Price-Structure-Order flow

Call it a "hedge"
I am looking at the GBP/USD market and it is showing something more in line with the USDX market.

I am seeing higher highs after a double bottom on the 12 hr chart and suspect we may get a retest of the most recent weekly high. This is in direct opposition to the EUR/USD trade that just triggered. So lets call it a "USD hedge". I'm sure one of these two trades will win which necessarily means one will lose. It will be interesting to see which.

Update AUD/USD - Long:

Stop loss tightened on this market to lock 117 pips. Just a little over 1xR

Stopped out on AUD/USD:

Stopped out in profit on this trade. Next week I will start looking for a reversal trade on shorts (I think) to return back into the bearish trend seen on the weekly chart.

Also worthy of note...this trade came to just shy of 2xR but didn't quite make it. I may need to include targets for counter trend trades in this study...

Update WTI - Long:

Its a bit surprising to see that after NFP as the USD is increasing against most all of the major currencies, the USD continues to fall compared to OIL. Or put another way, OIL remains strong even in the midst of USD strengthening. This appears supportive of continued bullish view for this market.

I have left my stop at the monthly low and may look to add into my position later in the month.

Well, if and when the usd gets weaker things will be getting in place. What is your outlook on usd. Would you bet on further strength? Are you holding your eurusd shorts?

A couple of fair questions which I will attempt to answer as fairly and honestly as possible. Am I holding EUR/USD shorts? Yes. I am also holding my GBP/USD longs - until one of these trades stops out. I am a firm proponent of trading each market as its own individual entity. Thus the opposing trades on USD. Each of these markets is providing what I consider valid entry signals. One happens to be in the direction of the overall USD trend, the other is against it.

In trading we always try to ask ourselves, "...what is more likely to happen?" That question assumes that we cannot know what WILL happen only that through the study of market behavior (which is really people behavior) and probability we can make an educated guess on what we think is more probable.

Thus when I see a signal, that I have shown through study to generate an 80% chance of profit availability, I am compelled to take action as this is our business. So now that I have a small profit on EUR/USD I will hold onto that trade as see where it goes and manage it to the best of my ability.

I will answer the next question in the following post...what is my outlook on the USD.

I was actually going to ask you about this aspect of your trading considering we have similar outlooks on how price moves. I actually avoid trading the GU and the EU at the same time. I also don't trade the AU and NU at the same time and sometimes i'll not trade the UCad if there's an open trade on the AU or NU. It's always good to see how others approach the same issues.

My outlook on the USD (as a whole) comes from looking at the USD index. It is worth noting that the USD index is a compilation of currencies, each with a percent "weight" allowing the observer, an overall view of the USD's strength relative to other currencies...As of July 2016 those currencies and their weight in the index were as follows:

1. EUR 57.6%
2. Yen 13.6%
3. Pound Sterling 11.9%
4. Canadian Dollar 9.1%
5. Swedish Krona 4.2%
6. Swiss Franc 3.6%

As you can see the EUR factors very heavily into the relative strength or weakness of the USD. And the GBP is significantly less...thus the idea of trading each market on its own individually. So each time there is an announcement that affects one of these currencies...it literally affects the entire globe of currencies, because the entire world is tied to at least one if not more of these currencies. So enough of the fundamental view.

I take my long term views from a technical approach start with the monthly chart.

Clearly once can see a bullish trend that has recently gone "parabolic" after a break of a 7 month balance area. Price is at levels not seen since 2002. This in and of itself generates a bullish bias to the USD until something changes...so the question would be, "...is something changing or about to change?"

Lets look at prices "intraweek". For that I use a candle that generates every two days.

The place where price closed this week is very telling of my view point on USD...I have no idea. It is stuck between two balance zones. One that formed just before Christmas, and the other after the start of the year. The fact that right at the new year price moved to 14 year highs seems to confirm the bullish bias, but during this week the sellers have stepped in and stalled the bullish advance and pushed it back to the previous balance zone, where buyers were once again active and held price. So we are at a "turning point" in the market. A stale mate so to speak. Buyers has shown enough force to hold price from new lower lows...and Sellers have shown enough force to push price back after making new 14 year highs.

