Disclaimer don't listen to me, i am a demo trader that has no useful knowledge to spread:
This situation seems to be a clear reversal signal given by the market maker in order to induce the typical retail traders in the wrong direction. As you can see on EUR/USD, the movement has been mainly in the bullish (upwards) direction, we have reached a new high and this means many types of retail traders have entered the market (such as break out traders, the trend is your friend traders, support resistance trader and moving average traders < these are the people we call the 95%). At position 1 (which i have annotated) the majority of these traders will have entered a long position for their respective reasons, the market maker/ banks benefit by making the majority lose money therefore they will move the chart away in the direction of the large pool of stop losses at position 2 (which i have annotated). Not only does the market maker stop out the traders going long, they also activate any pending short orders (sell stops) at position 2; this gives the market maker the liquidity to move back in the long/ bullish direction up to position 3 (remember every time someone is buying there has to be someone selling). This second spike into the long position gives more traders an incentive to go long. Once enough people go long (this means the bank is going short) and liquidity is built up, the market maker can then reverse the chart into the opposite direction to the majority of traders. This is what we call an 'M' formation.
Don't listen to me, this post is for my own purpose.
This situation seems to be a clear reversal signal given by the market maker in order to induce the typical retail traders in the wrong direction. As you can see on EUR/USD, the movement has been mainly in the bullish (upwards) direction, we have reached a new high and this means many types of retail traders have entered the market (such as break out traders, the trend is your friend traders, support resistance trader and moving average traders < these are the people we call the 95%). At position 1 (which i have annotated) the majority of these traders will have entered a long position for their respective reasons, the market maker/ banks benefit by making the majority lose money therefore they will move the chart away in the direction of the large pool of stop losses at position 2 (which i have annotated). Not only does the market maker stop out the traders going long, they also activate any pending short orders (sell stops) at position 2; this gives the market maker the liquidity to move back in the long/ bullish direction up to position 3 (remember every time someone is buying there has to be someone selling). This second spike into the long position gives more traders an incentive to go long. Once enough people go long (this means the bank is going short) and liquidity is built up, the market maker can then reverse the chart into the opposite direction to the majority of traders. This is what we call an 'M' formation.
Don't listen to me, this post is for my own purpose.
Trade closed: target reached:
tp closed for +40 pips, i was expecting a bigger reversal but +40 pips is sufficient.
I believe price is still due to go down, however the market makers have created some consolidation at the high of the month. The purpose of this is to induce traders into a long position, the reasoning behind this could be due to the fact that the market makers still have orders to be filled before they can reverse price. Ultimately what i am saying is expect price to fall soon, when it does use a trailing stop loss like i did in case its just another impulsive move to induce traders.
I believe price is still due to go down, however the market makers have created some consolidation at the high of the month. The purpose of this is to induce traders into a long position, the reasoning behind this could be due to the fact that the market makers still have orders to be filled before they can reverse price. Ultimately what i am saying is expect price to fall soon, when it does use a trailing stop loss like i did in case its just another impulsive move to induce traders.
Trade closed: target reached:
Perfection.