Simple Uncomplicated (obvious) trading

Is that a bearish wedge at a strong S/R? thanks

I tend to look at the market in terms of where buyers and sellers are transacting and which side seems to have more driving force or where the market becomes "unbalanced". Below you can clearly see where sellers overwhelmed buyers in the same general area approximately 1.5 months ago. To me, it is logical to expect more selling in this area as price returns. Whether those sellers are "new" shorts or profit taking longs I cannot say.

It is also clear to see that buying is currently driving prices higher. Therefore, IF significant selling does come into the market in this area, I would expect to see that prices slow and start to range as the order flow balances. IF more buying comes in there will be a clear sign of that as prices move higher without stopping or stalling...However, IF selling wins out again, there will also be a clear sign in the price action that can be utilized to enter a short...simply saying there is a "wedge" forming at "strong resistance" really says nothing to my way of thinking.

I do not trade price patterns as such (although I do recognize and note them). I trade when it appears to me that one side (buyers or sellers) have clearly and "obviously" won out over the other. As the current market flow seems to be moving lower (over all), I would anticipate that seller may return to the market in this area or perhaps a little higher...however I am not yet seeing that happen currently.

Hope this helps...sorry about the rambling...I tend to do that sometimes.

Hi Gspajon,

Your explanation was fantastic! I will put up the real volume now as I don't have order flow info and watch price action. Thank you so much.

SC

Be careful with "real volume" as it does not exist in the FX world...at least not what your broker is showing you. The volume you see on a broker platform is really a tick counter, how many transaction have occurred. But it does not nor can it (in this market) say the SIZE of those transactions, or whether they are on the bid or the ask, (meaning assumed buying or selling).

No one has the ability to see the entire order flow of the market (at least not that I am aware of) because the FX market is decentralized, but many larger institutions have the advantage of seeing the orders their clients have placed.

The true "skill" (if you can call it that) comes when you can "see" the order flow present behind each of the candles, and observe how that order flow effects price. It is really just "reading" price and knowing what you see is the result of either balance or imbalance in the order flow of the market.

Gspajon,

Good analysis on GU! Here is what I see:

http://i.imgur.com/xzhjLe2.png

This is options OI ... highest call level is 1.55, next is 1.56. The people who wrote the call options want to defend it. Look at when price when over 1.55 earlier ... it was sold into and forced down. The writers of the calls (many banks most likely) can come in and sell on the spot market to drive it down. As they do this, they accumulate short positions in GU. Before the options expire (3/9) they want to keep price < 1.55.

Now if they fail and price closes over 1.55 for a daily close, they will have a loss on (1) short positions accumulated, and (2) call options then need to pay out. They will then buy and cover, forcing price up.

The next option level is 1.56 ... normally its not the case and its not that close.

Look at EU in late Dec / early Jan. 1.17 was the high put OI at that time. Price bounced off of this level as the big boys bought EU to protect the puts. Early January it broke 1.17, so they were at a loss from their buying operations in the spot mkt, and also the put options they wrote. They then had to exit and short EU as a hedge to counter the puts. EU then tanked hard to 1.15, then the next week later got hammered again.

Refer to http://www.cmegroup.com/trading/fx/o...rest/main.html

EZ

EZ...thank you so much for that explanation. This analysis defends what I see in the charts as well, and gives a reason for why the levels that I watch occur. For me the bottom line is that any institution or "big trader" who wants to move price, up or down, MUST do so buy transacting in the market. Their objective in doing so is to create an imbalance in the order flow to move prices in the desired direction.

This will leave "foot prints" in the price action, which we can then see and utilize to our advantage. While these "big boys" may wish to remain unknown, their actions will ALWAYS leave some trail that we can use and follow.

Thank you for lending a reason to why we are seeing what we see in the price charts!!! It is most appreciated.

perhaps too aggressive but...3rd position added to NZD/USD short

Hi Gspajon,

I also feel that the NZD/USD should go down but don't see any PA signals for short...
Could you advise please what "obvious" signal did you use to enter?

Many thanks in advance!

