Is this fresh EURUSD low a trade trigger? How do we target the blue boxes on your charts?
Hey Username,
good question! I am going to take the opportunity to expose one of the issues I had a lot of trouble overcomming.
Basically the majority of those who set out to trade get focused on "the entry". It's a mentality like "show me how to enter and I'll replicate it and make tons of money".
Unfortunately the entry is only the tip of the iceberg. The entry is the "timing" part of trading. It is important but more important than the actual method used to enter is the level/zone (where as opposed to how). It's all about location and risk:reward.
I had a heck of a time overcomming this issue. I was so concentrated on the techniques available to "time" the market that I completely ignored the main reason why some entries worked and some diddn't. Jesse Livermore would call it "underlying conditions"...the guys from orderflowtrading call it "sentiment". The way I see it, you have to stack up a few things before you can actually look for an entry:
1) you need evident sentiment + evident trend showing you that there is participation/interest. It's useless to try and tackle the market each and every day. Simply because there isn't always decent participation from the big players. And as an orderflow trader I am very aware that I need to piggyback on other participant's orders and i need to be good at identifying the reasons that might make them participate and the zones/levels they might be interested in taking on. This is the background preparation.
2) then there's the timing part. I like to see the market start to work for me, as opposed to against me. Many traders like touch trades or pure fading..i like to have some sort of confirmation. Price action is a direct reflection of the current market psychology so it's like asking the market "what do you think about this?" at key levels.
As a concrete example, let's look at the EurUsd.
1) We know that the recent stance of the ECB (basically saying that rate hikes are off the agenda, as inflation remains subdued and there may be need for some additional QE) is negative for the Euro. Then we have had some downbeat eco data. Then we have the more recent Russian/Ukraine debate with the passenger jet taken down. If the EU sanctions Russia, pressure will be on Europe as well. So underlying conditions are euro-negative. And this is reflected in the clear downwards trending motion.
2) Does this mean we can enter anywhere? Nope...timing is important because it allows you to stack some odds in your favour. Tight stops vs. large potential rewards; not entering at the (potental) end of a move; not entering when participation is light.
This week opened with some slight upwards momentum. The areas I spoke about here were 1.3560/70 and 1.3590 for potential offers to cap. Price diddn't even get there. It rose just above thursday/friday highs and then fell back down. There was rationale for an entry yesterday after seeing the highs get eaten up again. If you diddn't want to take that entry and wanted to wait for some more confirmation, this morning gave an easier opportunity after the break/hold of the overnight lows:
As you can see Username, I try to get onboard
before price starts to do business with these big levels (like last week's low) giving myself potential leeway in case the level reacts strongly and pushed price back up the ladder. I try to sell rallies in a downtrend and buy dips in an uptrend, around key levels where it makes sense to ask the market "what are you thinking?".
