EUR/USD - Why There is no Secret or Mystery to Trading

PieterSteidelmayer

Well-known member
283 54
I've started this thread as an antidote to the anodyne, the pseudo-esoteric and the unmitigated blather on some other threads. None that are active I hasten to add as the ones to which I refer are all way, way in the past. Also, any resemblance to real persons, living or dead, is purely coincidental.

Caveat: I do not trade spot forex retail, but as this seems to occupy the thoughts of the vast majority on this site thought it might be of interest. Given the highly speculative nature of this asset I am confident basic technical analysis can provide some insights to potential price development. And as most here seem to trade the lower timeframes, I'll prepare an analysis for the 24 hours from open later tonight (midnight my time) for 24 hours ahead with a view to trading intraday moves.

If you trade this forex pair tomorrow based on anything I say here you do so purely at your own risk. My suggestion is that you do not. But come back at the end of the trading day and have a look see how it all panned out and if any of it makes sense to you.

This is a lose-lose scenario for me as many if the more astute members will be already well aware.So why am I doing it? To show that there is no mystery nor any secret. And to show that having a sensible plan with sensible targets and sensible trade management provides the confidence to trade with size. It's not the number of pips or the number of trades that's important - it's getting size on for the good one(s) and passing on the less than optimum ones.
 

PieterSteidelmayer

Well-known member
283 54
There are 7 levels to work with on eur/usd for trading intraday for today, Monday March 24th 2014.

Entry/Target Levels
UL-3 3844
UL-2 3822
UL-1 3803
Key 3795
LL-1 3780
LL-2 3760
LL-3 3738

Go with the Flow
The key level is 3795. If price is above this level you’ll want to consider directional moves to the upside. If below this level, to the downside. These are the safe bets. Depending on how price gets to one or more of these levels and what it does when it gets there, you could consider moves reversing back toward this key level, but these have a lower probability of reaching any of the target levels provided and require greater discretionary expertise in entry and exit. So for the safer, higher probability trades, only trade away from this key level, not toward it.

This is a Plan – Not a Forecast
I have no idea what eur/usd will do today. All I have it a plan for what to do if it does this, or that, or something else. None of these levels may get hit or the price may move several orders of magnitude further then the furthest levels given. Live with it. You get to make an almost risk free profit on the way or you get to avoid risking anything by sitting out. Get greedy with what you have the greatest confidence in and don’t try and bag the whole run – that’s just ego.

Assumptions
I am making a considerable number of assumptions with regard to trading experience and expertise. One of the most important is a basic comprehension of momentum. If the price steams up to and through a level – that’s a good sign. Hang on or get in. If the price makes its way at a leisurely but regular pace toward a level then shows uncommitted range (open/close well of the high/low) then wait for confirmation before entry or if in a trade, consider taking part or all of your position off. Like any area of potential support/resistance, you take note of how the price structure develops around it. Strong and hard, with little uncommitted range – good; tentative and testing, wait for confirmation or re-test. This is why limit orders are not such a good idea. Hitting the level is one thing; but HOW did it hit the level?
The other assumption I’ve made as I get my head round trading the market from a retail forex perspective is that just like a pro, you’ll prefer to miss a winning trade than take a losing one. I’m probably on shaky ground with that one, but it’s there all the same.

Consider Long
If price moves up beyond UL-1 with momentum or demonstrates support there, you’d want to consider going long with a stop on the key level. When price is midway between UL-1 and UL-2 move your stop to UL-1. When it hits UL-2 take all or a large portion of your trade off and move your stop up to UL-1 minus spread times two or three. If you have anything left on the table, when price is midway between UL-2 and UL-3 move your stop to UL-2. When/if price moves to UL-3 exit the remainder if momentum is coming off, if it is not bring in your stop tight in behind the low of the last positive price development point - higher high and ratchet the stop on the highest low. Caveat: Use your common-sense. If momentum shows a dramatic slowdown and you get failure of price development (a lower high is a concern, but not a major problem unless you have a lower low too) take some or all of your position off and wait to see how price develops. Note: The probability of a move to UL-2 is much higher than a move to UL-3 from UL-2. There’s no shame in deciding not to take a lower probability bet.

