EUR/USD overbought after long spike, crashing down soon? | Forex Factory

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EUR/USD overbought after long spike, crashing down soon?

  • #1
  • First Post: Dec 9, 2015 12:47pm Dec 9, 2015 12:47pm
EUR/USD overbought after long spike, many people rushing in buy... crashing down soon ?
feel like anytime it will crash down very fast like how it rise up, thee law of universe.
it time close long eur/usd and sell short eur/usd
When bull is tired, the bear will come take over
what do your think?
Sell 1.1000
Take profit 1.08000
  • #2
  • Edited 1:22pm Dec 9, 2015 12:58pm | Edited 1:22pm
I think you should have posted in the EUR/USD interactive thread. It would have been better entertainment.

Quoting forexpoor
EUR/USD overbought after long spike, many people rushing in buy... crashing down soon ? feel like anytime it will crash down very fast like how it rise up, thee law of universe. it time close long eur/usd and sell short eur/usd what do your think? Sell 1.1000 Take profit 1.08000
SPC * Swollen PocketZ Crew!
  • #3
  • Dec 9, 2015 12:59pm Dec 9, 2015 12:59pm
Maybe, but I'm long.
  • #4
  • Dec 9, 2015 1:17pm Dec 9, 2015 1:17pm
IMHO two key questions are:
 To what extent have the effects of Draghi's underwhelming QE policy announcement been priced in yet?
 How is the market anticipating the Fed's expected rate hike next Wednesday?
  • #5
  • Dec 9, 2015 3:04pm Dec 9, 2015 3:04pm
It either goes up or down, so you have a resonable chance to be right
  • #6
  • Dec 9, 2015 6:35pm Dec 9, 2015 6:35pm
Quoting feline207
It either goes up or down, so you have a resonable chance to be right
Even if you're wrong, 99 times out of 100, if you wait long enough, it will reverse and go your way.
  • #7
  • Edited 8:43am Dec 10, 2015 4:13am | Edited 8:43am
Quoting MisterWhite
Even if you're wrong, 99 times out of 100, if you wait long enough, it will reverse and go your way.
Just for fun I ran some stats on EURUSD,D1, for which my br0ker has a history of 5,532 candles (I've attached the XLS that I used). Suppose I open a trade on the open of a random daily candle, with no SL, and a TP of (for example) 100 pips. What is the probability that I will still (i.e. today, on Dec 10, 2015) be waiting for the trade to reach my TP?

The answer is: for a buy trade, ~3.42%; and for a sell trade, ~3.15%. Hence the probability of "still waiting" is more like 1 in 30, rather than 1 in 100.
Sure, the percentages become lower if you aim for a smaller TP, but of course so do the returns.

What are the worst case "longest wait" scenarios?

 If you'd sold EURUSD on Oct 26, 2000, you'd still be waiting -- more than 15 years later -- for price to reach your TP, and your account would have had to withstand a drawdown of 7,771 pips. A 15 year wait, and the possibility of several more years; and drawdown to date that is more than 77 times the TP.

 If you'd bought EURUSD on July 14,2008, you'd still be waiting -- more than 7 years later -- for price to reach your TP, and your account would have had to withstand a drawdown of 5,506 pips.

The possibility of no profit for up to several years. And not to mention all of the missed opportunities over those years due to margin being used, and the tiny position sizes needed to accommodate potentially unknown drawdown.

Given all of the above, I'd say that "waiting for a return to profit" is just about the worst possible reason to enter a trade.
Attached File(s)
File Type: xls EURUSD1440.xls   1.6 MB | 414 downloads
  • #8
  • Dec 10, 2015 4:30am Dec 10, 2015 4:30am
Quoting feline207
It either goes up or down, so you have a resonable chance to be right
50/50
  • #9
  • Dec 10, 2015 4:38am Dec 10, 2015 4:38am
Quoting MisterWhite
{quote} Even if you're wrong, 99 times out of 100, if you wait long enough, it will reverse and go your way.
Quoting hanover
{quote} Just for fun I ran some stats on EURUSD,D1, for which my br0ker has a history of 5,532 candles (I've attached the XLS that I used). Suppose I open a trade on the open of a random daily candle, with no SL, and a TP of (for example) 100 pips. What is the probability that I will still (i.e. today, on Dec 10, 2015) be waiting for the trade to reach my TP? The answer is: for a buy trade, ~3.42%; and for a sell trade, ~3.15%. Hence the probability of "still waiting" is more like 1 in 30, rather than 1 in 100. Sure, the percentages become lower...
Here.... A picture has more impact than words and numbers

Attached Image (click to enlarge)
Click to Enlarge Name: 1.png Size: 124 KB


Attached Image (click to enlarge)
Click to Enlarge Name: 2.png Size: 109 KB


http://www.forexfactory.com/showthre...46#post3752846


Peace,
CrucialPoint
  • #10
  • Dec 10, 2015 4:40am Dec 10, 2015 4:40am
Quoting hanover
IMHO two key questions are:  To what extent have the effects of Draghi's underwhelming QE policy announcement been priced in yet?  How is the market anticipating the Fed's expected rate hike next Wednesday?
Yeah how has it been priced in?
  • #11
  • Dec 10, 2015 5:41am Dec 10, 2015 5:41am
If EUR/USD crashes, then we are assuming...

