***Strong belief is needed when you start shorting or going against the strong test and when you see such strong behavior at first site and reaction on second then it totally become necessary for you to immediate react to the failures. I would cover my position now at 1313 area *** Still the imbalance could be here but I am not too much concerned with future price as I always prefer to trade the recent price action and what chart and "Context" telling me to do.
*** What would you prefer ? Long term trading or short term trading as it is not really matter what you target because its approach that matters a lot and the reason is whatever you prefer should be profitable for you. State of mind and performance pressure really let you put in lot of stress and you keep changing your mind again and again, But price will react the same way which ever method your prefer.
***Many of you are familiar with concepts of «overbought» and «oversold» market. Conventionally, if price is going up and momentum is slowing down, we see signs of overbought market, and, the opposite – when price is going down and momentum is slowing down, we see oversold market.***
Reason I am pointing out these facts because it is the way we always use to approach the market and such overbought/oversold situation occurs only when market is dominated by short-term traders. But let’s first get familiar with concept of domination. What doest it mean, that market is dominated by short-term traders? It does not mean that nobody is there except short-term traders, it means that they are the driving force for the market.
*** By the way, short-term trader does not necessarily mean lack of money on deposit. It only means that horizon of a trader is relatively small. In most cases, it’s short term traders who are responsible for initiative and liquidation breaks. ***
If you we see movement that is going to be highly volatile and starting from inside of the trading range, it’s probably a «cascading effect» - something that is created by «fear of missing out» - many traders are chasing this movement and will lead to fast auction, raising prices higher and higher. In auction market theory it’s called "initiative break", it means that something is happening very quickly, with significant expansion in volatility, and maybe – volumes. But volumes can be not interpreted easily in this case. When volume is increasing (or decreasing) inside of the trading range, this information can be misleading, because there are too many types of traders participating inside of the trading range – from algos to scalpers, and increased volume can be a result of those guys’ over-trading
*** What about "liquidation break"? This is the opposite to "initiative break". It occurs when traders who have been involved in the action (during initiative break) are closing their positions. Usually, volatility is also increasing, traders are scared due to some news announcement or they simply put their stops below similar levels again causing cascading effect. Really, there’s nothing new under the moon – traders often act like a herd, and they rarely try to find their own particular niche and instead do what is comfortable and conventional – say, buying on the moving market and selling on the falling market.
***Now, what if market makes quick break from outside of the range of the day? It is called «responsive break». More often than not, responsive breaks represent activity of other timeframe traders who are building their positions using high prices (of course, short positions). We should take into consideration that other timeframe traders are not too urgent – they don’t want to push price down here and now, they understand that market has opportunity to go down in medium term time perspective and they want to be in this movement, but they are interested to accumulate inventory before the rally, that’s why they are acting upon a good price, but not expecting to get good timing for their trades.
***When we see an opportunity to trade, We look to see the logic behind it whether it is an intraday or Swing Trading. The best point is that it should be very low risk opportunity and If that is with the trend then it should offer you another chance to enter with even tighter stops if the breakouts or stops are taken out by few pips.
*** I have posted above the eur/jpy chart and when you see this chart it is trading with repitative patterns, breakouts to the upside and strong rally to the downside and range and then breakout
***When we see pattern like this we think of pattern getting repeat itself again, but most of the cases it did the opposite, so I would suggest you watch the chart closely and see if you can find some "Logic" behind this trade, range breakout was to the upside and follow-through was very strong at the first attempt, but it could do the complete opposite even with strong momentum breakout and the only difference is that we have seen a new low this time, and two to three attempts have been faded out.
***So, Watch the chart properly and don't be in any rush to trade that opportunity as there should be logic behind your trading and you just want to trade good with the trend opportunities and one could be here very soon !
**In this post I would like to put more light on what is "context" which tells you what market is trying to do whether it has liquidated before or trying to accumulate further for next push to test the high or Low . ** It is necessary for a forex or currency trader to look the overall picture for intraday trading as it will make thing easier to get a long term success. The Chart I have posted here tells you what you should be looking for. **In the first attempt market trade location was lower low of correction which brought the spike and when it failed the market was in range for few hours and then immediate spike trap the new traders who think that "Candlestick Patterns" are best to trade patterns in any market. ** Market trap them and that is liquidation and see where market stops. Traders who have entered on pattern start recovering on next candle which was a large momentum bar with pattern and this suits best because market already was at new low and downtrend was confirmed. ** There are few examples I would like to post here today which tells you how important it is to know where the trade location situated and what are the reasons that you should enter a trade because market often gives you answers before making a next move otherwise there are no strong evidence that who is pushing the market in a range possible "Weak Holders".
**As I told everybody earlier that trading has three phases Culmination, young trend and mature trend and Australian dollar might be a start of culmination process as background telling you that everything is clear for further gains.. ** Perhaps it could be too early too speak, but only time will tell and If my assumption is true 0.9390 could protect every rally or you can enter after test and strong rejection candles with momentum could be right way to approach.
**Amongst all the majors Only OZ is the one pair which path is clear and fundamentals are also supporting. * Would update the next analysis soon and everything is mentioned on the chart and you can ask if any question in your mind.
I do mentioned the reason few days ago that according to this chart, Price is about to reverse,because when we see enough reasons that liquidation does not have follow through which means Imbalance ( I have discussed it earlier on the blog) has disappeared and market has break the "floor".
Even when there was effort of buying with long wick candles, it stopped on next candle with very small effort and reattempt to continue was even stronger. This is the reason that newbie traders like to buy on pullbacks, with engulfing patterns which never arrives and they left stranded.
As I have told you earlier when after a strong fall market tend to accumulate inside a bracket an start reacting to hot spot areas As I Mentioned in the Chart and when It react to intermediate where buyers and sellers have huge stop to dealt with, They probably decide to stay out and market lacking liquidation and value shifts higher to find the liquidation and finally accepting higher prices.
Then there was liquidation break at the top a strong pin bar, When background is as solid as this one, then we always consider entering at strong momentum areas and result was strong engulfing with strong rewards.
It could result in exhaustion but we have to wait and see if momentum fades then it could possible result in an mature trend, but its too early too speak. I will try and update the chart if there is any changes is seen, to keep you all updated.