What can break this stale mate? For that we must look at the intraday charts and this is where the nature of our business reveals itself...we must now "speculate".

We'll start at the highs...you can clearly see three major intraday attempt to push price higher. Each a new "round" of buyers that was met with ready selling at those highs...even the last push made it higher than the rest and ultimately fails falling farther than the other pushes higher. This tells us: (1) Sellers are active on these highs, (2) Sellers are coming in greater volume at each attempt, (3) there are fewer and fewer buyers at this level - buying exhaustion.

Now lest look at the lows...You can clearly see some gaps at the two lowest lows...there buyers came in a lower and lower levels. This tells us: (1) Buyers are still active, just not at the higher levels, they are active at lower levels. (2) there were enough buyers on the last rally to make a new high...before NFP.

So the speculation starts...1st ask some questions...

(1) Are there enough buyers to push price to higher highs? I think so, IF price can start running the stops on those who are short.
(2) What level with the buyers be poised to enter or add in? I think at a lower price...perhaps at the lows shown on this week's lows.
(3) Are there enough seller's to push price down to make lower lows (as seen on intraweek or intraday charts). This is the speculation...and THIS is the key question...Where are the sellers, and how many of them are there? Also...where are their stops?

So finally we get to it...what is my outlook on USD? My overall outlook is Bullish for the technical reasons just described, and fundamentally, the new US president by all appearances is very hawkish. The timing of new longs will need to wait until I see more clear evidence that the seller's are just about played out...that may happen as soon as Monday, or may drag on through out this quarter. I really don't know.

In the immediate term, I will be watching intently to see if the buyers overcome the sellers at the current level, or if they will be seen in greater strength at lower levels.

Hi LookinGood...Welcome. I really don't mind trading concurrent markets at the same time. Most of the time they are basically the same trade, but every once and awhile, they end up being on opposite side, and then the question always arises...which one is the right side?

That is why I try to trade each market as its own individual entity, as each market has its own "personality" (for lack of a better word)...Different types and styles of trading occur, and of course, depending on the economic outlook of each country, (like brexit) larger volume tends to push or flee the markets making price action more punctuated.

As an example, I have made many trades on AUD/USD along side NZD/USD and found that while they both make similar moves, one is more exaggerated than the other, thus making your profits significantly larger. The added volatility creates a better chance for taking profits.

Bearish reversal signal on AUD/USD:

Last week's NFP has produced a bearish reversal signal in this market after stopping out my long. I have placed entry orders as seen here. I would anticipate that they trigger sometime soon.

Thank you for your answers. I see you have a very ordered and systematic thought proccess regarding your trading analysis. How do you factor the news in all this? Do you compare reaction of currency to news. Just for example: strong nfp but dollar goes low or the opposite. like the saying - if it cant go up on good news...it goes down. and do you think that such observation carries any real info. Bye

You know, even though you say you haven't shown all your secrets, there's enough here that with a little bit of screen time and research one could definitely beat the banks lol. This will be the 6th thread like this that i've seen on FF.

I remember a while back posting about the paltry interest rates that banks offer on their CD's let alone their savings. Even mutual funds kinda suck. Between commissions and early withdrawal penalties on qualified funds, it'll be forever before you get enough money to mean something after inflation.

You are definitely doing a good service to all those people curious about how to take their investments into they're own hands. And you're also doing a great service for those who just want a little more money to pay a bill or two. $100 extra a month would do wonders for most families in this age.

My view of news and/or fundamental reports is unusual compared to what I've read here. I do not look at what price "should" do based on whether a report is "good" or "bad" for a particular economy. I simply watch the order flow and interpret that. Mostly news is a REASON for people or institutions to do one certain thing over another, depending on the outcome. But what folks here seem to forget is that news results are always anticipated, and discounted by the time the news comes out. Thus most results (if anticipated correctly) are already considered part of the current price. It is only surprise results that get violent responses....and those are usually negated within a matter of a few days.