Very good question Sergzav...I will try to be succinct. On this trade I was taking signals off intraday charts, specifically the 4 hr chart and trying to hold them into a still developing day chart...clearly that didn't work out too well...

Below you see a 4 hr chart where different areas of buying and selling had been established on the way up. At the beginning of the week I saw that selling caused price to drop below the most recent zone of buying and surmised that the longs had been stopped out. Anticipating more selling to come I entered as soon as price came back into the selling zones. A pin bar was produced which confirmed my suspicion. Price dropped away and I felt I had a good lead on the market...

Price hit a lower zone of buying that had been established two weeks ago and immediately rose. I was anticipating that buying would balance the order flow and provide a chance to move the stop a little closer, but it didn't...a wave a buying ensued and brought price back into the same sell zone I had entered from. (Thank you Janet Yellen!! )

Here you can see price ranging and looking like a balancing order flow again and I was thinking that more selling had come into the market and would push prices down again...so I added a 3rd position... I even got a final pin bar as a reward, and so, being confident in my financial genius, I went to bed...OOOPS!

I made many errors on this trade and will enumerate them for you:

1. I tried to hold an intraday trade into a position trade from the day chart when it was CLEAR that wasn't going to work - I got stubborn.
2. That premise changed my thinking and I didn't move my stop down to at least break even because I thought I needed to be more patient with the trade and let it develop...so I didn't want to stop out prematurely
3. Once the trade was clearly against me, I "added to my losers" with a 3rd position...terminal mistake

So to correct these mistakes I shall take the following action

1. Trade only ONE window...by that I mean, if my signal comes on an intraday chart it will be an intraday trade...but mostly I will look for daily chart trades and leave that as my trading window.
2. Be flexible for what the price action is showing me...don't hold to a single idea and lose when the price action is clearly telling me something different.
3. Be more diligent in moving my stops...to me this is the true "art form" of trading, knowing when and where to place your stops as the price action dictates...too close and you are knocked out too soon...to far away and you give up too much profit, or lose.

I know I wanted to be succinct but this is the shortest I could make it and at least have this sound cogent.

Trading Opportunity AUD/USD (long):
I've been watching this setup develop for several weeks now and it looks like the time has finally come:

THIS IS A RETRACE TRADE (Counter trend).

Price has been bottoming now for several weeks. the order flow has clearly balanced out not permitting any significant upward or downward movement. Yesterday however, price rose above the area of balance and has stopped out many shorts. Price has now returned into the area where buyers overwhelmed sellers and is retesting that area. I have entered long and have placed two more buy limit orders within the range. Stop as seen here.

We'll see what happens.

Hi Gspajon,

Thank you very much for your detailed reply!
It's very useful for all the followers of the thread to share our successfull trades as well as mistakes.

All you described is so similar to my own experiance. So many times I entered a trade without any signal but being confident for 1000% about further price direction and ... mostly failed

It's not easy sometimes to stay away from the terminal

As for NZD/USD it's finally forming a signal - "pin-bar" . So in case if daily bar is closed so, I'm going to enter short tonight

Update on Gold (long):
This week has been mostly ranging price action which for my position is a good thing, as I interpret that as a balancing of the largely selling order flow. Price seems to be pushing higher now at the end of the week, but as the last two days have shown, there may be a sell off towards the end of the day as people square positions before the week end and this being the last trading day of the month makes that a little more important. I am holding two small positions, currently positive for the moment with a third and final position still pending lower. However, if I see prices close near the highs today, I may move up my stop and cancel that 3rd order. I will have to see what it looks like at the end of the day/week/month.

Have a good week end all!!

New Trade Opportunity EUR/USD (long):

Below shows the daily chart of this market. The seemingly endless ranging that took hold in February has broken and anyone who was holding a long position was just stopped out. My expectation was to see new shorts come into the market taking it down further, but that didn't happen. Instead this market has stalled near the 10 year lows. I suspect that there are no further "big boys" who are willing to take this market short at the end of the month and at 10 year lows. By default I suspect buying will enter this market soon and drive prices higher.

