9-15-09
5:05a GMT – As predicted bulls were firmly in control of the EUR/USD yesterday. In fact, as I type this you could have gone literally at any point yesterday – forget about candlesticks, support, dips, continuation – any point and you would have turned a profit. On a side note that is why I don’t try and fight the trend – look at all those bearish candlesticks we see on the 1-hour chart below! Shooting stars, dojis, bearish engulfing. You name it and it is there. And none of them were good, reliable signals in the medium-term. Because it has been a hot topic in the discussions recently I’m going to write an article on candlesticks this weekend – how to spot them, use them, when they are significant,etc., so feel free to put in any suggestions for that
On to today’s signal. It is hard to argue that we are in an easy-to-spot uptrend at the moment. Volatility has been decreasing and the pair has been drifting upward with little resistance. There is an argument for the EUR/USD being highly overbought and the markets overly-optimistic, but that is not for us to decide – just speculate on. I’ll look for a more major reversal around 1.5000 – a significant psychological resistance level. In the short-term I will trade with the trend and look to buy on dips.
Trading Idea: There are many possible support levels we could look for dips on, including 1.4920, 1.4900 and 1.4870. Which one you go with depends on how much risk (size of your stop-loss) you are willing to live with. Risk/reward. Long targets are at (from 1.4870): 1.4900, 1.4925, 1.4955 and eventually 1.4995.
(click to enlarge)
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October 15, 2009 at 4:25 am
Hmm, if for example bearish reversal signals like shooting stars are ignored, are there any specific signs to look out for AFTER reversal signals that could confirm this reversal, so that we don’t go in blindly after the reversal candlestick?
October 15, 2009 at 4:36 am
Number 1 thing is, and I know I’m beating a dead horse here but is important, trade with the trend. If you see a bullish reversal signal and the trend is bullish than you’ve got your confirmation (though there are very conservative traders who wait for even more confirmation, usually longer-term traders on the daily or even weekly charts). What those traders look for are additional candlestick signals. For example a double doji. Or a shooting followed by a bearish engulfing that extends past the previous candlestick before the star. Or if it is a range market perhaps a reversal candlestick and an overbought RSI/Slow Stochastic.
I prefer to keep it simple – the trend is the best signal you can ask for, and candlestick signals just confirm the trend.
October 15, 2009 at 6:48 am
How does long 1.4950 tp 1.4975 look on the 1 hr chart
October 15, 2009 at 2:02 pm
Not commenting on the chart setup (because we know how that turned out) here is what I don’t like about your setup: your TP is very small, and to get a TP that small, at 1.4950 (resistance), you’d need a very large stop-loss to not get stopped out. With a very large stop-loss your risk/reward ratio is off. If you are going for small pips (15-20) it is almost always better to wait for a pullback, or a good dip. If you were to buy at 1.4950 when you posted this comment there would have been no dip, no major retracement.
October 15, 2009 at 2:05 pm
For example Stefan if you look at the 1hr or 30M chart if you would have waited for a better dip to support at 1.4925 or 1.4900 both of those would have yielded a gain of a quick 20 pips as the resistance provided some bounce to the pair.
October 15, 2009 at 8:58 am
Just curious Mark, how long did it take you to be able to earn a living with trading ? ( i suppose your only source of income is forex )
How steep was the learning curve? Did it involve alot of lost money :) Im sorry if this has been asked before…
Have a great day!
October 15, 2009 at 2:03 pm
Johny, read the “about me” link on the left and the “read me”.
October 15, 2009 at 10:46 am
We have 1.4925 at this time. What next?
October 15, 2009 at 11:22 am
Can anyone comment on the current movement and when this bearish move will turn around. Can the above support levels hold
October 15, 2009 at 12:11 pm
yea .. i have bought at 1.4930 … but it seems am getting hit now.. is that normal, will it uncrease again? or its a change in trend? i did a tp @ 1.5 is that good or should i lower it.
any adivice is welcomed.
October 15, 2009 at 2:06 pm
It is normal volatility in the market. The pair has been overbought with little to no retrace in the past days and weeks.
October 15, 2009 at 12:22 pm
Mark didnt give as any support below 1.4870 :)) but it seems it touched a support at around 1.4840 and went back up, but I didn’t go long there, don’t see any signal that would tell me that this downtrend is stopped, it could have gone up just to turn back down and break through more support levels, who knows lol, thats why we are here I guess.
