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.
OK, everyone. I am back in town. Had a good trip out to Bethesda, Maryland. I go about every quarter. This last year was a little bit different, with both of our parents with cancer, but every quarter I’ll meet with ‑ it’s about 20 business owners, now. And we get together and talk about challenges. We talk about successes, what’s going on in the market. We help each other out. It’s really an eclectic group. We’ve got personal development coaches, we’ve got survivalists, we’ve got fitness guys. It’s really, really a good group of people, and it really is a phenomenal chance to get out of the office. Now, we’re still working like dogs for two days, but getting feedback from people that are outside of the day‑to‑day grind that one might be in is absolutely essential.
In fact, that’s why I still have trading coaches. It’s why I go to Mastermind Groups, because it’s so easy to get caught up on our little box. We’ve got the saying, “Think outside of the box,” but it gets lost in translation of what that really means. And what it means is, from my experience, it is very difficult to solve a problem that I create. Because if I could solve it, I probably wouldn’t have caused the problem in the first place.
In fact, that’s why often in our one‑on‑one support sessions, when somebody asks me a question, I like to clarify what it is that they’re asking, because if I’ve explained it several times in the past and that wasn’t clear, odds are I’m probably going to explain it the same way again. And so rather than get me back into my box, it helps me when ‑ you help me get out of my box.
And so it’s something that I would encourage everyone to do for themselves. If you don’t have a trading partner or someone that you regularly communicate with, of course come into the support sessions. But you really will benefit from having someone to talk to about what is going on simply because they’re not involved in what you are personally doing.
OK, so let’s talk about the British Pound. Remember, we’ve been looking for some kind of pattern indicating that the Pound is likely to bounce to the upside or that the Pound is likely to fail and continue going down. And if you remember, we were looking at the Pound back here. This was late December, right? Let me make sure I’ve got those dates right. Yeah, late December coming into January, here is ‑ we’ve got the 30th, the 31st. Coming in now to the beginning of January, once we hit into January, if you remember, what we were looking for then was the creation of a higher low.
Now, the reason why we do that is because typically when markets bottom you get a push down about ‑ well, oftentimes here’s the pattern ‑ whoops ‑ you get a push down, a bounce, another push down ‑ which of course breaks below this prior low ‑ and then usually you get a churning action, something like this where you get some compression for a little while, sometimes a triple top. sometimes a double top. And you get one final push down which usually breaks below these two lows but not this one ‑ usually, sometimes it can. And then you’ll typically get the tunnel pattern or the ABC pattern as the market then moves up.
And so there are a variety of ways to trade a market that is going through that process. One way, of course, is waiting for the market to make the first two lows, come down, and then what we’re waiting for is the market to make a lower low here and then start to move up, just like we had back here. In fact, that’s what we’ve been talking about for the last few days. Let me zoom in here and we’ll take a look at the daily bars first.
And so if you go back and look at last week’s videos, what I did was I identified some prices areas, I put some boxes on the chart, and those are simply areas where I start to look for patterns. And so on the hourly chart you can see this low corresponds with this low on the daily, and this low corresponds with this low on the daily.
So I’m not looking to predict the market over here. What I’m looking to do is to trade some sort of pattern after the market has made that low. In other words, I want the market to prove itself first by making a low. Well, how do I know that the market has made a low? Well, it moves up, right? So the market ‑ let’s go over here to the daily ‑ the market moved down, it moved up, right about here is where I can look back and say, “OK, that was a low,” and then what I’m waiting for is the market to move back down again.
But I’m not just looking for any old price. I’m looking for very specific zones on the chart. Of course we’ve got the little dipper model, which tells us to look at, really, three different prices: 38%, 50%, and 61%. The last one, which is 78%, is really more of a make or break line, and if the market continues to push down ‑ which it did in this case ‑ what we’re saying is well, yeah, the trend isn’t all that strong, and we need to keep an eye out for a possible follow‑through to the downside.
So when the pound was pushing down towards the 78% level, frankly I was wondering if it was going to break through the low. But at the same time I’m not going to assume that price is going to break down. I’m going to wait for some other kind of confirmation or some other kind of pattern.
So, what do we do, then? Well, what we do is at each one of these levels we look for patterns. It really is that simple. And so if we come up here to the hourly bar ‑ in fact, let me move this over just a scosh and make sure I’ve got the right days. OK, so there is our first low. Let me move back.
OK, so this is the market moving down on the daily right here. OK? So as we follow on the hourly, it’s starting to make a low. You can see it’s digging in, now it’s moving sideways. We get a strong push down, another pop to the upside. At this point what we’ve done is we’ve seen the market move down, move sideways, move back up, come back down. OK? So now we’re seeing the market coming back…
Oops, I’m sorry. We saw the market move down, sideways, and then back up. OK, so this move up is what we’re looking at right here. And you can see on the hourly it was very, very fast.
