Brutally honest analysis of yesterday

If you have read my previous post you’re aware of what happened to US dollar. And without long speeches, I had 3 trades in one and 3 trades in another direction for the reasons brought out in my previous post. And as a result, I managed to get shut off by my stop losses in ALL of them. Thus my first tiny testing capital is so-said kaputt. No worries though, we'll continue ; )

So firstly, lets analyse what I did wrong, first the general things. Like I have mentioned before, I plan to learn from my mistakes if not more, then at least as much as from my winnings.

After the big move had taken place, I looked for hours for any indications of what may happen now. I was pretty clueless, I saw no signs of ANYTHING. Not a good sign, is it? Independent of that I decided that I need to make those trades. This decision was not emotional, but they were also not rational at the time of making them as I had nothing to base those deals on. I believe my expectations about another upcoming big moves could have been correct, however, as this wasn’t based on any analysis then these trades should not have been done.
When the first big move happened during the lunch (before I made any trades) then after I had seen what happened on the market, I expected a pullback in the other direction. Why? It’s the easiest to exlane when we just take a look at the market generally – there are big moves in one direction for couple of hours and then there’s often a pullback. However, we should not expect that, we should make analysis and make our conclusions after than, not saying that after a big move there is definitely a big pullback. This might not happen.
For winning from small changes, my current platform really is does have killer spreads and in order to win there needs to be at least a 10 pip movement. Thus I’m always 10 pips behind when I enter the trade. So my next platform I will be testing on can not have more than 2-3 pip spread on major pairs.

As a next thing, I will try to analyse yesterday’s charts (I'll talk about EUR/USD) and see if anything could have predicted the big changes on the market. Yes, following economic calendar would have been a good idea, BUT signs can be seen on the charts as well, as insiders start making the deals before the masses and once masses get in there are major moves with major volumes, That’s the theory anyhow. So now my further analysis will continue with my current template analysis, could they have told me either about the upcoming move or the continuation after the first big move. Was there anything at all that could have indicated what’s about to happen or what’s gonna happen after the first big moves had taken place?

Just to bring you a bit bigger charts I give you links to my charts instead of posting them here. Plus I’ve just added an mouseover script that should show you the chart as well, in case of any problem with that be sure to make a comment.

Firstly, look at this chart .

Look at the beginning of the chart and consider that the previous trend was downtrend, now in the beginning of this chart there was something similar to Doji Star (not perfect though) together with a confirmation (the long empty candlestick). Th upper bollinger band touches the price indicating an overbought environment but RSI doesn’t confirm. Williams %R indicates overbought market, Aroon can’t be used here as the two aroons are moving side by side. Thus on this chart the only right conclusion could have been done via simple candlestick analysis. Right thing to do would have been to enter trade with rather tight stop loss.

During the slow up-movement all candlesticks were rather small.

Now Look at the second big move ( chart ) on the same chart. During the second big move bollinger bands indicate overbought market and is confirmed by %R and RSI. However we must realize that market can be oversold for a while and if we consider this chart, then the price should start moving down once the price goes away from the upper band, once %R moves downward and crosses the -20 line again, once RSI moves downward and crosses the 70 line again. I’m not saying its always so, but at least when looking at this ( chart ) it seems to be obvious, at least in this case. Note that Aroon confirmed it all at the same time as well.

Secondly, lets take a look at our second ( chart ) with Parabolic SAR and Starc bands. I have never seen Parabolic SAR form that nicely before. During both upmoves plus the following downmove could have both been suggested also via Parabolic SAR. Of course, not the length of the move, but correc direction. Starc bands pretty much showed the same as bollinger bands.

Thirdly, lets see what does our third ( chart ) looks like. As you can see, also moving averages are giving the right signals at the right time. During the first move the 5-period EMA crossed both 9 and 14-period EMA plus after the initial price jump all the EMA’s moved diagonally without many interruptions. Note that also the volumes were big during the main upwards movements.

Something that you can’t see on those charts, but what happened during the night and today is that EUR/USD started to fall. And even though during the 12 hours before the fall and after the highest top the volume ws rather minimal then now after 12 hours when the price started to go down the volumes were up again, and this could be considered as one indication of trend reversal.

So what are the main things I should have learned from yesterday and my analysis today?

Candlestick patterns often give good signs
My templates, if interpreted right, might be rather valuable (we’ll see during the next weeks)
Multiple indicators should confirm bigger price movements - %R, bollinger, RSI, Parabolic SAR, moving averages, volume. Also trendlines could be used.
If not sure, when you're hesitating, DON'T make a trade!

Brutally honest analysis of yesterday

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