October 15, 2009 at 2:07 pm
It is drawn on the chart though :). 1.4840 where the red line is.
October 15, 2009 at 12:28 pm
On the daily chart, there could be one of those “twin towers” building up today, one large buy candle followed by a similar sized sell candle with almost similar upper and lower shadows. Sep 18 and May 29 they were followed by a reversal, not sure if its valid though or just coincidence.
October 15, 2009 at 12:42 pm
Where do I find the Mark’s responses to these the comments above? These are all very good comments but I notice only 1 or 2 of them shows responses from Mark. I wanted to know where do I find the other responses so that I don’t have to ask the same question or make the same comment.
October 15, 2009 at 2:09 pm
I get to them as quick as I can :). I’m in the US so I have to sleep sometimes. That doesn’t mean I’m not trading though. After I do my analysis I always put in an entry order. I put one in for 1.4865 so I’m currently long in the pair.
October 15, 2009 at 12:49 pm
He will respond to all of them here Lisa, just keep checking :-)
October 15, 2009 at 12:54 pm
you mean it would be a good idea to buy another lot now at 1.450. since its going up to 1.495 or 1.5? or that woudl be a bad idea?
October 15, 2009 at 12:55 pm
I guess Mark is working hard on his new signal service, even without knowing it I know that its gonna be good, just stay tuned :)
October 15, 2009 at 2:10 pm
I am working on the signal service! It is very exciting and I know you all will be excited when you see it to!
October 15, 2009 at 2:12 pm
On a side note the dollar is very tied to US stocks right now. When US stocks go up, the dollar goes down (making the EUR/USD rise). Yesterday stocks broke the big 10,000 #, which I believe to be ridiculously overpriced considering a lot of the recovery is being propped up by government spending. Either a major correction will occur at some point or the US goverment will just keep printing money which is bad news for the USD.
October 15, 2009 at 2:31 pm
“I put one in for 1.4865 so I’m currently long in the pair.”
On which specific signal is this entry based? Just because it showed some signs of support on this level once it went through all outlined supports? (and your next support was 1.4840)
Thats actually the hope I am having in your new signal service because things also change throughout the day and sometimes updated signals based on the different hourly situations are needed.
October 15, 2009 at 2:42 pm
A lot of logic went into that… kind of hard to throw it all into a few sentences but let me give it a try. The most important piece is this – the farther away you put your entry (so the bigger dip you are counting on) two things will happen: 1) you will get in on a LOT less trades. Which I’m fine with when I’m sleeping. Obviously when I’m asleep I can’t monitor candlesticks, bounces, dips, etc. but I also don’t want to miss out on a major dip. 2) the trades you do get in on have a much greater chance of success. The larger the retracement the better chance you have of that pair actually bouncing off your support level.
How do I know that? Experience, first of all. Second, I backtest strategies as a hobby. Not a very exciting hobby, I know, but I am constantly backtesting several strategies a day over the past 5 years and 10 years of data. Having an entry distance on any signal almost always makes a strategy more profitable in my backtests. Usually there is a “sweet spot” of Profit/Drawdown ratio, but the farther away you put it the more likely it will suceed.
So that is the “why” of placing an entry with no candlesticks. The “where” (what level) is a bit more simple – it was the third support level, so the farthest away, and also it was the 38.2% retracement of 10/12-10/15 rally. The most popular Fibonacci retracement #s are 38.2, 50 and 61.8.
There are a lot of moving pieces in forex trading.. does that help?
October 15, 2009 at 2:36 pm
Thank you for responding.
October 15, 2009 at 2:53 pm
Yes, thanks for answering, I’ll read it now a few times and then I think I’m good ;)
October 15, 2009 at 2:59 pm
There are a lot of pieces to it, I know, and I know that can be frustrating to a new trader. When I was a new trader to forex I can remember chomping at the bit at every price move thinking “I could have been in on that, next time I’ll pull the trigger earlier”.
And I’m still learning. Every good forex trader is. Anyone who tells you they’ve “figured it all out” or “has a magic bullet” is just trying to sell you something :).
