As we know, trading a good forex strategy is about find the strategy that fits you, much like a tailored suit on a person. One of the biggest things you have to figure out, is how to ask the right questions to suit your need. For example, what kind of trader am I? A very aggressive one. How early do I enter, and do I wait for confirmation? As early as possible, and no. Just these two questions alone have created new questions.
Trading this aggressive means that generally speaking, candlesticks are useless. Since you will be trading as the candle is forming versus letting it finish, the formations as a whole mean nothing to you. So my new questions now is not “what candles did I see”, but instead “why did this form, and what is the market telling me?”
This question is especially important when you deal with the theory of market manipulation, the big sharks, and the prediction of the big swings. Now if you know “the market will manipulate and hit this target price to weed out the small fish before the true move occurs” and you know it with a certain amount of accuracy, its much like insider information that you can trade on with a HUGE reward attached to it. So answering the question of “how can I tell this is the case?” is the million dollar question. These type of false swing moves are ALWAYS accompanied by a huge follow-up move, what I call the “true direction”, so being able to spot it is the difference between entering in the purple, and in the red (in this example a 100+ difference in entry price).
So that said, the true move is opposite of what the market is actually moving (in the example, the true move is down). This means if you wanted to enter in the purple, you will be selling against a big black candle (which is scary as hell if you don’t know market manipulation is happening).
So lets dive into my specific example further, by me providing some extra details. At the time of the big candle, you have USD unemployment claims (slightly better than previous, worse than expected), and ECB conference (unknown content). You would be looking for hawkish/dovish comments from the ECB AND the USD. On top of that, in terms of correlative play, while GU tests its previous box which is found inside a bearish head and shoulders, EUR/USD is testing the top of its most recent high (medium strength).
You see price hit 1.5680 (institutional number) on GPB/USD, and 1.24 on EUR/USD (handle), which is a huge move ~60 pips. The unemployment data was not impressive enough to warrant that big of a move alone, so the big question now is, “why?”. Then its “why is there a strong rejection here?”
If you ask the right question, and come to the answer of “market manipulation”, then that’s when you sell.
I know I havn’t been posting since June, but I have been busy dealing with some parts of my life, and will now be enrolling back into school again. My posts will be more consistent once my life becomes more consistent 🙂