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Forex Traders Daily

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Trapped Traders Daily Analysis

Buying EURUSD

November 25, 2016

The trap we’re going to look at today is what I refer to as a structure failure trap. Part of understanding how to trade traps effectively is to actually put yourself in the shoes of the vast majority. The different types of traders out there are varied as you probably know. However, there aren’t too many major core disciplines, and one of the major core disciplines that traders attempt to trade is retracement, right?

So, in the normal sense of a retracement, traders are looking for price to advance and then to retrace and, to a certain level, usually some type of Fibonacci level. So, 61.8 percent is a very common one, right? The golden ratio. And then look to go short, selling here. Now, the interesting part about trading traps is that what we’re trying to do is we’re trying to place ourselves in the shoes of our opponents based on their strategies and based on the fact that we probably have done this ourselves, so we know where these traders are.

So, once you have something that resembles a setup, the key part to the trap being set for want of a better phrase is the price action at the hard right edge that confirms or appears to confirm the move. It’s like an optical illusion in many ways. The hard right edge is this; is essentially the big void that we all have to the side of our charts, right? So, we tend to kind of not pay much attention to that and what we’re usually focused on is the historical structures and any type of analysis that we’re doing for that particular trade.

So, in this case, we’ve got a Fibonacci – 61.8 percent – pullback. It seems like we’ve had a series of lower highs and lower lows, so it’s a definition of a trend. The market’s trend. And puts in a new low. Pulls back. Looks like a great place to get short. And usually an additional benefit to that type of analysis is if you’ve got some prior support that breaks, as I was talking about, and the idea is that it then in the future becomes resistance. So, this is what tempts the trader in. It’s all of this analysis, but the final part that gets you to take some risk is the price action that seems to confirm what you believe is going to occur (i.e., the market should follow through).

You get some type of confirmation of that. So, as you can see here, we’ve got a market trending, right? We’ve got some historical support. I don’t buy that that’s support by the way. It may well be, but it doesn’t necessarily have to be. It can be just profit taking. But as it breaks out through that prior level, it pulls back. That is a prime location for traders to go short. And if you know anything about candlestick patterns, we’ve got a negative candle at the level. This looks like a great place to take a short, right? That’s what people believe.

So, all the focus is in on that hard right edge and the price action in the here and now, and it looks like this seems like a good place to take a trade. So, the trader then actually spends some money, and that’s the key, key part to this. Without that final part, you may do all the analysis based on the historical price and based on your Fibonacci’s, or whatever you use for your analysis, but you’ll not actually take the trade if in the final analysis the price action doesn’t look like it’s confirming the move because that’s what gets you to actually pull the trigger, right? It forces you in off the sidelines.

And then once you come in, the market starts going against you. And in essence, at this point, now you are trapped. Okay, so the market has now gone against you. And what you really want to do to try and benefit from these concepts is put yourself in the shoes of that individual who believed that the market was going lower. Maybe you put your stop above there. Maybe you go a little higher. There’s definitely stops above both of those levels. Maybe you placed your stop down here initially, and as it goes against you, you might still be convinced that this is still heading down. Still trending. You might give it a bit more room, so you cancel your stop loss.

You know the story from there. And then the trader capitulates outside of the process, etc. So, at the hard right edge, when this was playing out, the people who went short in here, that sold in here – they didn’t anticipate this occurring, but now they find themselves underwater and being squeezed. And this is really the process of one type of trap. There are many. I’ve identified probably in excess of 20 different types of traps, but if this continues higher and you get a bit of a pullback, this doesn’t look like a terrible place to get long.

And if you’d like to learn more about trading traps, I’d love to invite you today along to my Trade Room. Just click the button below and it’d be nice to see you there.