October 15, 2009 at 3:15 pm
Hey guys remember the service that Mark provides is FREE. Start to learn from his methodology. Apply all his daily information to all indicators and learn from him instead of requesting an expansion on what he currently provides. I for one would not like to be dependant on Mark’s service. Since I discovered his website I have become a better trader. I’ve learned to have patience. I’ve made 199% on my investment and thought I had all the knowledge intact. Then I became reckless and nearly lost it all. With Mark’s ideas I slowly recover my losses. So every day I do my own analysis and then I compare it with Mark’s. Should it differ, I do not place an order until I come across how he was thinking.
So, I vote: MARK FOR PRESIDENT!!!!
October 15, 2009 at 3:39 pm
Look at that bullish hammer on the 4-hour EUR/USD chart. That is a long, long wick…
October 15, 2009 at 3:52 pm
Hi! Do you have a reliable & accurate indicator that shows an entry point? if you can send me one. I will appreciate. thank you.
October 15, 2009 at 3:54 pm
I don’t use indicators for that sort of thing Shegun. Support and Resistance, sometimes combined with candlestick signals. You have to learn it to get good at it..
October 15, 2009 at 4:00 pm
Does anyone think that EUR/USD will cross over 1.5500? I really wonder how long the USD will remain weak! Its been a nightmare having many orders below 1.45 level. Any insights about the strenthening of USD in the coming weeks?
October 15, 2009 at 4:08 pm
Do you still see a confirmation for 1.4955 exit on the 4 hour chart.
October 15, 2009 at 4:42 pm
“Does anyone think that EUR/USD will cross over 1.5500?”
Chello, it doesn’t matter. this isn’t about prediction but about trading what is seen on the charts RIGHT NOW. Doesn’t matter one iota whether cross 1.5500 or fall from here.
October 15, 2009 at 4:51 pm
“Does anyone think that EUR/USD will cross over 1.5500?”
Do you mean 1.5000 or 1.5500? Whether the USD will go up or down is a hotly debated topic. One school of thought says as long as the US gov keeps printing money the USD will remain weak – and there doesn’t seem to be any short-term reversal in the US gov’s money printing. On the other hand the USD has been going hand-in-hand (inversely) with US stocks. When US stocks go up (risk appetite increases) then the USD with its very low interest rate suffers. And US stocks are pretty overbought right now so there could be a reversal in the cards but it is hard to call a top to the kind of optimism that is in the markets right now.
October 15, 2009 at 5:02 pm
Mark is 1.4995 still viable on your analysis?
October 15, 2009 at 5:09 pm
Sure it’s viable. Sometimes strong psychological supports/resistance act like magnets, pulling price action towards it. I’d definitely wait for a dip to take a run at it.
October 15, 2009 at 5:17 pm
a bearish candle forming on the 4 hour?
October 15, 2009 at 5:23 pm
a dip back to 1.4910 is a good enough to take a run at it?
October 15, 2009 at 5:35 pm
On 1h chart it looks like a perfect evening star lol
good time to go short ? price is at 1.4920 wright nou .
October 15, 2009 at 6:31 pm
Jevgenij,
that’s a DOJI at the bottom of a bearish candle on the 1HR and signifies a bullish reversal.
October 15, 2009 at 6:34 pm
Hello Mark, you say that you backtest your strategies for 5 till 10 year, I would like to ask you how do you backtest them, as i understand you trade manuell, how did you make then your backtest?
October 15, 2009 at 6:37 pm
It’s near impossible to backtest this strategy because 5 and 10 year because, as you said, it’s a manual strategy. All my signals are online for the past 1.5 years though (click older posts at bottom) and I kept a trading journal before that.
I backtest every other strategy that can be backtested though. Technical indicators, candlestick formations, trends, ranges, combinations of all of the above with hundreds of variables…
October 15, 2009 at 6:53 pm
yes its a doji … but last 3 candels before the doji form a perfect evening star .
tough it was not the higest poin for tooday :/
October 15, 2009 at 8:30 pm
Mark, you say “All my signals are online for the past 1.5 years though (click older posts at bottom)’
Can you point me to your archive of older posts? I don’t see the link…thanks
October 15, 2009 at 10:08 pm
Alvin, quickest way is to go to the homepage (piphut.com), scroll down and then in the Risk Disclosure box on the upper left you’ll see something that says “Older”. Click that to view the previous 3 posts. You can keep going backwards for the last 1.5 years.