What a day at the markets, guys! I really like what I see today. We are finally fair volatility . As I write this trading plan, there are many traders who are just biting their fingernails who are caught on the wrong side of the market and get stuck in trades. Other traders have already been stopped from their losing positions and so we can continue. On the other side of the coin, some guys harvested pipes left, right and center!
So how do we know that many traders have been caught today? Read on and find out something interesting about the ordering process and what happens when we see certain types of candlesticks . Before we go into all these details, let’s look at the daily chart of USD / JPY:
USD / JPY – Watch out for the bears!
The US dollar benefited greatly from Janet Yellen Mai’s speech, but this was particularly evident in the USD / JPY exchange rate.
Check out the daily chart for USD / JPY. Here we can see a remarkable shift in the USD / JPY technique. Not only did we see a false fracture lower (or false falsification ), but the pair also managed to close above its 20-day exponent moving average yesterday and today. Whenever we see a pair closely above this moving average, we need to pay special attention to trading it on the short side.
Going back to the traders who are just sitting on the edge of their seats – when we look at certain candlestick figures, we can draw valuable conclusions about what actually happened during their formation. The trained eye will immediately know what the ordering process was like and what might happen next as a result of the order flow. Let’s use today’s USD / JPY candle as an example. Here is the same diagram with the magnification of the last three candles:
First, let’s take a look at the second last candle on the chart. There is a relatively large top wick that, along with being placed on the list, enticed sellers to return to the market, thinking the bulls were defeated. This, and perhaps some other factors, moved the price to fall below the lowest level of this candle.
When the price fell below 20-EMA, sellers ’confidence increased and more sellers entered the market. Later in the day, the bear’s momentum was suddenly interrupted by aggressive customer pressure. This caught many bear traders and was on the wrong side of the market. As the price progressed, more and more short traders were forced to close their short positions, which only gave more and more fuel to buyer pressure. Traders who have sold near the low point of today’s candle have either been shut down or are in the process of losing positions. Today’s candle has trapped many bear market players who believed they were in control of this market.
It is a common phenomenon that after bullish tracking we can see bullish absorbs day like today. If we know this, we can position ourselves to take advantage. But where would we go and how would we handle our business at risk ?
The advantage of this setting is that it uses confirmation. If we do not see a further rise in this exchange rate, our trade will not trigger. The downside is that we use a lot to stop losses and buy at relatively high prices. Here the target is twice the size of the stop loss.
Another way to trade is to wait for today’s bullish absorbing candle to be retracted to time your entry. See the following table:
USD / JPY napi diagram
If you place a buy limit order for a 50% candle replacement than in the figure above, this will allow you to apply a much tighter stop loss and 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, this target distance in the hip is much shorter than in the first example where the target is only twice the stop loss distance. This makes the second trading setting more attractive with tighter stop loss and better entry price, although more risky due to the lack of confirmation of tight stop and bullish breakout. If you use this reinstatement strategy, there is also a chance that the price will jump higher without triggering your purchase order.
Some traders like to combine these two trading strategies and divide their original position into two parts to make sure that at least one of the settings starts.
Whipsaw-like exchange rates of this type today were not limited to USD / JPY. Many other instruments made violent movements in one direction, only after a while they turned in the opposite direction. We know that the speech by Janet Yellen, president of the Fed, caused much of this whipsaw. We have also seen this in stock markets, although perhaps to a lesser extent than in the case of USD / JPY. Let’s look at the St & P 500:
S&P 500 – It’s incredible!
S&P 500 Óradiagram
Do yourself a favor and check out the daily chart of the S & P 500. If you’ve ever wondered what a strong uptrend looks like, check out the St & P!
Pricing in the Blue Circle is the effect of Janet Yellen’s speech. The bears were eventually beaten by the bulls, resulting in a wonderful rebound.
Remember that tomorrow, at 15:00 GMT, this lady will give another speech. In addition, we have UK employment numbers at 09:30 GMT and US CPI and retail sales numbers at 13:30. Grab yourself for more volatility!