Short-term Trades on Trend Following EURO

Trading is still a number's game, so to speak, where it is often described as a zero-sum game that there are more losers than winners. Yet, a lot of so called market guru's presentation are always the same as the portrait of winnings can overshadow the risk of loss.

A clear cut example in one of the recent presentation made was riding a trend that reflects more than a thousand point move or 1000 pips in the FX market. Why it is so important, is because the wide range of the price retracement and their corresponding objectives is based on the real net changes on the closing. This is where the Moving averages and the Average True range reflected eliminates the noise (false moves) and price disruptions of the particular currency pair.   

EURUSD DAILY OVERLAY/ WEEKLY

eur8.26.2016

Market update: Again, 1st price reaction from Fed chair Janet Yellen proved USD fails to continue as recovery pulls back DXY and subsequently drives stocks lower for now. While EURO short-term trades in effect as end of week & month position adjustment prevails in US session; while CABLE keeping its pace.

The gradual higher botttom 1-2-3 reflects the pace of price action with the EURO. Likewise, the intial high A have provided the first signal of the trend direction moving to B; as seen also on the weekly chart overaly. The corrective phase which forms a price swing pattern is well defined. Even when the mid-term trend moves in a upward direction; short trades due to wider trading range is acceptable well within the major trend until now. EURO's Failure to penetrate resistance @1.1380 provided pressure below the 1.1250 which would end the month closing below these levels.

So far the difference of 400+ pips has been made from the breakout price of 1.1000 -to-1.1400. So much so less the corrective moves as the EURUSD retraces / pullsback some of its gains closing lower for the week heading to the closing of the month position adjustments.

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Two things to consider, 500- to-1000 pips indeed can be reflected on the weekly overlay charts. However, keep in mind whether such difference in FX prices is based on a whole figure or does it include the 5th figure in retail trading? This is what we would address at this time.

What this means a an example is that if the figure includes the 5th # (eg. EURUSD @1.12889; where the #9 is the 5th) from the decimal point then it is a fraction of a full pip point and should never be interpreted as a full pip during such presentation.  Yet no one dared to challenge such comments.

Secondly, most workshops on analysis and on retail training are made for nearly short-term trades, for obvious reasons, that when such gains are made is to simply take the profit and run; then make another trade. The other side of the coin is that stop-loss orders are triggered easily due to a wide price range on day sessions. The irony of the matter in making a trade presentations for purposes of showing substantial gains is a standard norm for seminars where risks are not fully discussed.

The most important issue should be pointed out that even before a trader gets from point A to B there are significant price changes in a session, a day or even a week that would prompt traders to ignore these essential components, that a day's trading bar on the chart can change before it even get to its goal. Thus a significant part of price action should be included in every trade as volatility can widen a trading range as we can see in today's market conditions.