If you’re busy during the day and maybe full-time employed, you’re gonna love this article.
Swing trading off the daily chart is your thing. Good Daily or Weekly price action signals like insidebars, bearish or bullish engulfing bars, and pinbars on the daily chart are rare.
Traditionally, pure technical traders look for these signals at prominent support or resistance areas and scrutinize where exactly those candles closed to see if it’s worth considering the setup. Furthermore, a sound technical trader would be looking for first trouble and noise areas on the charts to look for a potential take profit level.
We, Speculators, approach daily price action signals very differently. We see these signals with more significance, as these big reversal moves happen on the back of a shift in sentiment. That’s worth a lot of money.
A simple example, GBPUSD has been climbing the charts for some time. The market broadly expected a rate hike from the Bank of England, which is a positive factor for GBP. However, bad data hit the economy and the head of the BOE hints that a rate hike is unlikely in the near future. Naturally, the pair reverses and prints a bearish engulfing bar on GBPUSD. We speculators see that as a shift in market sentiment.
Daily order flows halt a sudden sharp move lower, otherwise, the pair would reverse 500 pips on the spot. Logic dictates that prices are about to crash lower as the recent bullish build up is set to erase all gains.
In that scenario, it’s a very easy decision, selling the pair off of that Price Action signal. Simply put, the incentives that drove the pair up are not in play anymore. Quite the
opposite, they are contrary to what they were a day ago. That’s a green light to sell as market is caught off guard.
These setups are very enjoyable to play. Logic coupled with robust Price Action is a speculators dream. Below is another example;
USDCAD was gaining ground on better U.S. performance and a vivid outlook for Canada. The Bank of Canada‘s head Poloz spoke on the day of that pinbar. His speech delayed further rate increases beyond markets anticipation and added fuel to the fire. Consequently, price action was dragging CAD$ lower or in other words boosting USDCAD over 400 pips higher.
These Price Action setups are commonly observed by all traders. A true Speculator connects the dots to a real-world story and has the confidence to do something that is the hallmark of strength, sit tight and let the trade ride it’s course.
“Traders who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make the big money.” – Jesse Livermore
If you spot a Daily/Weekly Price Action signal and like to understand the drivers behind the action, or are simply unsure if the signal will create a longer lasting effect, drop us a message on twitter @zfxtrading or @leohermoso or join us on the speculators trading room . Where we identify these opportunities on a daily basis and trade them live.