I have entered a small long position at this level and have a pending order to trigger another small long position at the low. I have my stop well below this level (not seen on this chart).

New week...new month...we'll have to see what happens.

EURUSD COT analysis:

Looking at the Commitment of Traders (COT) report, we see net asset manager and leveraged money (I categorize both as big funds) at historical lows. The below graph is a weekly graph of COT data (black line) with the mean and +/- 1 and 2 stdev of the mean, and avg EURUSD weekly price (red) overlaid. Fund positions are at -2 stdev from the mean and historic lows. When this happened in the past, price soon (within a few weeks) starts a major uptrend.

http://i.imgur.com/wpK7rdz.png

Now OI has been rising as funds enter their positions, so if you look the above as % of OI, you get a similar graph:

http://i.imgur.com/xRo36cg.png

So this shows everyone is on the same side of the market. When this happens, it typically reverses.

Next lets look at EURUSD Options OI levels:

http://www.cmegroup.com/trading/fx/o...rest/main.html

March options expire 3/9 for the highest put option levels. It shows over 6700 put options at 1.11, and April options shows over 3200 put options OI at 1.11. Next big support for put OI is 1.05. As I explained before, these levels will be defended by buying in the spot market.

Next we have to look at the fundamental data releases, and how price reacts to it. If we get bad EUR news and EU doesn't fall, or good USD news and EU doesn't fall, it may be time to establish long positions.

Looking at all of this, it may be soon time to long EU for a major uptrend ... but look at price action for confirmation.

Regards,
EZ

The above graphs are small, so I'm attaching here:

hello traders, where has everybody gone?

hi Gspajon

Your trades are awesome!

Gspajon
How do you determine where to exit your long EU trades? Thanks

Hello sclipp...its been awhile since I've posted here...I've had a busy schedule this last month and have started new classes...that is always very time consuming.

To answer your question, profit taking is as much an "art" as is stop loss trailing. Often times I am stopped out prematurely even though my initial assessment of the market was correct...as well taking profit always raises a dilemma...taking profit "too soon" or allowing it to run even though a retrace may temporarily eat into current open trade profits.

I used to have a math formula that I used (1x risk; 2x risk etc) but have found that these targets are too arbitrary and often don't accurately reflect the true potential in any given market at any given time.

Since then I have learned to recognize and "see" the order flow behind the price action. I have learned to "see" when the market has a balanced vs an unbalanced order flow. Thus I now trade through as many complete cycles as I can...a "cycle" being a complete order flow cycle. Balanced-->Unbalanced-->Balanced. When I see the order flow on my trade begins to balance again, I tighten my stop so that it locks pips but keeps that stop "out of range" of the current price action. If the next imbalance sends price against me, I am out with a profit...but if the next imbalance continues price in my favor I continue to trail my stop behind the order flow.

I do set "targets" when I am intraday trading the futures markets. These targets are generally placed in the area I see the most recent counter movement against my trade. It is anticipatory and therefore never exact. Example: If I am long and I see an area where I anticipate sellers to return, I will set a target at that level, and add my sell order to theirs. Meanwhile I trail my stop along the area where the last counter to my trade was unsuccessful so as to accomplish my trade priorities: (1) Limit Risk to x%, (2) Reduce risk as soon as possible (3) preserve profit as price allows.

I hope this answers your question...below is a screen shot of my current position in the EUR/USD showing entries and the current stop level which locks approximately 120 pips on the aggregate position. I anticipate the sellers may return in earnest around the 1.1175-1.1275 area...But I have not set a limit because I want to see if there are enough buyers in that area to push prices above the last high...as seen on the weekly chart.

Hi Gspajon

by "order flow" do you mean support/resistance?
is "balanced" seen by the shape /size of the (daily) candle?
is a complete cycle the highs and lows within one daily candle?
then do you find you only need to look at the daily close to base your decision
In your EU trade, you are willing to forfeit pips, in order to see how far the market will go?
-is it so that you can continue reading the balance and keep the consistency of your trading plan for future trades? - (if that makes sense)

thank you so much