This attached chart of the EUR/USD currency pair for today, Jan 18th, shows what traders are up against. I see this all the time and it even happened in another pair today as well. What they do is to pick a time when a market is trending along quietly and smoothly, then they will smash it hard the opposite direction for an interval bar, then reverse it back to the original direction in a major accelerated move. They do this to shake out the shorts (in this case) with the large sudden move up, then move it really hard down.
If I had been home trading today I probably would have gotten out of my short position (if I was short) and initiated a new long position. I would then have been mentally committed to the upside with this breakout to the upside. Then when they take it back down big I would not believe it at first, and hang on to my long position way too long. Then what Mark Douglas calls "Forced Awareness" sets in, and there is a panic frenzy to sell out the long position. This selling just further feeds the downtrend and then when you realize how far and how fast the downtrend has gone, you initiate a new short position way past the entry point providing them with a perfect market to cover their shorts while taking their profits and laughing at us all the way to the bank.
It is a nifty racket they have and it is a trading hazard for us small retail traders. We just have to be aware and adjust.
If I had been home trading today I probably would have gotten out of my short position (if I was short) and initiated a new long position. I would then have been mentally committed to the upside with this breakout to the upside. Then when they take it back down big I would not believe it at first, and hang on to my long position way too long. Then what Mark Douglas calls "Forced Awareness" sets in, and there is a panic frenzy to sell out the long position. This selling just further feeds the downtrend and then when you realize how far and how fast the downtrend has gone, you initiate a new short position way past the entry point providing them with a perfect market to cover their shorts while taking their profits and laughing at us all the way to the bank.
It is a nifty racket they have and it is a trading hazard for us small retail traders. We just have to be aware and adjust.
Last edited:
