EUR/USD Reading Price Action with Analysis 6/24/10

Posted by Fetor 14 Comments

This is a good video showing how to read price action and market weakness or strength. Note the areas where trade opportunities occur. These are also turning points that will help you manage trades that you are already in, especially evaluating when to cut a losing trade in order to protect your capital.

If you have questions or comments please leave them in the space below.

pipranger

Thank you Fetor
Chrische42

As always Fetor: Plain and excellent insight into the markets!
Thanks!!!

P.S.
How many pairs are you currently trading? EUR/JPY as well?

http://www.forex4noobs.com/blogfet/ Fetor

Chrische42,
I monitor about 8 pairs or so. Sometimes I’ll add a pair because someone will ask about it. I do not always have positions open on every one. I look at the best set ups, but I also use pairs to help evaluate other pairs (correlations). I do have charts for e/j mainly because people ask about it quite often. I can do some analysis for e/j, but I tend to use e/u the most as it has been for many years the most liquid and most middle of the road pair to learn to trade.

Ray Barton

Hi Fetor, great video on price action, I see you in the chat room , Im under Kawerau
MiG

Hey Fetor,

It is always great to see one of your videos. I love it!

You are talking about different time frames, and the fact that in the long term if we really want to be profitable, we should trade the higher time frames.

Would you trade a Daily chart like you would trade a H1 chart?

What are the differences (of trading) between these 2 time frames that you would do differently? (i.e. larger stop loss or profit target, different support or resistance zones, etc…???)

Thanks a lot for your contribution and help very much appreciated.

Best wishes!

http://www.forex4noobs.com/blogfet/ Fetor

MiG,

Yes, I would trade the D1 chart the same way. You would have to make a few minor adjustments because of the time that is covered; the H1 gives you more information than D1, but the process is the same. One thing I would be a bit different on would be my aggresiveness toward D1 trend lines and S/R lines as opposed to H1 trend lines and S/R lines. The D1 frame is going to have more influence on the market (traders) because of the time factor. A trend line formed over a month is more influential than a trend line formed over 3 days. Your D1 chart, depending on your entry, may require a larger stop point, but if that is the case then you need to be lowering your lot size. As a side note, you should only be ever lowering your lot size anyway, never increasing it. The vast majority of the time when a trader is increasing lot size on a trade they are attempting to beat the market and that’s a bad sign. There is nothing wrong with lowering your lot size on a D1 entry, then if you get a nice run you can add on at an appropriate point to increase profits. As far as D1 is concerned you should only have maybe 3-5 S/R lines on your chart. The other lines will show up on H1. Don’t put lines on every little are of S/R that shows up on D1, look more for the ranges on D1 (highs and lows) and the significant areas of S/R. The intermittent S/R that shows up on D1 you will actually want to look at those on H1 and trade those as H1 lines.

-Fetor

Itafx

Hey Fetor,

How can we adapt to market changes? I have been trading very well for the last 6 months averaging 20 % profit monthly, but since May I see a very big different in the market and I’m not able to adapt to the change. I keep using the same principle of my strategy but now I see it not working.

Thanks!!

http://www.forex4noobs.com/blogfet/ Fetor

Itafx,

Would you be able to describe for me what you have been using to trade and the method/principle elements of your approach? If you don’t want to share this publicly then email me at fetorforex@gmail.com.

Those are excellent monthly returns.

-Fetor

Mugged

Thanks Fet…

as always your analysis brings me to tears.. beautiful

-K
Timebandit

Hi Fetor
As usual lots of food for thought. You probably don’t know this but these vidoes of yours have definatly helped me turn my trading around.
Many thanks
Phill

http://www.forex4noobs.com/blogfet/ Fetor

Timebandit (Phill)

That’s great to hear that you are turning a corner. Keep at it. Glad to be of help.

-Fetor

janson

Hi Fetor,

great video as usual. Your blog and http://www.nobrainertrades.com/ are my favorite sites I use for education in naked trading.
I’ve got a couple of question if you don’t mind. For the short trade off the daily trendline, where would have been your initial stop loss? I think above resistance at 1.2410 would have been a reasonable place.

Let’s assume that the daily trendline got broken by a full bullish candle. Usually there are three options how to exit the trade then:
1) get out immediately at the close of the breakout candle
2) wait for a retracement back to the breakout level to get out at a better price
3) trust you SL and observe further price action

I know there is no general rule and it depends on the specific setup. But maybe you have some guidelines how to handle positions running against you.

Thank you!!

Janson

http://www.forex4noobs.com/blogfet/ Fetor

Janson,

If you get a D1 close on a trend break then yes you’ll want to monitor getting out, but what you should be able to do is monitor the price action on an H1 and even an M5 chart. The H1 close would be more significant than an M5 close below the trend line, but it at least gives you an opportunity to watch the action and possibly cut loose the losing position before the D1 close thus possibly saving some capital in the case that price does run (often you’ll have time though to evaluate as breaks of major areas are going to cause trepidation in traders). For example if you look at EUR/USD from this past week on June 28 at 1pm New York time you’ll see a break low of a D1 line that formed. I was in a long position that I ended up exiting because of the H1 action (congestion) that formed below. It didn’t take but a few candles for me to see that I was in trouble and needed to exit. I then took a short to make up my loss and moved with the action, but the decision to close was based on how the price was reacting to that area where the market was setting a “price marker”. So, to answer your question, any of those options are valid depending on previous price action, momentum, time of the day or week, etc.; it’s discretionary trading, so we look at our options and then make the best decision we can based on analysis of the market, price, ect. Let me know if you have further questions or if this isn’t clear.

-Fetor

janson

Hi Fetor,

thanks for your answer.
Acutally I meant a trendline break on H1 but your example made it clear to me.

You addressed important points besides price action and momentum: time of the day or week.
Could you please explain how you adapt timing to your trading decisions? You can read a lot about all kinds of technical analysis, but less on WHEN to trade.

In my trading I generally like to trade bounces from key levels after US session and during asian session. It seems that there is a higher probability of bounces during times of low volume than during London and NY session. But that’s all I know about the different sessions. And I know nothing about the differences intraweek.

Thank you for help!

Janson