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I'm just amazed about how EUR/USD behaved so perfect to my forecast, I didn't expected to nail it to the pip but basically if you check out my previous blog posts here:EUR/USD Bull Traps and here: EUR/USD Bull Trap (part 2) you will see my actual forecast and how price has indeed followed my prediction.
In one of my live accounts I'm short EUR/USD from beginning of the first trading day of this year from around 1.3760 and I'm already up 240 pips on this trade and counting, I'm looking on this trade to catch 1000 pips movement and if let's say you're trading 1 full standard lot it should net you a 10K profit, but still there is a long way to go and many things can happen.
Also Friday in the chat room section I've told the guys who were online, just one hour before EUR/USD to brake lower, I said something like this: "Friday is the perfect time for the dealers to move the market lower and run those stops below last swing low 1.3550 as we have the perfect low liquidity environment".
Typical on a Friday night after the market has established an oversold (or overbought) condition and some kind of support (or resistance) has been put in place traders novice traders will presumably think the support (or resistance) level will hold until the weekend.
But during this time of the day and because we are at the end of the weekend the dealers most likely will have to clear their book ahead of the weekend or they will have some order to execute from some important client, be it hedge fund, pension fund, or some big institution. You can have the best trading idea but if you can't find a counterparty to take the other side of your trade you'll have just an idea and no trade, so liquidity is the answer here. So in order to execute that order on a Friday night, ahead of the weekend with thin market liquidity, market moves in the direction where the liquidity is and most likely in our EUR/USD case the stop orders were below last swing low level and support zone(see Figure 1), price always follows the line of least resistance.
- Figure 1. EUR/USD Friday classic Stop Run(click on the picture to enlarge).
Just to make it clear for everyone I'm not speaking here of the nonsense that "Brokers hunt your stop loss", it's about the market microstructure. Stay tuned tomorrow I'm going to cover this subject as well: "Does your Broker hunt your stops?". I'm sure you'll be surprised by my answer but the short answer is : NO, they don't! and in my next blog post you will find why.
I'm not going to update my EUR/USD forecast because from here on things will become very interesting, but I suggest you to go through this process and try write down your own forecast and than watch the market how it behaved and how much it followed your forecast, doing this you will learn more than what you think about market action.
Best Regards,
Daytrader21.
