Zooming Out

“Zoom out” is a meme in the crypto world, but it’s exactly what I’ve been doing the last 24 hours or so. I’ve caught myself getting too involved with lower timeframe charts and failing to make more calculated moves based on a larger technical picture. It’s easy to do, but that’s not much of an excuse.

It’s pretty clear to see where bitcoin is from a long-term perspective. The daily chart shows a tightening range in a downtrend; I am not unique in spotting this, not by a mile. Generally, these patterns break down.

But the technical picture in Ethereum is a bit more interesting to me. (more…)

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Deceptive Divergence

I’ve seen a lot of folks on crypto twitter posting the following chart and pointing to the divergence, stating it’s a reason to get long:

First, as I always say, divergence on its own is never reason to get long or short. Divergence is a supporting criteria, not a primary one.

But more importantly, this isn’t valid divergence. The scandal!

Most new traders don’t understand it. Lower low on price and higher high on RSI, right?! Nope, sorry… not that easy.

Some more experienced folks will tell you that it’s not valid because it’s “too far apart”. And while this is kind of true, it’s not the whole story. Folks saying this are either saying, “I don’t really know why it’s not valid, but I want to sound like I know what I’m talking about”. Or, “It’s too nuanced a conversation for me to have right now”.

Well, here’s the nuanced version for those that care to learn. (more…)

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EURUSD has been like watching paint dry

Last week I was short EURUSD until I wasn’t. I flipped my position, taking a slight profit, and made some good money (on paper) being long. I decided to hold through the weekend. But it’s been a pretty lame start to the week.

Don’t get me wrong, the overall trend right now on the daily and 4-hour charts is bearish. But the 15-minute and 1-hour charts are both currently bullish with their SMA’s purely aligned to the top side:

(more…)

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GBPUSD At An Inflection Point

Every strong trend is eventually broken, or at least takes a breather. It’s important to recognize when this transition is taking place in order to be able to respond accordingly. If not, it’s a classic example of not being able to see the forest over the trees. Getting caught committing too heavily to a trade in either direction when a pair is in transition can result in multiple strings of loses. Nobody wants that!

So what does a transitioning trend look like? The other day I talked about GBPUSD and how the higher timeframes were in obvious downtrends. But what I didn’t mention too much was the lower timeframes and how those are actually showing potential uptrends. This is a classic example of a trend that is now in transition, and the biggest tip off to this is often our trend and trade tracker tool. Here’s what it was showing yesterday:

Yesterday the weekly and daily timeframes were both in downtrends, yielding a sell signal on the daily chart. But the hourly and 15-minute timeframes were in uptrends, yielding a buy signal on the 15-minute chart. (more…)

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Forex Trend Trading: The Ultimate Guide to Determining Trends

One of the most popular posts on this blog is this one on how to identify a forex trend. And while it’s a great overview, I always knew I wanted to do more of a deep dive into how I really think about forex trend trading.

That post generates a lot of questions on forex trend trading, and specifically how to properly identify forex trends. On the surface, this question seems simple. In fact, it seems almost obvious. Currency pairs trade in only three directions: Up, down, or sideways, right?

While that’s true, it can get much more complicated than that. How do you know an uptrend is really an uptrend? What actually defines a sideways trend? In essence, what makes a forex trend a specific trend? (more…)

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How to Use the Forex Trend & Trade Tracker Tool

I recently launched our new tool, the Forex Trend & Trade Tracker. Going forward I’ll generally just refer to this as the Trade Tracker or just the Tracker, but understand that the trend aspect is just as important as the trade indicating portion.

In this post I’m going to run through a few things: 1) Why I developed this tool; 2) How it works; 3) How you should be using it in your trading every day.

Let’s get started! (more…)

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A Textbook Example of Divergence Trading in Forex

In this post I’m going to explain what divergence trading is by breaking down textbook example of divergence and showing you how we traded it here at FMM.

Early last week I had a bias to sell GBP/JPY. For a number of reasons, I thought this pair was heading lower. In fact here is the chart I was looking at to start the week:

GBPJPY-4H

The problem, as I stated in my forex trading weekly outlook, was that

“…we’re now trading in no-man’s land, sitting almost smack in the middle of the channel.”

So while you could take a trade at this point, there’s still a good chance that price pushes higher before going lower. And that’s exactly what happened. Price pushed up to the top of the channel. (more…)

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How to Determine a Forex Trend

Each week I like to look at the forex markets and get an idea for where I’m looking at potential trade opportunities. In the past, I’ve focused this discussion on GBPJPY because that is the pair I’ve been most dedicated to.

However, I’m now starting to spread out into other pairs more evenly. I’ve also implemented a number of trade rules that will better aid me in getting into and out of trades. (more…)

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Forex Trading with Supply and Demand Zones

Today was an incredibly interesting and eventful day for forex traders. We experienced a classic whipsaw where US equity markets rallied hard on the open and the gave up all of their gains plus more than 100 points into the close. Days like this are notoriously tough for traders; I can promise you, many of a retail forex traders’ accounts were busted. Experienced traders know how to profit from whipsaw-like days while smart beginners know enough to stay out and refrain from trading completely.

(more…)

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