Consider Short
If price moves down below LL-1 with momentum or demonstrates resistance there, you’d want to consider going short with a stop on the key level. When price is midway between LL-1 and LL-2 move your stop to LL-1. When it hits LL-2 take all or a large portion of your trade off and move your stop down to LL-1 plus spread times two or three. If you have anything left on the table when price is midway between LL-2 and LL-3 move your stop to LL-2. When/if price moves to LL-3 exit the remainder if momentum is coming off, if it is not bring in your stop tight in above the high of the last positive price development point - lower low and ratchet the stop on the lowest high. Caveat: Use your common-sense. If momentum shows a dramatic slowdown and you get failure of price development (a higher low is a concern, but not a major problem unless you have a higher high too) take some or all of your position off and wait to see how price develops. Note: The probability of a move to LL-2 is much higher than a move to LL-3 from LL-2. There’s no shame in deciding not to take a lower probability bet.

Clarity, Repetition, Clarity
I’ve boiler-plated that last paragraph from the one before. A plan needs to be clear and spelt out in detail for every eventuality. There is no such thing as being too specific. Assume you’re writing the plan for someone else. If eur/usd is tanking, don’t assume they’ve read the caveats for going long which apply equally to going short or that they will be motivated to do so under fast moving conditions. Everyone has a plan ‘til they get punched in the mouth. Your plan has to allow for being punched in the mouth too. Leave nothing to chance.

Trade Management
When and if price makes an interim level (LL-2/UL-2) or when momentum stalls you can consider taking part or all of the position off. Depending on how many lots you’re on for I’d recommend taking in the region of 7-8/10 off and moving your stop up to that level plus/minus spread times two or three unless you’ve got clear indication of continued momentum in which case stick with the previously specified stop placement suggestions. I have posted elsewhere that these levels seem concrete because they’re given as one specific value, but as with all things they represent a band of finite width around that level.

Consider the Possibility of taking both Long and Short
The price may hit both UL AND LL levels in this one trading day. Should you favour one direction over the other? No. Clearly the Long will offer you significantly better reward/risk, but a good opportunity is a good opportunity – everything else is relative.

Not Trading
And for anyone frozen like a rabbit in the headlights who doesn’t trade eur/usd today out of fear or because it doesn’t move above UL-1 or below LL-1, don’t worry, you’ll be financially better off than around 90% of those that do.

Final note
What if these levels are hit to the pip, will Pieter become even more unbearably arrogant? Yes, of course. What if none of the levels are hit? You don’t trade. What if one or more are hit but not the next target level? I’ve covered that. What if the entry gets triggered but momentum falls away? I’ve covered that. Is there anything in this plan you haven’t covered? No, I don’t think so. Does this mean Pieter will even more unbearably arrogant regardless of what happens on eur/usd today? Yes, of course.

If you’re not putting together something like this for yourself each and every day for each and every instrument you will consider trading, you’re selling yourself short. You’ll be at the mercy of indicators as they twitch and switch or impulses both of the market and of your own.

My professional trading focuses around longer timeframes and a quite different class of assets where the fundamental aspects are significantly more important than technical ones. But even so, I won’t go into any battle without a plan of some sort. Even in this plan for eur/usd based almost entirely on technical factors on an asset I don’t trade, if I chose to tomorrow, I would in principle feel totally comfortable doing so as it is sufficiently thorough and comprehensive to cover any eventuality. I would not in practice however as the reward/risk is marginal.

This post is for informational & instructional purposes only. Do not trade it. Unless you want to.
 
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PieterSteidelmayer

Well-known member
283 54
UL-2 target hit 08:00 GMT

LL-2 target hit 11:45 GMT

Possible reset for another down move if UL-1 if tested for resistance, or maybe on up to test key level and then on to test UL-1 on momentum or re-test for support for a long. Or none of these. Or both all of these.

It's all in the plan. No mystery. No secret.
 

PieterSteidelmayer

Well-known member
283 54
It's been suggested a chart would have been useful. It's just 7 horizontal lines on a chart. But I suspect even that will have been too much for some. I even have a sneaking suspicion that far more people came to read that post that actually bothered to do so to the end. Too much effort even to read it. That's why they are where they are.

The paradox is those that know all this stuff, who could just have easily written what I wrote, those that need it the least or not at all, are the very ones that will have read it right to the end. Because that's their mindset - there might be something more to learn. That's my mindset too. I even read the idiots' posts too. No payoff yet, but you never know...
 
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PieterSteidelmayer

Well-known member
283 54
24 hours further on.

