EUR/USD 05.28.10 Part 2

Posted by Fetor 8 Comments

This is part 2 from the previous blog post. Though these are separate trades, I recommend watching Part 1 first because of the analysis I do in the first video that then leads to the second trade which is covered in this video.

This was a simple trade right off the line on a D1 chart.

Any comments or questions please leave them in the space below.

Rob J

Hey Fetor, nice trading, this video answered my second question, I was going to ask about taking a short off of resistance at 1.2438. I notice you trade EUR/USD alot from your Videos, do you favor this pair. I’m not able to trade this pair with much success, I know it is my analysis, so I’m working to improve this issue, but I seem to be better at analyzing GBP/JPY. Any suggestions would be fantastic!!!!!

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

RobJ,

I have about 10 pairs that I watch, but I like to use the Euro for instruction because it tends to be a great middle of the road pair and it’s the most liquid pair in the currency market so normally it provides smooth movement with moderate volatility. These days though we’ve seen some of the most erratic EUR/USD behavior that I’ve ever seen, but that is everywhere in the market. You know something is wacky when the EUR/USD ATR is giving GBP/JPY a run for it’s money. But what I’m showing here with the Euro are the same methods and technical analysis I do with any other currency pair. You can also apply these methods to futures, commodities, and other markets. But, I do trade other pairs, for example, I had two trades with USD/CHF this week as well. GBP/JPY can be nice for realizing profits quickly because normally when it starts a move it really moves, but this is also a double edged sword.

http://www.musclemass.com.au Karim

Nice Fetor. Thanks for the videos once again. Ive found it hard to trade the last couple of weeks with all the volatility.
Dod

Great video Fetor! Cant wait for the next video.
janson

Thanks for this video, Fetor!

I just wonder what made you believe the market could turn. In the first video you said that the sentiment was long and only a fool would go short now.

I’ve got another question about the initial SL on that trade. When I look at my charts I would have found it hard to place a SL at a reasonable level since there was no recent swing high in the near. So I guess the 50 pips were just a number you thought would work out.
Wouldn’t it be better to watch price at the resistance level and just go short if there are signs of weakness in price? Then you probably would be able to use a smaller SL by just putting it above the last candles.

That’s what was going through my mind when I saw your video. It would be nice to read what you think about.

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

Janson,

I probably shouldn’t have said “only a fool would go short now” as that is maybe a bit strong, considering I’ve been the fool on many occasion. I was referring to the H1 buying sentiment and the overall demand in the market (price action) that was bringing in more and more buyers. My stop loss would have been behind the very steep trend line on H1 and so would have only been about a 30 pip risk which was in line with what we want to maintain, at least 1:1, but preferably 1:2. When you ask that you wondered what made me believe the market could turn, I’m not sure exactly to what you are referring, but I’m assuming it is where I thought it would turn at 1.2435. In the second video I took a short at that turning point where buyers drove the price to the D1 trend line. Price turned about 1.2451 and my entry on the trade was 1.2442 I believe. The first trade I exited because price was running right into D1 trend line resistance and that higher frame would have more influence over traders. So I exited with the 50 because that is where buyers would start taking profits (which they did). Then in the second video I take the short with the sellers and ride the price in the other direction with the D1 trend. So, first trade was with H1 trend (against D1 trend), and second was a with trend move from D1.

You asked if it would be better to watch the price at the resistance level and then enter. Yes, at times that is appropriate, but not always. In this case I was willing to take a blind entry because the market had already set the price there and buyers would have to really be in force to drive the price higher and sustain buying. Since trading is based on probabilities, they were in my favor in this case because of the technical realities from D1. Those technical aspects would put exiting buyers and new sellers in agreement and thus significant price rejection there, which we saw. Putting the stop loss above the last candles is not usually my first choice for stop placement. I much rather look for a S/R price level or a trend line rather than a previous high/low of the last candle. That is my preference. Other traders may say that it is their common practice to use previous candle highs/lows. It’s a matter of preference and money management/risk management. As far as stop placement on the second trade (the short position taken off D1 resistance) I put a distance of about 40 pips, which for the most part was an arbitrary pip amount constrained only by risk. The point was to give the price some breathing room before buyers gave up and sellers came in. Since the momentum was strong on the buy side running into resistance the “breathing room” was to allow for any momentum that might carry the price a bit further than 1.2435. Points where prices turn don’t always bounce exactly off the line because over time people are getting “on the bus and off the bus” at different times. Just look at an level of S/R, not every price turn bounces exactly off of the line, but will usually be within a small range.

I hope this answers your questions.

janson

Thank you for your detailed answer!
kibed83

Hi fetor,
Much appreciated… you worth more than rubies ,your price action analysis simply trasheses indicators that only lag the market behind …..i know it take time & much determination to master this Art….am following suit set by step..You have already answered my questions on your detailed post above..am ready for the next video.