Potential breakout on the EUR/USD?

xelite777

xelite777

This is a textbook chart formation, first we have a clear downtrend (1h chart) and then the price moves sideways inside a nice channel, against the main trend.

This is usually a rather bearish chart pattern but watch out, the breakout on the EUR/USD could go either way!

Good luck.

(As always, trade at your own risk)
 

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Quote from pfranz:

Good luck.I'd have taken the opposite side, given recent QE increase announcement.
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Thanks.

Any idea what caused that sudden 50 pip move?

Market makers playing games during the Asian session, perhaps? :cool:
 
Quote from xelite777:

Any idea what caused that sudden 50 pip move?
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Yes. I've been expecting it for the last two days, and posted about it in advance on ET. That it occurred in a low liquidity environment during the Asian session is not surprising or unexpected...quite the opposite actually,

http://www.elitetrader.com/vb/showthread.php?s=&postid=3901954#post3901954
http://www.elitetrader.com/vb/showthread.php?s=&postid=3903104#post3903104

My only purpose in posting on this thread is to get people to think differently about such statements as "watch out, the breakout on the EUR/USD could go either way!". The fact that some traders are able to anticipate such moves (generally the upwards movement towards 1.36) and the manner in which the moves take place (this sudden spike) suggests that there is more order to the markets than meets the eye, and typically there is only one direction that a breakout is highly likely to come given how various participants are positioned.

Those who are trading directionally should be interested in accurate prediction of market movement for the timeline they are trading...whether this be for the next 1 minute, 15 minutes, or day. Therefore comments which reduce to "the market could go up, but could also go down" belong in the financial media and are counterproductive for those wishing to learn to trade proficiently.

The context in which this move was being discussed is times when so called "mean reversion" breaks down - and a move starts to extend with shallow or no pullbacks, and there is a panic as those on the wrong side must dump under duress. garachen had commented that it can be profitable to trade in the direction of the panic - if you anticipate it soon enough - and exit as soon as it is over.
 
Quote from xelite777:

Shorting EUR/USD at 1.3565
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You're not likely to get any help on that during the Asian session (where is the selling going to come from?), and come the European open it will most likely move against you again. You wrote earlier that a breakout could come either way...well it came upside...so why are you going short? Step back from that, does that make sense if you analyse the market in terms of breakouts? In fact, as a breakout trader, wouldn't it be better to take the small profit while you still have it, reverse long (you've bought the breakout), with a stop somewhere like 1.35, and target 1.36 to take partial profits, and see if the market carries on above that tomorrow? At least then you're trading a breakout strategy (and taking advantage of others who will want and need to be buyers tomorrow).

The condition described in the other thread is still in force, and further panicky type moves, when European traders wake up to see the market against them, and perhaps even into the American session tomorrow, would not be out of place here. Dangerous indeed for shorts.

(I'm not advocating breakouts as a trading strategy, nor am I advocating trading when you clearly do not understand the cycle which is in play - and I hope these trades aren't live - just pointing out that the decision you've posted doesn't seem to be consistent with your prior analysis)

You've guessed at traders playing games, so this suggests a motive. What is the motive then? Why are they playing the game, what does it achieve, and what conditions are in force which allow "them" to play in the first place? And if you don't understand any of this, and need to ask on ET what caused a move, why are you taking a position against it in the first place?

Massive opportunity for aspiring traders to learn something here by asking the right questions and thinking logically.
 
Agree on possibility of short breakdown. But the current price action lends itself to tests of resistance before the break. So I would be prepared for some pain but I wouldn't go long since to me the risk vs reward is not good enough. You can make 50 pips on the up side maybe but ur risk is a sudden retest of 1.3300.
 
Quote from Blotto:

Therefore comments which reduce to "the market could go up, but could also go down" belong in the financial media and are counterproductive for those wishing to learn to trade proficiently.
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Easy now Blotto, I do appreciate your comments but your tone is a bit condescending.

