EURJPY Live Market Commentary

This thread is meant to be a public collection of a personal journey, and is open for any kind of discourse. Therefore, the first post will be updated periodically to reflect it. Please note that by opening this journal, I'm trying to focus not on the trade, but on what's happening right now on the market. I'll try to just give commentary, not showing the trade as much as I can.

First, let's start with why.

1. Why do I trade?
Currently, I'm still learning. Ultimately, I want to make a living out of trading.

2. Why trade EURJPY?
I always feel discomfort if I have to let the trade go for hours without monitoring i.e. for sleeping time. Therefore, I conclude that the best match for me is daytrading. For daytrading, a big daily range is a must. Another requirement is that it's reasonably 'easy to read', which means the traders don't like to give big surprise, and hopefully their behaviour in critical moment is somewhat predictable.

The second requirement points to a market which consists of not-the-best-traders. I posit that the best traders prefers major pairs (XUSD, USDX). Therefore I have to search for another market. I found a likely alternative in JPY pairs, as Japan is politically and economocally stable (relative to other nations as of 2017. Brexit means there'll be turmoil in Euro community and England). According to economic data, the top trading partners of Japan are China, US, Australia, England, and Euro (not in order). US is out of the question. There's no CHNJPY pair in my broker. When I compare the spreads and daily range of EURJPY, AUDJPY, and GBPJPY, I found that EURJPY provides the best mix of big daily range and reasonable spread. Indeed, there's Euro element in EURJPY but if we compare it to GBP, the risk is smaller. Meanwhile, the spreads and daily range in AUDJPY just too inferior. Thus the EURJPY.

3. Why do I feel confident to trade?
Because I realize there's nothing to fear. I used to feel fear of getting loss, not profit. But loss is an inherent probable outcome in any business. So why do I have to fear it? If fear is a risk, then all I have to do is to manage it by minimizing the risk as small as possible.

As of how...

4. How do I see the market?
I see the market as (probably the most) primitive means of exchange. It's so simple and direct. One exchange currency A for B, and at one point one exchange it again to hopefully get a profit. From that postulate, one can ask: then what is really exchanged there? What drives the exchange? I further posit that the one being exchanged and the drives are one (package) and the same: fear and greed. That forces us to see the market as the end of human most basic nature, an emotional entity. A change in price simply means that one side (buyer in bullish move, seller in bearish move) is more interested to trade than the other. A stalled movement means that buyer and seller has found a fair value, an equilibrium. What move the market is that for some reason buyer and seller disagree of the previous fair value, and they move to another one. An endless negotiating process.

5. How can I trade the market?
Based on the above perspective of the market, one need a logical framework to define a) the fair value area, b)tracking buyer & seller behaviour in the search of fair value.

My approach to trade the market is to track the waves of buying & selling pressure (the movement), their intensity, and their strength (how far is the movement). Fair value is defined as a level that is retested, or a price formation that is full and stable, with shapes like = (horizontal), > (concentrating at half point), < (fanning out from a focal point), etc in the chart. Because of it's nature as indicating fair value through consensus these area can be viewed as zero point (the origin of trend). Trend is simply the line of least resistance between 2 fair values.

To put it simply, all one has to do are:
1) Find fair value area
2) Ride it once the price has broken free
3) Keep on tracking buying and selling wave until it find another fair value.

*My understanding of market can be tracked to the way of dbPhoenix, Richard Wyckoff, Lance Beggs, Charles Dow, and Peter Steidlmayer, to name a few. I realize that my current approach and understanding is still immature, and I didn't give them justice by writing this article.

Observations

A pre-Brexit analysis

From D1 chart [Pic 1], we can see that the bear trend that is started since 13 Mar seems to meet its end on 23 Mar. However, the inability to break support cleanly (12032) begs a question. What happened these past 4 days? Is it a reversal, or just a retracement after all?

Recall the reversal at the end of Feb and beginning of Mar. There's a decisiveness once the market realize that we have a change in trend. But not now.

