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, everybody. Well, it has been a very active last few sessions. Now, what do I mean by that? Well, we’ve gone from a distinct down trend. We’re looking at the 15 minute bar here first. So, we’ve gone from a distinct down trend to this chopping back and forth motion, but this activity has, at least, been far ranging. Look at this. We’re going from 5560 to 5650, almost a hundred points top to bottom. Now, the reason why this type of trading can be so confusing is because the market is trying to transition. All right. Remember, if there are more sellers than buyers, the market goes down. If there are more buyers than sellers, the market goes up.
So, if we’re dealing with a liquid, active, world‑wide global market that goes sideways, what the heck does that mean? Well, it means we have both. We’ve got the sellers pushing the market down from the top. We’ve got the buyers trying to push the market up from the bottom. Nobody at this point is winning.
What that means for us, my friends, is that we have an opportunity because at some point one of these groups is going to be wrong. If that’s the sellers, then you’re going to see the market break to the upside. If that’s the buyers, you’re going to see the market break to the downside.
Now, where a lot of traders can go wrong‑‑let’s shift down to the four hour bar here. Let me zoom in. Where a lot of traders can go wrong is when the market trends like this. We’ve had a nice trend from 6400. The second breakout which we were talking about back in January came just above 6100, and so call it 650 points worth of market move, worth of trend.
When that happens, the rookie trader and some professional traders alike start thinking like, wow this trend just has to keep going forever which we all know and we can say, “We know it’s not going to go forever, Mac. What are you talking about?” But then, we trade like it is. We start thinking like it will.
And so, what we have to start doing is transitioning once we see sideways markets, these up and down markets. Actually, this one went down; popped back up; down. In other words, it looks like this: boom, boom, boom, boom. We’re getting this W bottom. When we start to see this, we need to sit up and say, “Hey, looks like we’ve got compression. Looks like the market is trying to put in, at least, a short term bottom.”
Now, let’s go over here to the‑‑my daily bars still have errors on them. I don’t know what’s going on with that. Let’s go over here to the hourly. Let’s zoom in a little bit more. All right. So, what we can see here is more detail. We’ve already seen this on the 15 minute bar. Really, we’ve got to draw the pattern like this for simplicity sake, and what we have here is a very sloppy flag pattern.
We’ve got the market kind of poking out on the top. It’s kind of poking out on the bottom. Again, it’s not a nice, neat picture, but it’s still telling us that we’ve got compression. We’ve also got this. Whoops, let me use the straight line right here. That’s what this is. This is a wedge, right? Things are coming up from the bottom here. We’ve got the buyers coming in, pushing the market up at the same time that the sellers are being aggressive and pushing the market down.
Either way, it just points to more compression. The buyers are now becoming more aggressive. The sellers are meeting that aggressiveness, not with enough force to push the market down but certainly enough to hold the market in place.
What does all this mean? Well, let’s go back to our four hour bar. We have a vacuum area now, really from about 5900 down to the top end of our breakout zone which is going to be at about 5660, so from 5900 to 5660. If we can get the market pushing above 5660, I’m expecting us to see a price of 5900 very, very quickly.
Now, I know these daily bars are really screwed up. I still don’t know why. Ah, 5600. Let me just make sure the prices are right. OK, they are. All right. So, let’s look at the daily bar. I realize that it looks like there’s just one day pushing the market down. We all know that’s not the case. My point is this. If the market does manage to break further to the downside, what we have here is a lot of churning, a lot of back and forth, a lot of buyers, a lot of sellers, a lot of people… I keep saying a lot. Let me rephrase that.
We have areas where both buyers and sellers were willing to draw a line in the sand. We’ve got one down here. We’ve got one right here. Whoops, that’s not quite straight. We’ve got one right here. What all of this means is that if the market moves down, expect it to be choppy. Don’t expect the market to drive all the way down and go back down to 3800. There’s far too much activity for that right now. So, what that means is I like the upside better, meaning as far as fast moves, as far as the market getting there very quickly versus what might be going on on the short side.
So, selling, yes there is this angled line right here. I think to be conservative that means we’ve got to sell underneath 5660 with a little dipper. In other words, we need to wait for the market to break below 5660; come back up for the retest or we need to wait for the market to break low‑‑our low’s here. That’s pegging it at 5548. That means the market break below 5548 and come back up for the retracement.
If we don’t get either one of those, because of the choppiness in the market I believe it’s better to stand aside. If you’re an aggressive trader and you can afford to get stopped out a couple of times in a row, yes it’s still viable for an auto pilot trade, meaning taking the market below the low over here which is below 5566 or below the low over here which is just below 5541. On the top side, things get a lot easier. We’re trading above the high over here at 5659.
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