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. There was a problem with the video last night, so I’m up early re‑shooting one for you. The British Pound ‑ we’re looking at a daily bar here and it’s zoomed way out, so I know it’s going to be tough for you to see a lot of the detail ‑ but what is important for you to notice at this stage of zoom is that the British Pound has come off of this high. So we’re in a short‑term downturn trend, but we’re also in this longer‑term sideways market, and it has been going on for, I believe, about ten months now. In fact, if you go back and look at the videos I shot back here in the early stages, I warned that in the currency market in particular you can get long, long stretches where the market is just going absolutely nowhere.
And so this is perfectly normal, but the one thing is this: because it has been going on so long, basically, the longer this goes, the easier it will be to break out of. Why? Well, because people get used to it. As humans, it doesn’t matter how bad it gets ‑ like you know, say, the Holocaust, where it’s just atrocious living conditions, to even something like what is going on right now in Haiti. Even as horrible as that is, it’s possible for the human organism to adapt to that environment, and it becomes normal. OK?
So we adapt very, very quickly, and we adapt very completely. So this long‑term sideways action is giving us this big, big congestion area, this big breakout area. And so if we do ‑ I shouldn’t say if ‑ when we get a breakout from this overall thing here, we can expect a fairly long trend to the up or downside. At this point, it is looking like more of a down move is in the works, just based on what is coming out with the news and the way the professional traders are talking up the market.
However, we also need to be aware that the pound has come into a support zone. In fact, it’s right about here. And you can see, earlier ‑ this was early yesterday ‑ how the market pushed down into that area and popped back up. So what we’re now looking at is a support zone on the short‑term running just underneath current price.
And so if you are shorting underneath 5908 right here, which is the low of this hourly bar, you’ve got it, but you’ve got to understand that there are some buyers out there, which mostly likely will force the market up on you. Now that we’re in the longer‑term support ‑ and this is all in the quick start videos, it’s also on discs number three and five ‑ now that we’re in the longer‑term support area, what we have to switch over to ‑ if you remember, as the market was coming down I was saying, “Well, the short side has got more room to move.” We have to flip‑flop that.
Now you can see we’ve ‑ the British Pound has this long area where there is not a lot of trading. I call those vacuum areas. Whereas on the downside there is a lot of support. So if price does manage to get above 5975, I’m looking for a break back up into 6140, maybe 6130. On the other hand, a break below the low down here, 5905, for the short trade, you’ve got to watch out for the trading all the way down to below this low here, 5864.
And really, the market has got to push through all that before it’s going to get going much to the downside at all. Now, if we zoom in here ‑ there we go ‑ if we zoom in here, you can see we’ve got the low here. We’ve also got the lows running all down through here, and then this kind of spike move. All of that is going on in this support area.
And remember, the reason why we look at these chart patterns is because they tell us a story. When these bars are pushing down and closing up over and over, day after day, what that’s telling us is that there are buyers down there. When the market makes a big push down and can’t stay down there for very long and comes right back up, again, that’s telling us there are buyers down there.
So as that process gets repeated over and over, we need to recognize that pattern. And you can see, when we come down into this area moving across over and over as well, we see the market getting down into these prices ‑ 5800 and up to about where the market is now. We see the market pushing down and then popping back up. So that’s why we’re looking for support here.
But really, now that the market has moved down into this support area, we need to start looking out for breakouts below 5780 or so, especially 5800, because if the market can get below there, then likely we have completely broken out. However, here is what we also have to watch out for: if you notice back here, the market was moving up along this angled line. We had basically a wedge pattern here.
And what I said when the market broke out down here was that we had a possible breakout, and I was waiting for the little dipper, and you can see the market pushed down and back up here. I thought that was the little dipper, but then what happened was the market did not follow through. We’ve got to watch out for that. In particular, after the market has gone through a long consolidation period, after we’ve had a trend run like this and we get this consolidation here, we’ve got to watch out for the false breakout.
When I talk about trend trading on disc number five, and even in the quick start where I talk about trend trading, these are some of the subtle nuances that, for example, with computerized trading can be difficult to pick up, but as a human being, of course, I can recognize these price patterns.
So again, just because we’ve broken out to the downside does not mean that price is just immediately going to make some massive trend move like this just to the downside. We’ve got to be prepared for a false breakout. It’s all going to depend on what the market looks like.
When this market broke out, it never looked back. When this market broke out, it had three days of downtrend, then it started to come back to the upside. So again, we’ve got to monitor momentum, we’ve got to monitor the patterns and keep our eye out for the likely scenarios.
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