Unfortunately many of us don’t fully realize how it is important to find and trade opportunities with good risk-reward ratio. They are blinded with thoughts about profits only and its very bad, because traders remain unaware how to manage risks.
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Ok - first thing when thinking about the right side of the chart is to think about risk - not our risk, rather how does the market feel about risk - right now - this very hour.
I’ve spoken about the USD2000 (small caps) many times and how and why it is a real time risk barometer - most recently a couple of months back ‘in that index lies money and risk’.
Anyways yesterday evening into the US close there was a risk alert using this index.
All charts are hr1 yesterday - FOMC day.
Chart1 is US30 , chart2 S&P, chart3 US2000 and chart4 the Nasdaq.
I checked the S&P etf sectors and sure enough XLK was in positive territory led by the usual tech companies. XLP was the only other green sector - (consumer staples) - a defensive sector (it’s also the least negative sector right now).
Two things stood out with above 4 charts - as I watched I could see that the 2000 was leading the drop and obviously the Nasdaq was on it’s own - reminded me of 20 years ago and we know how that played out.
No need to show what has happened risk today -
One other risk barometer - the US Bond market - there was talk a couple of days ago that the Fed would enact YCC (Yield Curve Control)
Learners - remember that as the US Bond price rises so the Yield falls
US Govt bonds are seen as a safe haven - risk off.
Here is the US10YR (the one I use most often) price hr1 yesterday - the Fed said they’d use all their tools-
Some commentary a couple of days ago:
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OK = right now the 2000 has reached Friday’s high - the other 3 have some way to go.
US10yr looks to the open gap.
So it’s decision time - if the US2000 breaks north then the rest will follow and a buy on S&P would be nice - so these 2 - the 10yr and the 2000 will be my indicators.
Edit - 30mins later - still no break - 2000 still holding firm though - let’s see
S&P, Dow all bullish
Theme of the week,
Lockdown Easing (Risk On?)
Riots, 2nd Wave . . . etc all inconsequential
(story for another day)
Human life is like a mustard,
Lives of the poor are cheap,
The boss calls the shot.
And there she blows - all 4 in unison 
Edit: so what’s all this to do with FX - check Eur/Usd timing right now
Ok - now one hour has passed - I chose the timing to show that it is very possible to predict the market even very short term - the buy on the S&P was placed exactly one hr ago - here is the HR1 for the S&P
If the 2000 had not broken then no trade but the chances were that it would since it was leading - investors only buy small caps when they are feeling risky
You said it all. Humans are predictable, and they keep repeating same pattern of behavior. This can be seen in price action. So yes, the market price i predictable.
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Here is that break and what has happened 2000 up to now.
The horiz is what I was watching - the up arrow around the time of watching - the trade was not on this chart - it was S&P - drawdown was negligible.
So over to the right side - all 3 other US index printing almost identical right now but if I wanted to chase, say i missed last eevening, perhaps buy S&P this early - it’s at 3159?
No point in watching the 2000 since it’s print is similar to the others, so here is what I’m watching:
I believe that with a correct understanding of the market and the influence of all sorts of factors on it, it is quite possible to understand the results of the work.
Sounds good but unfortunately you offer some very general approach of how to tackle extremely complex problem. I think traders should focus on developing an edge rather than trying to find universal solution (equation?) which describes movements of prices.
Well if I had have chased at 3159 - the very next hr candle (arrowed) was down - my trade would have been under water almost immediately
You will often read how guys buy and almost at once price reverses.
So what about my indicator - would it have stalled the chase?
It was at 138.50 (up arrow) I was looking for it to break the low just like the 2000 broke it’s high on the last buy - didn’t happen - the very next candle was back up.
So yesterday use of risk analysis to enter and today use of similar analysis to stay out
Here is a short - short term thought - right at the end of the week.
SPX at 3086
This can be a risky time to trade but worth thinking about.
40 mins later - important to show when a trade can go wrong just as much as the past posts show everything going right.
SPX now 3103 - there are no stops in this thread - that is yet to come.
This late chase is very common - price has fallen this past 5 hours - so get in quick a couple of hours before the close - now it’s under water because price reversed up at 3084
So next question - would I bail with the loss - 1 hour to close?
Answer - no
SPX now 3114 and rising - what now?
Do I bail?
Time is running out, it’s Friday and the close is close - decision time - loss now at 5720.00
Context - here is hr1 at that time - a short just below:
