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, everybody. I know the audio on this is going to sound really low, but this is my backup of a backup backup system. So if you remember, I was having some computer issues last week. They came to a head again today. Windows just absolutely crashed, so I’ve got to completely reinstall everything, and with Windows that is never a short process. There is never a dull moment here. In fact, I’m looking over here to the side to make sure that ‑ I’ve literally been installing this for the last hour or so. So that’s running in the background.
Let’s talk about what happened today. It would ‑ and then looking at this one hour chart, you can see that the Pound came into resistance here at 6300. If we look, as well, down here on the daily, you can see this was the point that we were looking for a breakout. Remember, I talked about watching for a little dipper back at this area. You can see, that came a couple of days ago, and then the pound pushed right back into the top end of its prior resistance.
Let me go ahead and zoom back out then we’ll zoom back in. And let’s take a look here, just a scosh more. There. Now, if your remember, what we were looking for was the market to clear the resistance over here. There was also some resistance back in this area. Basically, the O\Pound is coming into this very thick area where trading has been on again, off again. Buyers have come in, sellers have come in.
Ultimately, that is tough trading because what you have are conflicting ideas. You’ve got one side, which is the sellers. They’re saying, “No, the Pound should be lower.” On the other side you’ve got the buyers which are saying, “No, the Pound needs to be higher.” When we get into a congestion area, in particular a long‑term congestion area ‑ let me zoom, actually zoom in here. And you can see this long‑term congestion area. Let me go ahead and highlight it like this. It runs down, really, between 6200 and 6300.
Any time you get that, where the market is just coming into this thick area, buyers and sellers lining up on both sides, you’ve got to be on the lookout for these whipsaw days. So yes, today actually, we had one of those whipsaw days. What that means is ‑ and let’s go all the way over here to the 15 minute chart ‑ early in the morning you can see this. This is 3:00 AM. That’s right when the European session is in full swing. The market had tried to push up to 6450 and just couldn’t do it.
You had a break of our low here, very nice entry that was possible right around 5:00 AM. That’s coming through the low there of 6387. And really, towards the end of the European session you can see the market made a bee‑line for the support back on the 18th. So, push into resistance, a very fast move down.
This is where knowing what the market mechanics do, what what I call the universal laws of the market are, in order to forecast or predict some of this stuff. So, let’s talk a little bit about what to look forward to in the coming sessions, but then also let’s talk about how you could have capitalized on what was going on.
First of all, let’s go back over here to the daily. What we’ve got to do is understand how support and resistance work. Remember, if there are sellers in an area ‑ in fact, just the fact that the market was unable to hold these prices up here indicates that overall there are sellers in the market. And so anytime the pound starts to move up, in particular when it’s a fast move up like we saw today, we’ve go to be on the lookout for a reversal.
But ‑ let’s go back up to the 15 minute ‑ trying to predict this type of market action, let me tell you, is next to impossible. So, here is how the professionals track this type of move. Once we see the market moving very aggressively over here, that’s when we want to see how the market behaves up in that area. Once we see the market starting to turn down ‑ and look, you had 15, 30, 45, 60, over an hour to make this decision ‑ once we see the market coming down off of this level, we look for the break of the low.
Remember, we’re not trying to predict where the market goes. We’re not trying to get fancy. We’re trying to determine the likely direction of the market., And again, folks, if I sound like I’m yelling, it’s because I know this microphone really stinks. So I’m not yelling at you, I’m just making sure that you can somehow hear me, because the audio is probably pretty low.
So again, we’re not trying to predict the market up here. We’re combining the fact that the market is coming into resistance here on the four hour. We’re combining it with the fact that on the daily, we’re coming into this resistance area with the understanding that if the market goes really, really fast for a short period of time, it’s likely to have a fast reversal. We then key in on the break of support down here.
Remember, at this point in time ‑ this is during the thick of the European session right at the open ‑ everybody on the planet said, “Hey, we’ve got to buy Pounds.” If price breaks through there, everybody up here, folks, is losing money that bought. So we’ve got to understand that. That’s why we’ve got a good entry there.
So, coming into tomorrow’s session, we’ve got another resistance area building here. That’s running from 6380 up to about 6395. So 6380, 6395 is the key area in tomorrow’s session for the pound to break through. If it does break through there, watch for the little dipper. I mean, you don’t have to be a cowboy and try and jump in right at once. You can be conservative. Wait for the break above, then the little dipper coming down, and then if you’re ultraconservative, you can wait for a break above the high in order to get in. All of those are perfectly acceptable entries.
Now, on the short side, yes, we do have a break below 6350 that is a viable entry, but you’ve got to realize we have got a ton of support running all the way down to 6325 and a little bit below that here at about 6315. So if you do go short there, you’ve got to realize you might run into a whipsaw reversal all the way down to 6313. What I mean by that is you might get a break of this 6350 area, a very fast run down, and then boom, all of a sudden in just a few minutes the price has reversed against you.
This is where the 80/20 rule can come into play. This is where, frankly, the Forex Deal Butler software can really keep you out of trouble.
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