The Fundamentals of Trading

Good Morning All

EA had a bit of fun yesterday, so as expected the hanging man of a few days back on the daily got tested the high of two weeks back was taken out at 15607, it ran up the hill a bit to 15646. AU broke down through 7180, but has recovered it whether it can hold remains to be seen. For now I am still confident with my analysis of the start of the week.

Simon

Trade Update

EA
Short at 15612, got stopped out at 15634, then short again a few hours later at 15635, so this is my current trade.

Here is the break down of the PA as I traded it last evening.

I knew this first trade was wrong quickly because if you look at that candle GMT 6:00 from yesterday, when that closed it was smart to get out as it was a very bullish candle couldn't be sure it wasn't going to keep going up the hill.

I waited for a while to see what the market wanted to do, then GMT 9:00 put in a bearish close, so this was the first clue things were slowing, at this point I had a marker for a trade the high of GMT 9:00 was 15635, so this is where the next order had to go. I knew I could have another go, for the following reasons:

1. If it had gone past 15650 I was out, so it was relatively low risk
2. 15607 was 200% overstretched PA from the last week in April, so this was definitely going to turn
3. The retail market data had the retail market at 85% long for this pair, so lots of fuel for the short fire going into NY open.

Lets see how it plays out now.

Simon

NZDUSD

My analysis for NZD is as follows:

In the last few weeks we have seen this pair come off from 7050 down to the low 67's. I think the weekly chart best reflects the mood of the market and that in my opinion is indecision, last week we had a pause in the fall, with a spinning top appearing, then this week so far we have been up and down, so the next week or so is going to decide what the next move is going to be.

Whilst there is little news in the next few days to stimulate NZD, the news for USD is different with a ton of it culminating in NFP friday week which should make this pair move around some.

Looking purely at w1 chart for the moment, as to me it doesn't seem like its done going down. I think the buying channel for this pair opens around 6670 and extends all the way down to mid 6500's. As I am not ready to commit a trade here I am not going to bother drilling down just yet for further levels, until we get some sort of signal from the market that its ready to buy. Sells at the current level look risky, can't see anywhere low risk to get in and the downside looks capped.

Simon

EA
Trade Update I have closed it while its still well in profit, no follow through that I can see, could be wrong but looks like it not quite ready to go down yet.
Simon

How about the cable. I think there is a level around 1.4749-69 based on the big move on the 1H on May 3rd. Its definitely bullish enough to get there. Of course maybe its too bullish and will blow right threw it. Not sure right now....I'm just going to monitor this today and see what happens when the GDP and such are announced later this afternoon.

Hi Wage

Depends what happens with news as you have pointed out that level looks ok but I think it goes right through, there will be motivation to get there as it appears on multiple TF's and this makes its almost seem too easy to me.

I am very very wary of the pound until this damn referendum on June 23 is out of the way, also its one the last days of the month today and tommorrow so this will fuel euro selling and GBP buying as money is repatriated home for UK based companies.

Simon

Thanks for the advice! I hadn't considered the repatriation factor. I am cognisant though that being so close to a level near huge news is more likely to blow thru it then gently take price to it and then reverse.

I think its interesting to look at the last decade of cable on the weekly as shown below. Its clear that the zone price is in right now is a bearish outlier. I think price will want to get back above 1.50 post Brexit resolution. There should be some nice long action albeit I suspect it will start not after the vote but rather before it at some sweet spot where the vote is close enough and the polls indicating "remain" firm enough.

First thing to really look at take a look at d1, 4h, 1h charts any of them really, to me price dosen't show any sign that it's setting up to reverse yet, now does that mean it won't of course not right, but sell offs always happen this way:

1. we get a big candle or something that tells the market reversal is coming.
2. The retest of the top or close to it happens next
3. then we go down

so do what I do wait for the market to tell you its ready.

The best traders I have seen are pullback merchants for the most part, I admit I am bit counter trend really cause I personally like picking tops and bottoms most of the traders I know and have learnt from are experts at PA in relation to pullbacks, retests and reading price.

Simon

So here is a chart from EU, its interesting how PA is telegraphed to you if you are looking, check out this chart, with explanations.

AU

Here is a block of PA on AUD, that shows also how the market offers clues then the reality happens after that.

Simon

CJ

another one just about looking at the charts closely and studying there clues.

Simon

GN

last few weeks for GN, completely dominant and the charts on the Long TF show this, was only going one way. There has been intraday CT trades in here but they have proven to be shortlived.

Simon

GA

A gap or japanese window this time on GA a number of weeks back set the tone for the month of may, and it hasn't looked back.

Simon

EJ
Its been a bit messy but even that has been true to form when only looking at PA
Simon

Ok you get the idea, allow your candles to speak to you, many traders I have known and coached spend their days and nights looking at commentary for clues on where I should be entering and exiting, using indi's to justify trades etc.

The best thing you can do is listen to your candles and then look for the imbalances in PA for the spots where the orders are going to be. This takes practice and patience she is no get rich quick scheme, not even sure its a get rich scheme but if you like charts its an enjoyable living.

Simon

NU
Actually one more check out NU its playing nicely for now. its going to the buy zone at 6675 and if it breaks that its going to 6590 as the next leg down.

Simon

EG

one for next week I think at this stage, but EG is setting up nicely for buying below 7530 (we need to look at smaller TF for exact numbers) for a run back to at least 7740, when the selling in Pound comes its going to be fast and furious imo

Simon

EA
While we are at it some thoughts on EA as well.
Simon

Hey, where's Simon

I for one hope that Simon comes back at some point. I want to hear more. I've had a long time to read this thread through many times already. I finally see the logic in everything he says. I find it amazing, though, that there are only 31 pages in this thread. I have seen many threads on this forum. Some are in the thousands of pages and don't have 1% of the information contained in this thread. This thread has some of the best information on trading that I have ever seen (a lot of it similar to BillyRayVal's thread, whom I also greatly respect and have read through many times). Simon was right about one thing he said in this thread. Most people want a system that can give them a signal, mechanically, because it is easier that way. However, they find that this does not work a majority of the time because of many different factors (it may work for some, but they are probably very disciplined individuals that even still use some of the ideas in this and other price action threads). Simon was right about it, and the amount of replies to this thread show it. People are lazy and aren't willing to put in the work to make a difference in their own trading. He lays it right out in front of us throughout this thread. I highly recommend anyone that comes across this post and wants to make a change in their trading, or go from a loser/break-even trader to a consistent winner, to read every post Simon made in this thread. This thread is laced with gold nuggets and other gems.

Best of luck to everyone in their trading!
-Atreides