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Forex Update: Testing Major Resistance Zone on the AUDUSD - YouTube
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Forex Update: EURUSD Watching for Breakout or Reversal - YouTube
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Forex Update: Selling GBPUSD Under the Trend Line and Resistance Zone - YouTube
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Forex Update: Looking to Sell NZDUSD on Retest into the Resistance Zone - YouTube
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Transcript of Video

From Forex Traders Daily, this is your daily analysis with Ross Mullins, live from Richmond, Virginia.
Hello everyone, this is today’s video analysis for July 27, 2018. Today we’re taking a look at the New Zealand Dollar versus the US Dollar [NZDUSD] for today’s trade analysis.
Of course this currency pair has been in an downtrend for quite some time. We’re going all the way back into April of this year, where we capped out at the top of the black trend line close to the 0.7400-level all the way at the top of the chart. Then we started moving lower. First leg pressuring down into the 0.6850 or so level. A little bit of a rally back into 0.7050 and then the second leg pushing all the way down to the low on the chart into the upper-0.6600s.
Since then, we’ve been somewhat of a range or consolidation here for the NZDUSD right inside this black box, bottom right-hand corner of the chart. Pink zone as our support. Green zone as the resistance. And the blue zone somewhat as a hinge point. Above it, heading to the green zone. Below it, heading to the pink zone.
So, let’s go ahead and concentrate on this area here. Let’s zoom it in and we could see the green zone as resistance. Over the past couple of days even, we’ve seen the market challenge between 0.6830, 0.6850, and now selling off and falling back underneath the blue zone. The previous times we’ve done that, we could see over here the first time getting underneath the green zone. Back under the blue zone. Heading down to the pink zone.
Take a look at that. That’s very significant here for this pair right now, is that underneath. Every time it was above the blue zone, getting back underneath the blue zone, it head to the pink zone. So, that’s critical for today. We see it above the blue zone at the green zone. Back under the blue zone. So, historically speaking, the statistical fact is once it does that, there’s this expectation that it will continue to head back down towards the pink-shaded area into the 0.6745, 0.6725-level.
With that expectation, we could be looking for shorts underneath the blue zone, targeting the pink zone. Of course if it can ever continue the trend and continue to break underneath the pink zone, we’ll look for it to go lower. But for right now, the easiest setup here is under the blue zone, we head back down to the pink zone. The risk is pretty simple. The risk in this scenario is we just don’t want it to get back above the blue zone.
If it gets back above 0.6800 and the blue zone, it will likely go back to the green zone. So, for the day today, it’s pretty easy to figure out that if you are looking to trade this, you don’t want to buy it under the blue zone. Likely resistance as we’ve seen historically underneath the blue zone, but more likely you’re looking for a setup to go short towards the pink-shaded area. And the only reason you would buy this is that it was at the pink zone or above the blue zone.
Let’s take it on down to the four-hour timeframe. It doesn’t really change it, but gives us a little bit of a different perspective here. You could see historically, again, multiple times. I’m just going to take a couple of black X’s here. You could see under right here, where the black X is. Under the blue zone. Went to the pink zone. Far left-hand side of the chart, under the blue zone. Went to the pink zone. I could put multiple X’s on here. Many times finding resistance into the blue zone when it was underneath it, and the only reason it went higher is it got back above the blue zone.
So, today, again, we are underneath the blue zone. 0.6780, 0.6800 is that blue zone. And so, for the day today, as long as it’s underneath there, we have this opportunity for it to go back down to the pink zone or lower if it breaks through that pink zone. And of course if it breaks through, historically speaking, there’s potentially for it to go down to the yellow-shaded area down at the bottom of the chart. And I’ll bring that over a little bit as well.
So, when do we sell it? That’s probably the first question. Well, to have the lowest degree of risk, we want to sell as close as possible to resistance. Stop loss is going to be above the blue zone. So, if we were to sell it now, our stop loss is higher. Let’s just measure it from current market price up here. You’re looking close to 50 pips if we suppose these stop losses right about right there.
The other side of that is if it comes back up. If it makes a little bit of a rally from current market back to the blue zone, then we’ve cut our risk a little bit. If we were to sell it at the blue zone, you’re now looking cutting your risk about 20 pips. Then of course your potential reward at that point is much greater as it falls back down to the pink zone. So, if I’m looking to go short, I actually want to do it as close as possible to 0.6780. Give me a better risk-reward profile for going short.
Now, the other side of that again is that it breaks above the blue zone. That’s the risk in this scenario. So, I’m looking to go short under the blue zone. Target the pink zone or lower for the NZDUSD today.
From Forex Traders Daily, this has been your daily analysis with Ross. If you would like to get Ross’ analysis on all the currency pairs he’s watching and all the trades he takes today, join him in his live Trade Room by clicking on the link below. Please leave any comments you have about today’s video in the comment section below.