UL-2 target hit with a few pips overrun. Then LL-2 target hit to the pip. Then back up for UL-2 again and a minimum after UL-3 hit on continuing momentum. I'm calculating an approximate total of 7:1 reward/risk of which around 5:1 was virtually risk free.
 

tb00075

Newbie
3 0
There are 7 levels to work with on eur/usd for trading intraday for today, Monday March 24th 2014.

Entry/Target Levels
UL-3 3844
UL-2 3822
UL-1 3803
Key 3795
LL-1 3780
LL-2 3760
LL-3 3738

Hi Pieter,

I appreciate the your insight on this, I like the common sense approach and having all eventualities covered.

Can I just ask how you decided on those levels? They have have been visited numerous times in the last few weeks, but is there a systematic way that you chose to set them up as UL-3 through to LL-3?

Many thanks!

(Chart attached for anyone interested)

Tom
 

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Splitlink

Legendary member
10,850 1,234
I checked yours against one I found on the web. It did not seem too far different , a few points, and you did say that they had to be considered as zones. I'll see how I get on today before I ask you for more help.

I enjoyed the read. A bit acerbic, we are not all stupid but I do see where you are coming from. :)
 

PieterSteidelmayer

Well-known member
283 54
I checked yours against one I found on the web. It did not seem too far different , a few points, and you did say that they had to be considered as zones. I'll see how I get on today before I ask you for more help.
They change on a daily basis. Here are the levels I gave Tom last night.

UL-3 3929
UL-2 3884
UL-1 3842
Key 3835
LL-1 3795
LL-2 3755
LL-3 3713

I'd be surprised if they were much different from any of the others as if they were, they wouldn't be that useful.

II enjoyed the read. A bit acerbic, we are not all stupid but I do see where you are coming from. :)
I don't think you're stupid splitlink, but I was just going with the balance of probabilities.
 

forex_born

Newbie
2 0
Hi Pieter...

Where do you get these levels?

I've used various indicators in my time from Fibs and Pivot points, just wondering what yours are based on?

Thanks in advance

There are 7 levels to work with on eur/usd for trading intraday for today, Monday March 24th 2014.

Entry/Target Levels
UL-3 3844
UL-2 3822
UL-1 3803
Key 3795
LL-1 3780
LL-2 3760
LL-3 3738

Go with the Flow
The key level is 3795. If price is above this level you’ll want to consider directional moves to the upside. If below this level, to the downside. These are the safe bets. Depending on how price gets to one or more of these levels and what it does when it gets there, you could consider moves reversing back toward this key level, but these have a lower probability of reaching any of the target levels provided and require greater discretionary expertise in entry and exit. So for the safer, higher probability trades, only trade away from this key level, not toward it.

This is a Plan – Not a Forecast
I have no idea what eur/usd will do today. All I have it a plan for what to do if it does this, or that, or something else. None of these levels may get hit or the price may move several orders of magnitude further then the furthest levels given. Live with it. You get to make an almost risk free profit on the way or you get to avoid risking anything by sitting out. Get greedy with what you have the greatest confidence in and don’t try and bag the whole run – that’s just ego.

Assumptions
I am making a considerable number of assumptions with regard to trading experience and expertise. One of the most important is a basic comprehension of momentum. If the price steams up to and through a level – that’s a good sign. Hang on or get in. If the price makes its way at a leisurely but regular pace toward a level then shows uncommitted range (open/close well of the high/low) then wait for confirmation before entry or if in a trade, consider taking part or all of your position off. Like any area of potential support/resistance, you take note of how the price structure develops around it. Strong and hard, with little uncommitted range – good; tentative and testing, wait for confirmation or re-test. This is why limit orders are not such a good idea. Hitting the level is one thing; but HOW did it hit the level?
The other assumption I’ve made as I get my head round trading the market from a retail forex perspective is that just like a pro, you’ll prefer to miss a winning trade than take a losing one. I’m probably on shaky ground with that one, but it’s there all the same.

Consider Long
If price moves up beyond UL-1 with momentum or demonstrates support there, you’d want to consider going long with a stop on the key level. When price is midway between UL-1 and UL-2 move your stop to UL-1. When it hits UL-2 take all or a large portion of your trade off and move your stop up to UL-1 minus spread times two or three. If you have anything left on the table, when price is midway between UL-2 and UL-3 move your stop to UL-2. When/if price moves to UL-3 exit the remainder if momentum is coming off, if it is not bring in your stop tight in behind the low of the last positive price development point - higher high and ratchet the stop on the highest low. Caveat: Use your common-sense. If momentum shows a dramatic slowdown and you get failure of price development (a lower high is a concern, but not a major problem unless you have a lower low too) take some or all of your position off and wait to see how price develops. Note: The probability of a move to UL-2 is much higher than a move to UL-3 from UL-2. There’s no shame in deciding not to take a lower probability bet.

