NZDUSD H1 – Trade analysis

2015-10-21 19_35_35-NZDUSD,H1

Today I would like to analyze I think the most common mistake amongst traders – opened trade at the top of the market, right before price reversal. The professional knows people react to the two fears – the fear of losses and the fear of missing out, and so trades with this in mind.

After substantial rises, the ‘herd’ will become annoyed at missing the up-move, and will rush in and buy. This includes traders who already have long positions, and want more. The problem is that usually smart money is selling at this moment. They do not have to wary that this selling will put the price down, because they have plenty buy orders coming into the market (from weak holders) which will support the prices (therefore volume is high). Without interest in higher prices from professionals, price will inevitably fall. This will usually happen after up-thrusts: a wide spread up during the bar, accompanied by high volume, to then close on the middle or on the low.

  1. At the time of entry background is strong – o’k
  2. Dynamic trend turned from red to green – o’k
  3. Weak signal at the top of the market without strong signals at this price level (In VSA it is an up-thrust) – Not o’k
  4. The trade is opened when the price moved too far after trend changed – not o’k

During upward trend it is better to wait a reaction to this trend and enter the market after strong signal which would suggest that the reaction is over and rally will be continued.


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