So let’s move forward some more. Here’s the market making a double top, starting to move back down. And now here’s where we can set onto our chart the Fibonacci levels that we’re interested in trading against. OK, and you can see here as price is coming down… Oops, let me get rid of that window.
As price is coming down, there’s the 38%, and you can see that it did hesitate. OK? And it did manage to bounce up. And if you had taken a trade there, it would have been a loser. Comes down to 61%, there’s a small bounce there again.
Actually… Oops. Yeah, the 38%. I’m sorry, I’ve got to look around my microphone against my keyboard. Well, the 38% initially would have been a winner. That was a move from 86 to 144, so that definitely took the 23 pipside. It just would have stopped out on a break even trade. Really the same thing goes for the 61%. You can see it came down, bounced up once and then just kind of fluttered around.
So the second trade probably would have been losing trade. And then you can see here as we continue to go, here is the triple bottom starting to develop. But an aggressive trader would have been stopped out right about there as the market kept moving down. And you can see it held 78%. This was for about a day and a half and then started to move its way back up. There’s some news in here that’s going to…
Let’s see. Get back to my calender. Was that a non‑farm payroll? Oh, that was the eighth, yeah. All right, so this is a non‑farm payroll. You can see the market got a little bit wacky and then eventually started moving back up again. So the key here is that we’re using the Fibonacci retracement to help us identify areas to look for patterns. And we’re not trying to get in all the time. This is really a mistake of rookie traders, is they’re constantly looking to trade rather than being patient, sitting back.
In fact, James, when he’s in the live trading room, that is the number one lesson that we’re continually reinforcing is just be patient. Just wait for the trade setup, let the market come to you, wait for the profit target to stop to get hit. It’s difficult, though, because we want to be active. Right? In our jobs we’re active. We’re doing things, we’re doing this, doing that.
But with trading a lot of times we have to sit back and wait for the market to do something for us. So the way to get around that is to have very specific plans, waiting for various specific areas on the chart. Now that the pound is broken out above this prior high, on a conservative play we’re waiting for a little dipper. It’s going to come back down here and then hopefully we’ll get a pop back to the upside. Again, the key is waiting for some type of pattern. We’re going to focus on that on the hourly bars.
So that’s where we’re looking for a flag, pennant, some kind of compression that’s going to come back really into this area here, which is about 6, 180. We’ve got a couple of highers over here that the market bounced off of… Let’s see. Oops. OK. So yeah, I wanted to zoom in. This is the hourly again zoomed way in. The little dipper I’m looking for is coming back down to this double top. It’s because we’ve got some prior resistance there in the path to.
And so I’d like to see some sort of pattern. This is a very sloppy pennant that’s forming here. But something similar that forms down in this area would be more than ideal for a setup. At this point, though, the pound is just kind of trending, breaks above our highs over here. 6,281 are going to be good for long trades. On the short side we can afford… Well, the market pattern is conducive to going short aggressively. 6,291.
Even though we’ve got a couple of other lows down in here, because of the steepness of this angle and because we’ve got this vacuum area right here. If we do get a break to the downside, it will probably be fast and you’ll see 60 or 70 point move back down maybe to 6,190 or 6,200. All right, so here’s the Japanese yen. Over the last few days you can see this very aggressive down move here. But remember, we had our exit in place.
As the market had climbed up, of course we had a couple of different hand patterns. The first hand pattern was here, where we moved our sop up second hand pattern was here. This is one of the times where you can see the moving average was here, stock price… Stock price.
The courtesy price was here. A bit of a radical change, but we just didn’t get any sort of consolidation. Just a very aggressive double top here or an M top. You can see it looks like a letter M. And so we’ve got a stop out here. I wasn’t really looking for a stop in reverse. Of course, if you’re an aggressive trader and you took that, it’s an acceptable trade. But again, very, very aggressive. In fact, let’s get to the euro because we’ve got a similar situation in that on euro, we ran into, if you remember, on the euro was a sequence of witch saws. Right? And so as the market was chewing through this area, we got in, got stopped out, got in, got stopped out as the market was moving around. But then finally once the trend did come through, the market did make a very aggressive break to the downside.
If you remember with the euro we had a long trade over here, barely missed the stop over here. Initial stop was of course down there, moved up with depending on where you got in. If you got in aggressive, your stock moved up. If you got in where we were looking at over here on the stop and reverse, because remember we were in a short position.
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