LEECH OFF OF SOCIETY” you know that sorta jazz.

Yes, it truly is. On most things it gives you a general idea of what’s happening in a field, but it has biased statements and unreliable claims.

If you ask any academic they will tell you wikipedia is nonsense.

Nope, most people think they are trading to be very profitable, but actions don’t align with thoughts.

Hello Mr.Lacoste

I remember reading a paper on the research of small businesses in Canada and the numbers were pretty staggering. The

researchers found that for 145,000 new businesses start up each year in this country, about 137,000 businesses declare

bankruptcy each year. I also recall reading that 80% of new businesses fail within their first year. As regards to betting whether a

guy can successfully ask a woman out is considered as gambling or not, i would probably concur that it is. Take note that I did

not write the definitions I’m just quoting definitions from those sites :).

There are people who gamble at horse racing and are very serious about it. There are many schools of thought about horse racing analysis and wagering that folks might find very similar to trading the markets if they thought about it. Professional horse players (and professional gamblers in general) take risk management / value very seriously. Like in trading, horse players recognize that very often they will lose more times than they win, so they try to keep things in their favor by making sure that when they win, their RR is very favorable. They also reserve their plays for when they are most likely to pay off, like in trading.

Every business venture or for that matter every time someone gets in their car to drive to work, it is technically a gamble because the outcome is uncertain. Why is it less noble to become an independent trader, than to work for Goldman Sachs, Citicorp, Morgan, Deutsche, etc? I think the reason is because the words gambling and day trading, just evoke negative connotations that people associate with compulsive behaviors. And that Goldman Sachs is really really good at gambling.