1) USD to continue it's bull run
2) At the same time rates are increased by the Fed
3) At the same time while US equities has topped and begins to fall
4) At the same time JPY is increasing

Just a few thoughts
Follow me at andrewfx2020 (dot) com
  • #12
  • Dec 10, 2015 5:47am Dec 10, 2015 5:47am
I think EUR will fall in the long run.
  • #13
  • Edited 8:44am Dec 10, 2015 8:30am | Edited 8:44am
Quoting forex_fairy
how has it been priced in?
To keep ahead of the 'herd', traders who use FA attempt to anticipate the outcome of important news announcements, and the effect that they will have on price. These traders attempted to anticipate Draghi's QE2 policy ahead of time, which caused EUR to weaken (and hence EUR-based pairs to fall) for 3-4 weeks leading up to last Thursday's announcement. Hence those expectations gradually became 'priced in'.

Then Draghi announced measures that were not as severe as expected, which has (arguably) been the primary cause of EUR's strengthening since the announcement. When this effect has been 'priced in', EUR will stabilize, and then traders will start anticipating -- and pricing in -- the effect of the next major event.
  • #14
  • Dec 10, 2015 10:08am Dec 10, 2015 10:08am
Quoting hanover
{quote} Just for fun I ran some stats on EURUSD,D1, for which my br0ker has a history of 5,532 candles (I've attached the XLS that I used). Suppose I open a trade on the open of a random daily candle, with no SL, and a TP of (for example) 100 pips. What is the probability that I will still (i.e. today, on Dec 10, 2015) be waiting for the trade to reach my TP? The answer is: for a buy trade, ~3.42%; and for a sell trade, ~3.15%. Hence the probability of "still waiting" is more like 1 in 30, rather than 1 in 100. Sure, the percentages become lower...
What happens when you have a SL, and no take profit.
  • #15
  • Dec 10, 2015 10:22am Dec 10, 2015 10:22am
Quoting verv
{quote} What happens when you have a SL, and no take profit.
There is no fun in that, because you will be getting losses and losses waiting for the big 15 year/7500 pips opportunity. So, must probably, you will give up before it happens and with a net loss. hehe
  • #16
  • Dec 10, 2015 10:36am Dec 10, 2015 10:36am
If EUR/USD breaks 1.1096 then long to 123
POSTMASTER
  • #17
  • Dec 10, 2015 11:34am Dec 10, 2015 11:34am
I'm not saying have no SL. If you're doing 1:1 or 2:1 trading, with a 5% SL, that's reasonable amount of room (a huge amount of room, actually) for it go your way the vast majority of the time. It's how I trade. I may have to cut 1-2 positions out of 100, if it is clear it just won't go my way. In fact, I have a USD/CAD position I might have to cut, soon. The downside is, I might have to be in a position for a month or two, if it goes very wrong.
  • #18
  • Dec 10, 2015 11:38am Dec 10, 2015 11:38am
Quoting CrucialPoint
{quote} {quote} Here.... A picture has more impact than words and numbers {image} {image} http://www.forexfactory.com/showthre...46#post3752846 Peace, CrucialPoint
Fix up, trade sharp ...
  • #19
  • Edited Dec 11, 2015 11:37am Dec 10, 2015 12:39pm | Edited Dec 11, 2015 11:37am
Quoting verv
What happens when you have a SL, and no take profit.
If you used a SL of 100 pips, and simply left every trade open that's survived, then as of today, the results would be:

 If you'd bought on every daily candle open, you'd currently still have 174 winning trades open, totalling +276,101 pips; but you would have lost 5,358 trades x 100 pips = -535,800 pips.

 If you'd sold on every daily candle open, you'd currently still have 189 winning trades open, totalling +444,838 pips; but you would have lost 5,343 trades x 100 pips = -534,300 pips.

Of course performance would be worse than this, due to spread/commissions/slippage. I don't have the data needed to consider swap.

Quoting CrucialPoint
A picture has more impact than words and numbers
Agreed!
  • #20
  • Dec 11, 2015 3:33am Dec 11, 2015 3:33am
Quoting hanover
{quote} If you used a SL of 100 pips, and simply left every trade open that's survived, then as of today, the results would be:  If you'd bought on every candle open, you'd currently still have 174 winning trades open, totalling +276,101 pips; but you would have lost 5,358 trades x 100 pips = -535,800 pips.  If you'd sold on every candle open, you'd currently still have 189 winning trades open, totalling +444,838 pips; but you would have lost 5,343 trades x 100 pips = -534,300 pips. Of course performance would be worse than this,...
Interesting analysis, good stuff.
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