Superior Trading Skills through Education

Range bound EURGBP Print
Written by Site admin   
Wednesday, 13 May 2020 10:00

Stuck in a loop &

Range bound

Dear Trader and Clickevents reader

As we all await release from lockdown, our enforced daily routines are tending to merge into a Groundhog Day world.

Socialising has become distancing, with WhatsApp the vital connection to our extended families. We've adjusted to taking virtual afternoon tea and barbecues with friends on Zoom and have amassed so many films and series to watch on DVDs and downloads we are starting to hope lockdown doesn't end too soon!

It's been quite a lesson in adjusting to changing circumstances and that should be no great difficulty for traders. Market dynamics never stay the same for long, morphing from one stage to the next.

Massive trends

As virus realty took hold, the Dow Jones collapsed into a rampant down trend, losing over 5,000 points in three weeks.

Then the Oil debacle between the Saudis and Russia was preceded by the collapse in demand as countries closed borders and trade.

These massive moves in oil and stock markets have been partially rescued by Trump's printing press, but many of the  currencies have stalled.

Since late March many of the currency pair charts are showing a distinct change from deeply trending to range bound.

The EURGBP is typical of these.

Despite wall to wall virus coverage, commentators and the media have almost totally ignored Brexit or more accurately, the trade deal. It's still being batted to and fro across the Irish sea and Channel with next to no progress.

The massive up trend in February and March gave 'set and forget' trades hundreds of pips from a relatively simple break out setup.

Then, through April, it became range bound.

Trading tactics which bring in the profits from trends, does the opposite in ranging markets, so traders have to rapidly change tactics and adapt, or give back those trend-following profits.

Drop down a time frame and that trading range becomes a trending market again. A-B is a double bottom, Multi Point Reversal, MPR setup. It's confirmed as price action pops above the two indicator lines.

At C, an explosive False Break Reversal, MPR setup developed. These are so powerful as reversals because break out traders would have been convinced of lower prices as it dropped below A-B. When they realise their mistake, they become urgent buyers as stops are hit.

Dropping down to the hourly chart reveals the detail of the take profit (+42 pips), trend reversal and next MPR setup.

Again, the upside break out at the blue box will have got many traders buying again, in the wrong place. The profits are made by patiently waiting for price action to confirm the key FBR price levels to enter the next trade.

There are ground rules to follow of course on each of these setups, which are fully explained in the soon to be released course on advanced setups. These last two trades gave 79 pips, at £3 a pip, that's a useful £237.

Let me know if you would like details of the new course when it is released next month, just reply to this email.


From the blog

KISS Trading - Keeping it Simple...and Safe....

Dear Trader and Clickevents reader

I guess we all have a natural naivety built into our DNA. We like to believe what we are told, particularly if we respect the source of the telling. It's also a herd thing. If lots of people are told the same thing, they tend to start agreeing with each other. After all, it must true if everyone believes it.

Far too frequently our beliefs turn out to be the opposite of reality. Central Bankers, politicians and economic gurus' words, statements and policies frequently prove to be the opposite of what actually happens.

As with many things, personal naivety has a spectrum. Ranging from 'I believe everything and everyone', through to the opposite, totally sceptical view, of believing nothing unless seen and experienced first hand.

Way back, in my youth, I had a spell in the car trade that taught me everything I needed to know about supply and demand, pricing and presentation. I rapidly realised I could never believe anyone's description of how wonderful was the condition of their trade in car!

I soon learned to believe 0% of what I heard and no more than 50% of what I could see. A useful policy for anyone trading the markets.


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