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Forex Update: Another Opportunity to Short EURUSD at the Resistance Zone - YouTube
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Check out today’s free Forex analysis video provided by Ross Mullins.

Transcript of Video

From Forex Traders Daily, this is your daily analysis with Ross Mullins, live from Richmond, Virginia.
Hello everyone, this is today’s video analysis for July 26, 2018. Today we’re looking at the Euro versus the US Dollar [EURUSD] for today’s trade analysis.
It’s been a pretty slow week of market movement. We haven’t seen any significant movement really across many currency pairs this week. The USD has been very sleepy this week and hasn’t made any significant moves quite yet. No real trending moves if you look at most of the US currency pairs. No real good trending moves this week. We’ve been consolidating, contracting within some pretty tight ranges here for many of the US currency pairs.
Let’s go ahead and look at the EURUSD for the day today. And as you could see, even going back a couple of weeks, we’ve been tighter and tighter within this triangle pattern between support and resistance. We’re looking at the blue zone as our resistance right now, 1.1705 and 1.1745. It’s been finding resistance there for quite a long time now. Support even into the yellow zone, 1.1645, 1.1620. And you could see the rising lows along the blue trend line. Falling highs along the black trend line as we’ve seen this contracting or consolidating pattern here for the EURUSD.
Green trend line of course over here clearly a downtrend. No questions about that. We’ve just been bouncing around between support and resistance for the past few days. Even if we zoom it in a little bit here on the daily timeframe, we just look at the past four days. We’re looking at today’s candle. We’re looking at Wednesday, Tuesday, and Monday. And really if I just take a box right here and put it in here, you could see that red box. That encompasses this week’s movement here for the EURUSD.
So, again, there’s not a whole lot Monday, Tuesday, Wednesday, and now Thursday of movement here for the EURUSD. We haven’t seen any breaks above the resistance. We haven’t really seen any significant breaks below the weekly support, bottom of that red box. We’ve just seen it bouncing around in here for the past couple of days. So, if we’re looking for an opportunity today, unless we see some significant breakout scenario, I think the best opportunity for lower risk and higher reward here for the EURUSD is potentially selling the top of the pattern.
Again, we’re back at the top of the triangle pattern. Falling highs. We’re into the blue zone, where we’ve seen historical resistance. That may become our lowest risk and highest reward opportunity. Risk of course is that it gets above the blue zone. So, if you decide to take the short, the stop loss is pretty easy. You just don’t want it to break back above the 1.1745-level.
Buying right now just doesn’t seem like a logical scenario until it breaks through 1.1745. Then that changes our mind about it. But until it breaks through 1.1745, I don’t think buying right now makes much sense here for the EURUSD. I think you’re more likely looking for the short side here into the blue-shaded area. At least that’s better risk versus reward here for the EURUSD until something significant changes.
Until likely we go over here to the dollar index. We see it either break through this green support right around 93.90, 94.10, or suddenly bounce back higher as it has done many times over the past several weeks here for the dollar index. You come back to the EURUSD. That’s a similar situation, yet opposite here at the blue-shaded area.
Take it down to the four-hour timeframe. And again, it really doesn’t change a whole lot. I could take that same box and bring it back here. Not here in this blue-shaded area, where we’ve seen such significant resistance. Again, it just doesn’t make a whole lot of sense to go long right now unless we see it break above the blue zone. More likely we’re looking for shorts.
We need the USD to rally today for this to go short. We do have some news later on that could affect the EURUSD or really the USD coming up at 8:30AM Eastern US time. But until that happens, we’re just looking for the market to make some sort of breakout scenario. Underneath the blue zone gives us confidence it’s going to go down towards the yellow zone. If it gets above the blue zone, of course we’d look for it to continue to rally higher and change the direction back to the upside and potentially head back up to 1.1820, the purple-shaded area at the top of the chart.
So, we really need it to get outside of this blue zone today for our next trading decision, but really not looking for the long shot. More likely the short shot here for the EURUSD today.
From Forex Traders Daily, this has been your daily analysis with Ross. If you would like to get Ross’ analysis on all the currency pairs he’s watching and all the trades he takes today, join him in his live Trade Room by clicking on the link below. Please leave any comments you have about today’s video in the comment section below.

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