Forex Traders Daily
Trapped Traders Daily Analysis
Stop Hunts off Interesting Levels
January 10, 2018
Hello traders, Mark Chapman here. I hope you’re well. We’re taking a look at the NZDUSD. This is a daily chart. And if we drag the whole chart to the left, you can see this level has been of significance. It’s not the most perfect-looking level. It gets nailed a few times in there, but then it starts reacting in a pretty repetitive fashion. I won’t draw them all out, but you’re getting the idea. There’s plenty of action in and around this level.
And then we go forwards to more recent times and it reacted off it again. Just make sure it is behaving like that in more recent times because if it sort of is a mess, it’s not perfect in here obviously, but in here it respects it and in here it respects it. Actually it’s not bad there, but then it nails it a little bit there. A bit of a stop hunt off that level for those with the good eyesight.
So, just quickly. There’s the entry cheese. People go long. Place their stops below that structure and then they get nailed, and then boom, it goes up. It didn’t go for very long mind you, but nonetheless it did. So, anyway. Here’s the level and price is back into the level. On the daily, it isn’t particularly exciting. It’s okay. It’s not bad entry cheese. We’ve seen better on a daily.
If you drop to the four-hour though, it looks a little bit more exciting. There you go. So, we’ll include this reversal candle in there as well because that would’ve looked very tempting in real time. You’ve got all this sideways indecision. Doji, spinning tops, etc. Hammers. The whole thing. And usually that’s an indication of a potential change in the direction.
So, what’s the change in direction? Well, if it’s been going up, then it’s probably going to go down. And don’t forget we’re going back into this level, so people would have eyeballs on it. Negative price action. Look at this wick. This would’ve dropped and would’ve looked negative as well. You’ve got all this entry cheese in here. Probably a little bit of a pullback in there as well on the lower timeframes.
If you were to go and have a look, like a 61 percent fib. Something like that. Well, I’ll tell you what. Just for kicks, we’ll go and have a look. There’s the drop. 78.6. Close enough. So, people would’ve gone short in there, so you’ve got retracement traders. You’ve got breakout traders. So, you’ve got the actual level itself. People just selling off the level itself and then you’ve got, as price drops, pulls back. There’s your retracement traders. And again. And again. And then you’ve got breakout traders when price breaches down below that level.
They’re going in short in here. Then you get some retracement traders getting caught right at the lows. Caught. Caught. And now up. So, the logic is all these people are placing their stops somewhere above there. Not all of them. You can make an argument that people are placing these minor swings, but off the level certainly enough that better retracement. More legitimate retracement rather.
You would imagine that’s what they would do. So, going back up. So, now, as those traders were looking at the level, believing that it would drop. It’s a nice target as well by the way if you look at that broader area. Place their stops above the level like that and now, as price continues on, they are increasingly coming under a bit of pressure. So, just ask yourself the question. If you were a seller in here, you’ve taken that trade off the level. How would you be feeling about price and your trade currently? Not good, right?
And there will be some stops getting triggered now as people just place them above that higher structure, but it’s really that area. I would imagine most people would go above certainly both of those areas combined. So, there’s people getting stopped out and the idea would be that this would follow through. Cream all of the stops and then you would have your manipulation and down.
Nice pair in terms of fundamentals, so this looks like a decent trade. It’s not quite there yet, but definitely keep an eye on it.
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