Been working 8-4's this week so haven't been able to keep a close eye on the markets, however I spotted a nice trade first thing this morning - I left for work a little early so I could keep a close eye on the London open and this trade presented itself.
We were expecting the 3rd push up on the EU today in line with Cycle and this trade hit the ADR low before giving a pin bar confirmation on the 3rd candle. The stop run was well presented by being well under the 200EMA.
It does go to show how important it is to believe in one strategy and to stick to it religiously and also how vitally important it is not to second guess the market. We deal in probabilities here which leads to the profit in the end.
SCHOOL of Pips
There was some very investing comments from Vincent and Pip in the room today about PA and Volume, a summary of which I have posted below.
Pip firstly marked up a chart of what he felt was happening on the EU - notice his assumption of a 3rd push up.
Then he started talking about expected PA with the EU - notice these were the comments around point 1 on the chart - he wasn't talking in retrospect..
(1) note the ultra high volume on that bar, lots of contracts exchanging
SM are defiantly participating in that up move and most likely selling in it
they are off loading their buy contracts.
(2) now we will see a small retracement due to retailers taking profit
SM will gladly buy those contracts from them to sell again at higher prices
same old tricks
one might ask, how do you know if it is a real breakout?
the answer is summarized in two points
(3) the bar closed above the range of the channel taking out previous highs that was tested multiple times (which means it was weakened)
(4) the ultra high volume on the previous bearish bar with pin to the low coupled with the ultra high volume on the last bar. The first indicated SM buying in prep for the up move while the second SM selling into the up move, which means more up in the short term
now look at the current bar with 5 min left and high volume (1 +1) with all this high volume price didn't really move anywhere which means SM's are eating up all the contracts (i.e. fading the herd) and when that happens, you get trend continuation
SM are always both buying and selling at different levels, the question is, when are they doing one more than the other earlier in the day they bought more than they sold, which would make you think they will go up later now that they have gone up we see more ultra high volume, which means either they are selling or more buying based on price action and the DTFL cycle count one would be lead to believe that this high volume is SM activity releasing profit into the up move as they are selling into the move they are picking up buy contracts as well for more up, but their net activity is still selling in the up move I know it sounds confusing but if you think about how the SM work it will make all sense. I struggled with it at first but it becomes clearer as you practice that trail of thought more and more..
now, just for the record; you don't need to learn volume analysis just yet if you are new or struggling with basic DTFL knowledge i say this because learning volume analysis will not help you if you are struggling with basic DTFL knowledge and SM basic thinking process once you have solid understanding of how SM operate, by learning DTFL methodology, volume analysis seals the deal and provides understanding of the underlying forces
Pip is a Forex Oracle - :)
Speaking of Oracle's - Vincent looks a little more at Volume than PA though he always comes up with the same analysis as Pip... some of Vincent's comments today ref Volume.
guys, volume is still high now so don't go long blindly on price, we want to see price stall on low volume, it is not your entry price that matters but the fact that the SM activity is reversing even though Pip said 1.3295 and I said 1.3290 as possible long, allow price to test and retest, see how far it pushes, each time it tests lower, look for reducing volume, once a level is reached where there is no volume, price will "spring" like a jack in the box, that is when we should look to get in, no point being price-conscious and getting stopped out if they hunt deeper but better to take a trade and find SM has no business going back down to that level again (in this case) it usually takes about an hour or so for this to happen, no hurry, just patience to watch how the price-vol develops because you may or may not have a DTFL setup.
TRADING BOOK UPDATE
AFTER 6 TRADES I AM +7R - MY RISK IS £100 PER TRADE
SO 7xR = £700 PROFIT SINCE THE START OF THE MONTH.
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