What a day at the markets, guys! I really like what I see today. Finally, we become competent . As I write this trading plan, many traders who are currently biting their nails, who have been caught on the wrong side of the market, are stuck in losing their jobs. Other traders have already been stopped due to losing positions and so we can continue. On the other side of the coin, some guys want left, right and center!
So how do we know that many traders are caught today? Keep reading and you will learn something interesting about the course of the order and what happens when we see the creation of certain types of . Before we get into all these details, let’s look at the USD / JPY daily chart:
USD / JPY – Watch out for the bears!
The US dollar has benefited greatly Today’s speech, but this was especially evident in the USD / JPY exchange rate.
Check out this USD / JPY daily chart. Here we see a significant shift in USD / JPY techniques. Not only did we see a fake break below (or ) a few days ago, but the pair also managed to close above their 20-day exponential yesterday and today. Whenever we see a pair close to this moving average, we need to be especially careful when trading it on the short side.
To go back to the merchants who are currently sitting on the edge of their seats – when we look at certain forms of candlesticks, we can draw valuable conclusions about what actually happened during their formation. The experienced eye will immediately know what the order flow was and what could happen next as a result of that order flow. Take today’s candle at USD / JPY as an example. Here is the same chart with the last three magnified candles:
Let’s look first at the second last candle on this chart. It has a relatively large upper fuse that, along with its position on the map, lured sellers to re-enter the market, thinking the bulls had been defeated. This, and perhaps some other factors, have shifted the price to break below the lowest level of this candle.
When the price moved below the 20-EMA, sellers ’confidence increased and additional sellers entered the market. Later in the day, the bear’s momentum was abruptly interrupted by aggressive buying pressure. This caught many bear traders unprepared and on the wrong side of the market. As the price progressed more and more, more and more traders were forced to close their short positions which only added more fuel to the buying pressure. Traders who sold close to the minus of today’s candles are either already stopped or sticking to losing positions. Today’s candle has captured many bear players in the market who thought they had control of this market.
It is a common occurrence to take a day like today. If we know that, we can set ourselves up to take advantage of it. But where would we go and how would we manage our ?
The first way to trade this setting would be to trade the top side of today’s candle . See the following table:
This setting has the advantage of using a certificate. If we do not see further growth of this exchange rate, our trade will not be launched. The downside is that we use a large , and buying at a relatively high price. Here the goal is twice the stop loss.
Another way to trade this is to wait for today’s bull candle to enter until the time of your entry. See the following table:
Setting a order at 50% candle retraction, as in the chart above, will allow you to use a much firmer stop loss and you could achieve a better risk-reward ratio. In this setting, the target is three times the stop loss distance. Note that although the target is three times the stop loss distance, that distance in the shorter ones is much shorter than in the first example where the target is only twice the stop loss distance. This makes the second trade setting with stronger stop losses and a better entry price very attractive, although it is more risky due to a firm stop and a lack of confirmation of a bullish breakout. If you use this retracement strategy, you also have a chance that the price will jump higher without you launching a purchase order.
Some traders like to combine these two and divide their original position into two parts to make sure they are activated in at least one of the settings.
This type of sword-like price action is not only seen on USD / JPY today. Many other instruments pulled violent moves in one direction, only to turn in the opposite direction after a while. We know that Fed Chairman Janet Yellen’s speech caused much of this cat. We also saw this in the stock markets, although it was perhaps to a lesser extent than in USD / JPY. Let’s look at the S&P 500:
S&P 500 – This is amazing!
Do yourself a favor and check out the S&P 500 daily chart. If you’ve ever wondered what a strong uptrend looks like, check out S&P!
The price action in the blue circle is part of the effect of Janet Yellen’s speech. The bulls eventually beat the bears, resulting in a magnificent bounce more.
Remember we have another speech by this lady tomorrow at 15:00 GMT. We also have employee numbers in the UK at 09:30 GMT and US CPI and retail numbers at 13:30 GMT. Prepare for more volatility!
Good luck guys, I hope you have a profitable day tomorrow!