WARNING: This text is a word-for-word transcription of Mac’s daily forex trading video. That means the writing will reflect the way he speaks, if anything seems out of place, please refer to the forex video on the page.
All right, everyone. We are looking at the British Pound on a daily chart here. Let me go ahead and zoom in. You can see the Pound fell out of bed, as it’s called. In fact, somebody had sent me a message over Twitter asking about this, because the move happened before any of the announcements. One of the things that we just have to come to grips with as traders is that number one, the markets can and will do absolutely anything, and we as traders are at our most vulnerable when we start to think that we’ve go the market figured out. In fact, I was on a webinar, I was helping a friend of mine. She has a brokerage firm, it’s called CompassFX. Great brokerage firm, by the way, and I don’t make a dime off of saying that. There’s a woman on there who’s 71, she traded on the Toronto Exchange, she’s been trading for a long time, and after I was done presenting she said “I’ve learned more in this past session than I’ve learned in my entire history, in my entire trading career.”
I’ll hallucinate, because it’s convenient, that she was talking about me, although admittedly she might have been talking about somebody else, or not, whatever. But the reason why I bring it up is because in that presentation, what I and the other speakers were talking about was how mindset affects our trading and how important mindset is. But then I also realized that in the beginning stages, what we look for is the skillset. It’s like, “Don’t bother me with the details, just tell me how to make money.”
The only reason why I’m bringing any of this up is to say that in the Insider Code Kit, there are a couple of areas, I think, that will deserve your attention, and if you’re brand new to the Forex market, it’s disc number two, because that’s where I go over how to use MetaTrader and how to look at charts and some of the basic vocabulary. But then on disc number six ‑ and I know I’ve said this before, don’t skip ahead ‑ but on disc number six I talk about some very important concepts in the marketplace in terms of who the players are and what those players do to make money. I call it some of the advanced techniques.
A day like today is very typical. Let me get to the punch line and why I stated talking about mindset, and then also why I then went on my little tangent there. When the market moves up like this, what happens is people have an incentive to buy. There’s an enticement to buy? Whenever you see everybody wants the latest Furby doll. Well, because everybody wants it, well, I want one too.
I notice that with my kids all the time. A couple of kids have something, “Oh, Daddy, Daddy, I want one of those.” Well that doesn’t go away just because we’ve grown up. So when we see the market up like this, what’s important is that we start looking for the signs of opportunity. The signs of opportunity come if we get compression, small bars.
Where it can be difficult is when the market just turns on a dime like it did back here. Again, this is the Pound on a daily chart, and this is back towards the end of May, and you can see here, it just went up and then it went straight back down. Those types of trading reversals, they’re just difficult to trade, folks. There’s no two ways about it. Because one minute it looks like the market’s going up, everything’s A‑OK, and then the next minute it’s coming right back down.
But these trading opportunities can tend to be the most fertile simply because it gives us clearly defined areas to get in and make our trading decisions.I’ll go over this very quickly because I’ve already been going for four minutes. The main thing that we’ve got to remember here is traders, doesn’t matter how big or how small, have their decisions displayed on the chart.
So looking at this past high, no one in the entire universe was willing to pay one more PIP for the British Pound. They weren’t. They just weren’t willing to do it right here. No one in the entire universe was willing to sell one PIP lower. They just couldn’t do it. So when we see these areas on the chart, these reversal points. We need to recognize that traders have made a decision. They voted with their wallet. So if price gets to that level again, we need to be aware of that decision.
In other words, if I draw a line straight across like this, and I see, OK, we’ve got a point here. They reached up. OK, that’s close enough for government work, close enough for government work, whatever.
We’re looking at this blue line, and we see traders made a decision along that line. For whatever reason, they weren’t willing to trade. If price gets back down there, it’s not that we’re guaranteed a trade.
There are no guarantees in trading. It’s not that we have some sort of magic pixie dust that we can spread over our charts and make money instantaneously, but it is where we can start thinking about trading, because we have an edge. Up here, we have an edge.
Everywhere in between we don’t, simply because we can’t easily identify areas where traders have made a decision. Remember, what we’re talking about here in trading is if we are buying, and let’s say you made the decision to buy up here.
What you are saying is that the Pound is undervalued, and you are betting on the fact that people are going to be willing to pay a higher price than you.
Same thing down here. If you bought down here, what you’re saying is the Pound is undervalued, and that you’re betting on people paying more than you. Well, that worked out that time. Let’s say you bought over here. Well, that didn’t work out so great right away.
One hour chart. We’ll look at just this recent trading. If you remember, in the last video I was talking about some of these areas. Here we have a couple of clearly defined areas where traders had come in, and voted with their wallets, and said you know what?
The British Pound needs to be higher. The British Pound needs to be higher. So when the pound revisits that area and it can’t hold that area, which it didn’t, that’s very important information.
Here’s a little dipper pattern. What happened? The market broke down, came back up. Traders are looking at this price again, and this is how traders think. They’ll say, “hey, the buyers came in before. They weren’t able to come in now, so let’s sell.”
Or they may say, “well, let’s look and see. Let’s put price up there to see if anybody who bought over here comes back and buys again.” If they don’t buy again, you know what the traders do? They turn right around, and they sell, and it drives price down.
The Insider Code is not based on some pie‑in‑the‑sky mathematical formula, folks. It’s based on how traders think and the way the market has to act. Now that doesn’t mean it’s guaranteed.
So what do I mean when I say the way the market has to act? What I mean is it’s the way the market has to act, unless something changes. In other words, we don’t have a 100 percent chance of making money there.
But because we had buyers here, we had buyers here, and now we don’t have buyers, what we are saying is that because the buyers here did not come in again here they’re probably not going to come in over here. That’s what we’re saying, because that’s how traders act.
The only way that price is going to continue to move up is if the reason that drove price down just simply isn’t as important anymore. That’s the only way. So unless something fundamentally changes, guess what?
If they didn’t buy right here, they’re probably not going to buy here, and because that’s a probably and not a guarantee, that’s why we use a stop. That’s why we use effective money management.
Otherwise, if the flip side were true, if we had some kind of guarantee, then we could just come in with all of our money every single time and we’d retire with millions of dollars inside of 60 days. But that’s not the case.
Now coming in, if you remember, last couple of days I’ve said we have a vacuum area all the way down to 6500, except for this little area here. It’s no coincidence. I think price is starting to slow down in this area.
In fact, if we draw our lines across, you can see it goes from here to here. It’s right at the tip of this area. We need to expect some choppy trading. What I’m looking for: some kind of flag pattern, the same basic stuff, folks, looking for some kind of flag, maybe a pennant pattern here, watching for a double bottom.
We’re just going to have to see how this whole thing pans out, but it’s at least panning out as expected.
The next area as far as autopilot trades go is going to be below 6700 to catch the market coming back down here towards 6500. Really, for the market to be going to the upside, I’d like to see some sort of double bottom.
If we get a V reversal and it just takes off to the upside, hey, I’m content to miss that. You don’t get every trade. At this point, because of this volatility, we want to see that this momentum is taken up before we just go jumping in.
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