Consider Short
If price moves down below LL-1 with momentum or demonstrates resistance there, you’d want to consider going short with a stop on the key level. When price is midway between LL-1 and LL-2 move your stop to LL-1. When it hits LL-2 take all or a large portion of your trade off and move your stop down to LL-1 plus spread times two or three. If you have anything left on the table when price is midway between LL-2 and LL-3 move your stop to LL-2. When/if price moves to LL-3 exit the remainder if momentum is coming off, if it is not bring in your stop tight in above the high of the last positive price development point - lower low and ratchet the stop on the lowest high. Caveat: Use your common-sense. If momentum shows a dramatic slowdown and you get failure of price development (a higher low is a concern, but not a major problem unless you have a higher high too) take some or all of your position off and wait to see how price develops. Note: The probability of a move to LL-2 is much higher than a move to LL-3 from LL-2. There’s no shame in deciding not to take a lower probability bet.

Clarity, Repetition, Clarity
I’ve boiler-plated that last paragraph from the one before. A plan needs to be clear and spelt out in detail for every eventuality. There is no such thing as being too specific. Assume you’re writing the plan for someone else. If eur/usd is tanking, don’t assume they’ve read the caveats for going long which apply equally to going short or that they will be motivated to do so under fast moving conditions. Everyone has a plan ‘til they get punched in the mouth. Your plan has to allow for being punched in the mouth too. Leave nothing to chance.

Trade Management
When and if price makes an interim level (LL-2/UL-2) or when momentum stalls you can consider taking part or all of the position off. Depending on how many lots you’re on for I’d recommend taking in the region of 7-8/10 off and moving your stop up to that level plus/minus spread times two or three unless you’ve got clear indication of continued momentum in which case stick with the previously specified stop placement suggestions. I have posted elsewhere that these levels seem concrete because they’re given as one specific value, but as with all things they represent a band of finite width around that level.

Consider the Possibility of taking both Long and Short
The price may hit both UL AND LL levels in this one trading day. Should you favour one direction over the other? No. Clearly the Long will offer you significantly better reward/risk, but a good opportunity is a good opportunity – everything else is relative.

Not Trading
And for anyone frozen like a rabbit in the headlights who doesn’t trade eur/usd today out of fear or because it doesn’t move above UL-1 or below LL-1, don’t worry, you’ll be financially better off than around 90% of those that do.

Final note
What if these levels are hit to the pip, will Pieter become even more unbearably arrogant? Yes, of course. What if none of the levels are hit? You don’t trade. What if one or more are hit but not the next target level? I’ve covered that. What if the entry gets triggered but momentum falls away? I’ve covered that. Is there anything in this plan you haven’t covered? No, I don’t think so. Does this mean Pieter will even more unbearably arrogant regardless of what happens on eur/usd today? Yes, of course.

If you’re not putting together something like this for yourself each and every day for each and every instrument you will consider trading, you’re selling yourself short. You’ll be at the mercy of indicators as they twitch and switch or impulses both of the market and of your own.

My professional trading focuses around longer timeframes and a quite different class of assets where the fundamental aspects are significantly more important than technical ones. But even so, I won’t go into any battle without a plan of some sort. Even in this plan for eur/usd based almost entirely on technical factors on an asset I don’t trade, if I chose to tomorrow, I would in principle feel totally comfortable doing so as it is sufficiently thorough and comprehensive to cover any eventuality. I would not in practice however as the reward/risk is marginal.

This post is for informational & instructional purposes only. Do not trade it. Unless you want to.
 

PieterSteidelmayer

Well-known member
283 54
Nothing brewing today on eur/usd. If you'd been convinced to short on the LL-1 you'd still be in the trade unless you'd taken any one of the discretionary exits which would have got you out anywhere between minimal loss, to scratch, to minimal profit.

Here are today's (Thursday March 27th 2014) levels. Somebody has already (almost) busted the strat and quite quickly too. I'm bordering on impressed. These levels for tomorrow will either freak them or confirm their suspicions.

UL-3 3859
UL-2 3833
UL-1 3807
Key 3795
LL-1 3780
LL-2 3755
LL-3 3729

As said before, not my bag, but if anyone wants these levels for any other forex pairs, let me know.
 
 
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