The bottom line however is this...good news, or bad news...EVERYONE must buy and sell the same way. That is they must all put their orders into the market and have them filled by someone on the other side taking the opposite side of the trade. That is the structure of the market...PERIOD. Therefore new announcement become volatile because there are so many orders being placed at the same time, that the market becomes overwhelmed and has hard time keeping up. As well if there is some surprise in the data, many orders that would've provided liquidity to the market, (meaning they were the counter party to trades), get pulled off the market, making the volatility that much worse, and much harder to get filled at the price you wanted.

For these reasons, I generally don't like to trade major news announcements for entries...rather adjust stops as needed and just stay away. I really don't compare what the announcement was to what was expected in the price movement, because I feel that cannot be predicted. I simply follow what the order flow is doing...at the time, and make appropriate decisions. I also try to keep in mind that after the "drama" wears off, things generally return to what they were doing before the announcement.

My ability to "predict" what price will or will not do is terrible. I can only look at what it is doing NOW and compare that to what it did...in the end this is all any of us can do.

Thank you LookingGood. I am glad to hear that you find value in this thread and encourage you to please chime in whenever you like. As I said at the beginning, while my methodology is nothing new or special, it does have my own little "tweeks" that I have kept to myself. For example I have a peculiar way of finding levels for placing my orders that many I've talk to don't understand and tell me I'm nuts. OK!! But it seems to work for me. And that is the true "holy grail" of this business.

Finding your own way of relating to the market is YOUR holy grail. I've seen here many "systems" that might work but that leave no room for individualization. The "rules" are the "rules" and don't ever change them because then the system doesn't work anymore. This is because people get so deep into indicators and technical analysis, that they forget that the market isn't some beast waiting to take their money...it is simply a machine that matches buy and sell orders at a particular price. Those prices are set by the traders themselves and are agreed to by both parties given their individual circumstances...at that moment. While I am no math wizard, I am pretty confident that there is NO math formula that uses price as a common denominator, divisor, multiplier, square root, or any other math function that can predict what humans will do. That is why most of these systems fail.

Instead a "methodology" is an organized approach to "reading" what is causing price to move higher or lower, and because that is open to interpretation, it is also subject to being incorrect at times. But when you add in YOUR view point and how you feel about the market, and what its doing, you will find that your intuition is often correct (mostly in the short term) and all that is needed is to listen and act on that intuition.

Lastly, (I learned this as a cop), "intuition" is really just your mind taking in and processing sensory input from your body so fast you really don't realize where it is coming from. "Intuition" is the result of what you are experiencing at that moment and your brain's interpretation of that based on experiences urging you to act. It is called intuition because you are out of touch with yourself so much you don't know or realize what it happening. So, to apply that to our business, the only meaningful sensory input we get from trading is visual...so if your intuition is urging you to do something...there is something in those charts that is telling you that you've been here before...there is a visual pattern you are UNconsciously aware of. You must bring that to the fore and understand it completely...THAT is your holy grail.

If looking at the way that I trade helps you find that...I am grinning from ear to ear with pride.

Update on AUD/USD - Short:

Price moved into the target area...where I thought it might not....and stopped me out for a 48 pip loss

Update on EUR/USD - short:

All three entries have been triggered on this position and price is starting to move in my favor...I'll keep my fingers crossed to see if this continues working in my favor over the remainder of this week.

Update GBP/USD - Long:

This trade stopped out almost as soon as the market opened this week...

Of note though price is currently balancing and has been over the past 36 hrs...so perhaps that move higher is still in the works. I will have to keep watch on this.

Update WTI - Long:

Stopped out for a 713 pip profit on the remaining 1/3 of this position

I agree with you on all points, especially your comments on intuition. It has implications beyond trading, from relationships to motor skills, all we need to do is learn, practice, and trust ourselves enough to not second guess our solutions. Also not giving up and being accepting of yourself and others helps as well. A lot of people have wired themselves in a way that won't allow for success in trading. They are unable to recognize whats been in front of them all along. I was like this for quite some time. But i trust myself now and i know it sounds cheesy but i'm able to do things now that i only dreamed of before.

Any who...

Quick update on EUR/USD - Short:

This trade is starting to work now and I have reduced risk in this trade to approx. 25 pips on the aggregate. I am holding to the bottom of the current range (as seen on the weekly chart), and will take 2/3 of the position off there...the last 1/3 I will hold for further downside...if it doesn't bounce.