If we look closer in the current trend, there's some interesting phenomena [Pic 2]. First, it's clear that there's very little interest on level 12000 and above. It is also suggested that the movements on the level below 12000 are accompanied by drastic, increasing activity. Today's movement may provide a hint: we have bear wave with explosive volume, and there's a bull riposte with clearly decreasing activity. One therefore may suspect: is this an indication that traders (or, as Wyckoff may say, Composite Operator) are building their position in the lower limit of the channel? What is its implication in our preparation against Brexit announcement tomorrow?

I hypothesize that this is indeed an indication of traders preparing for bullish trend (accumulation phase as per Wyckoff, or the head & shoulder pattern as per Schabacker), which may proven true once the resistance at 12032 is broken. In this view, one has to be very careful if price break 11928, as it could be just a spring, a test to see if there's anymore seller.

We start the day of Brexit with price still in line with daily channel. Look closer to H1 and we'll find that price has broken the support for about 6 pips. Somewhat negligible. According to previous analysis traders are buying, so we'll also look for buying opportunity(es) somewhere near support line. The moment may come soon as we see the price has established & confirm the fair value at 11977. Now, how can we be sure that the trend has changed, i.e it's going up now? Quite simple. We have the last lower high at 11988. If price break through it, and then the next bear wave ends above (or at lest the same as) 11977, then we put a buy order.

Higher high confirmed. Now just wait for higher low confirmation, and I'll be in.

Price stalled, and then goes up. I see it as the end of bear wave. Higher low confirmed. The trend is officially bull.

It seems that I'm still impatient in waiting for the wave to end.

That's impatience alright. The important question is: will it make lower low? If it is, wait until the buyer show themselves.

Until this moment, there's nothing interesting happened in the market. Unless the last lower high is broken, there's nothing to do. The only exception is if there's sudden, big push to the level below 11965. At that moment, I will start to think of bearish possibility.

I see that buyer and seller have reached consensus. Notice the horizontal formation on renko. Is buyer coming now? It seems so. How strong though?

The bigger picture.

Frankly, I'm bored. I'll give commentary in major pairs market, just for fun. Caveat lector, it'll be a giant wall of pics.

1. USD Index. Last selling opportunity is on 14 Mar. Fair value is found around 145. Inablity to break through this will indicate that sellers are still dominating. Which means we're going against USD in the major pairs.
2. USDCAD. Price is currently in the upside of median bull channel, which is started since 22 Jul 2011. Price kinda stalled since May 2016 (wow, almost one year now). Since 14 Nov 2016 price enter a congestion and now make a nice, small bull wave, just upside of the median. The funny thing is, volume increased quite a bit here, which means buyer and seller are happy in this trading range. I'd say it's a retracement of bear trend (notice the lower low), so if price break the trend line, there is an opportunity to sell.
3. AUDUSD. There is a 3 years bear trend, but since last year price is in a neat congestion. This month buyer tried to test 7738, but it seems unseccessful. Volume is also decreasing, so it points to possibility of (the beginning of) bear wave. Please keep in mind that there's no lower high nor lower low. Be patient.
4. USDJPY. Price is still on bull channel since 2012. On Dec 2016 it bounce off the median, going down, and currently it reach 50% of the previous bull wave. If it test the level again (around 110) but it bounce instead, we're having a bull continuation.

The other pairs are boring, so I'll stop here.

Apparently really weak. It reached 11980 (give or take 10 pips) and then fall. Now about that selling possibility....

Huge volume, break TL. Prepare to get out

Wow.

...and stopped out at 11915. Today I really learned what it means to be patient. And let the profit run, as long as the trend is still on.

Prepare to buy after retracement, probably in 11910

That's all folks. A quote to end the day:

Yesterday price finally broke down, which provide us with a possibility of a larger bear channel [Pic1]. It is shown that price tried to explore the area upside of the median, but it bounced back. When we see closer to H1 [Pic2], we see that the previous bull wave only retrace to about 50% of yesterday's bear wave. It suggests that buying pressure is weak. The higher possibility then is to sell. Where should we look for a trade though?

Look at last week low at 11932. Price broke 30 pips from that level, went up, and now is testing it again. If price broke it again, we will immediately looking for a selling opportunity. If it's not, then we need to reasses the trend.