Transitional
markets are the most difficult to gauge since the dominant psychology is
shifting and potentially even reversing or pausing. What is a transitional
market? The reading is taken from the daily chart and when the daily chart has
been trending (for example) downward as the EUR/USD has been, transition occurs
when the downtrend loses bearish sentiment and momentum and the 34EMA Wave
begins to flatten out.
Shorting the EUR/USD’s downtrend has been a steady bet since the
GRaB candles went red and the 34EMA Wave angled downward to “four to six o’clock”
on November 1, 2011 and November 15, 2011 respectively. These two events in
combination revealed first the sentiment and momentum turning bearish and the downtrend
following that.
Past
performance is not indicative of future results
The two arrows point to the downtrend
dominating the EUR/USD. Currently however both sentiment and momentum are on
the side of the bulls as prices are testing the validity of the 34EMA Wave’s
resistance. The dynamic resistance provided by the 34EMA Wave as well as the downward
angle of the trio of Exponential Moving Averages were defined the downtrend in the
pair.
The challenge with the transition of a trend is twofold. First is
the trader’s own ability to recognize that the trend has either shifted or
reversed and second is the ability to act on that information. After a
particular strategy has been working for some time - as short selling has in
the EUR/USD - it can often be difficult to reassess and consider other entry
strategies rather than “blindly” going with what has been working.
Do not make the mistake of assuming that if the EUR/USD is no
longer in a downtrend that it is now in an uptrend. This would be a mistake and
I see plenty of opportunities for bears to still step in between 1.3050 and
1.3200. However there is the distinct possibility that the downtrend could
continue to lose bearish momentum and begin to chop sideways between the 50
period SMA close and the low at 1.2623.
As an active forex trader and Chief
Currency Analyst for InterbankFX.com I do write for a number of sites all over
the web and I am happy to say that I will be posting updates atwww.IBFXconnect.com. MyActivity Boardwill feature the trades from my trading account as well as
intraday commentary.
Start the discussion! Questions?
Comments. Leave it here at the Daily Forex Trading Edge for Raghee to
personally answer. Using the icons at the top of the article to forward this
update to a friend via email, post it on Google or Facebook or simply print it
out for reading later.
Forex
trading is one of
the riskiest forms of investment available in the financial markets and suitable
for sophisticated individuals and institutions. The possibility exists that you
could sustain a substantial loss of funds and therefore you should not invest
money that you cannot afford to lose.
Posted By:
Raghee Horner
Raghee Horner, chief currency analyst for Interbank FX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.
Transitional markets are the most difficult to gauge since the dominant psychology is shifting and potentially even reversing or pausing. What is a transitional market? The reading is taken from the daily chart and when the daily chart has been trending (for example) downward as the EUR/USD has been, transition occurs when the downtrend loses bearish sentiment and momentum and the 34EMA Wave begins to flatten out.
Shorting the EUR/USD’s downtrend has been a steady bet since the GRaB candles went red and the 34EMA Wave angled downward to “four to six o’clock” on November 1, 2011 and November 15, 2011 respectively. These two events in combination revealed first the sentiment and momentum turning bearish and the downtrend following that.
Past performance is not indicative of future results
The two arrows point to the downtrend dominating the EUR/USD. Currently however both sentiment and momentum are on the side of the bulls as prices are testing the validity of the 34EMA Wave’s resistance. The dynamic resistance provided by the 34EMA Wave as well as the downward angle of the trio of Exponential Moving Averages were defined the downtrend in the pair.
The challenge with the transition of a trend is twofold. First is the trader’s own ability to recognize that the trend has either shifted or reversed and second is the ability to act on that information. After a particular strategy has been working for some time - as short selling has in the EUR/USD - it can often be difficult to reassess and consider other entry strategies rather than “blindly” going with what has been working.
Do not make the mistake of assuming that if the EUR/USD is no longer in a downtrend that it is now in an uptrend. This would be a mistake and I see plenty of opportunities for bears to still step in between 1.3050 and 1.3200. However there is the distinct possibility that the downtrend could continue to lose bearish momentum and begin to chop sideways between the 50 period SMA close and the low at 1.2623.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
Start the discussion! Questions? Comments. Leave it here at the Daily Forex Trading Edge for Raghee to personally answer. Using the icons at the top of the article to forward this update to a friend via email, post it on Google or Facebook or simply print it out for reading later.
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
Raghee Horner