The chart pattern described above is usually bearish, but I also want the traders to be ready for any possible scenario, so they can limit their losses, if any, if the breakout goes the other way.

That said, why don't you post your opinions (trades) in real time? I am sure ET traders could benefit from your seemingly vast experience and expertise.
 
Quote from bhristov:

Agree on possibility of short breakdown.
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Is everyone just talking their book here? Is it a coincidence that certain categories of trader keep calling short in this market? What are they governed by? What information is leading them to make these decisions?

Quote from bhristov:I wouldn't go long since to me the risk vs reward is not good enough. You can make 50 pips on the up side maybe but ur risk is a sudden retest of 1.3300.
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No, that is nowhere near your risk. Unless you're trading a few hundred million, you can get out of a position in EUR/USD most any time you want during the week, in any size, for the inside market +/- 5 ticks. If you don't want to hold a long all the way down to 1.33, then you don't have to.

You refer to risk vs reward, and making 50 pips on the upside. Well the quotes are currently around 1.3550. So you could buy and put a stop at 1.35 and a limit at 1.36. Equal risk:reward. Except one of these has 80% chance of being hit first. So your true odds aren't 50/50 are they? And the expectation of the trade is massively positive. If you got the genuine opportunity to buy a dollar for 63 cents are you saying you wouldn't take it? Risking 50 pips to make 50 pips if the market has 80% of going to target before reaching your stop is the same thing.

Would you advise not entering short since the low at 1.33 because his risk is a sudden retest of 1.38? If not why not?
 
Quote from xelite777:

Easy now Blotto, I do appreciate your comments but your tone is a bit condescending.

The chart pattern described above is usually bearish, but I also want the traders to be ready for any possible scenario, so they can limit their losses, if any, if the breakout goes the other way.

That said, why don't you post your opinions (trades) in real time? I am sure ET traders could benefit from your seemingly vast experience and expertise.
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I stand by what I said. I know from my study that it is extremely unlikely that we would get a proper downside breakout at this point in the market. So telling traders that we could have a breakout either way isn't helpful. Sure, everyone needs to have a plan to limit their losses, but lets face facts that the majority of losses are going to be caused by trading in the wrong direction, based on attempting to apply such abstract concepts as "trend" without understanding how markets work.

The point is that there was only one high probability directional breakout, and it came opposite to the direction you were calling. Whats more, the information to give this conclusion was available in advance of your even making the short call. So that casts some doubt on your assertion that this so called pattern is bearish.

So your drawing turned out to be incorrect on this occasion. Fair enough. Nothing is 100% in the markets. Lets see what you can learn from this to improve your trading odds in the future. Why don't you draw out and post this condition the next 20 times you see it occur, in real time before the outcome is known? Then we can see whether this is a reliable bearish pattern as you attest.

It is unfortunate that you think my tone is condescending...the motive was to help others by prompting them to understand why they would be wanting to call shorts in a rising market. There is opportunity in identifying when a large proportion of traders have done this, as you can profitably trade against them.

The only reason I have time to be discussing trading and posting on ET...rather than getting on with it...is because I'm suffering from an episode of a recurring illness and therefore cannot trade at the moment. Trying to help some folks out alleviates some loneliness and boredom, and distracts from suffering. But I guess it isn't wanted so I'll fuck off. I'm quite sure that with your many hundreds of posts per month that you know so much more than I do about markets, so my input isn't needed. We can all see how your short turned out tomorrow. Remember to tell us where and when you exit, so we can see how good your "textbook patterns" are.

I'm training up a guy to trade for me when I can't, we discussed Euro earlier today, and after the US close discussed the likely spike during the Asian session. And it might interest you to know that I said "long 1.3490 hold until 1.36" at 06:55 EST today to an ET member who is well known here as a self made multi millionaire and "big baller". I decide who I do live / calls with and it sure as hell ain't gonna be folks who are rude and disrespectful.
 
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