Another way of looking at the markets is from a ‘market profile’ perspective and in particular ‘points of control’ where there is generally a two way market between buyers and sellers (auction market theory). Current and previous ‘POC’s highlighted on the chart below with purple lines.
Ideally as a trader, one should buy below market value and sell above it (obviously) that is the nature of ‘trading’ whether it be trading in second hand cars, TV’s or even currencies or metals. However to complicate matters the perception of where value lies is constantly changing.
Unlikely to be successful trading if you have no idea of where value lies on the chart, and where it is going to. It would be likely going to an auction for secondhand LCD TV’s at £200 a pop when you could buy new for £150.
The short sellers came in to ‘squeeze’ the GBPUSD long’s. The squeeze is represented by the dark grey area, which pushed priced through a previous liquidity area (purple outline).
Suits me, because I’d like a much lower price to get long.
As price has not been squeezed below the option barrier and below the previous days ‘inverse range low’ I would expect GBPUSD to at least test the previous low.
Something like this is a viable ‘scenario plan’
Low target two (LT2) is also a possibility at around 1.53475 is also a possibility. At least for a liquidity grab
I think big sellers will start to re-emerge above 1.5500. Will buying at below full value, or at pullbacks to liquidity areas on smaller time frames
Nice pullback to demand today on GBPUSD
The lower area dating back to 10th Feb may have been taken out now (puff!) but it gave a good response following BOE Inflation Report this morning.
Another area may have formed slightly above it though.
Little reaction in the market seen, GBP already offered:
These are the little ‘ledges’ of demand it helps to pay attention to if like me, you think that you ought to be in a trade, before price moves. This little level on GBPUSD appeared at just below value (where the liquidity is).
Trading (IMVHO) is all about levels and not chasing momentum up, down and all over the chart. The rate of return of passive buyers and sellers, always better than aggressive traders.
A recurring theme of this blog will probably be, assessing where ‘value’ lies. Really you should attempt to buy at below value and sell above it and vice versa . Makes sense?
Bearing in mind that the markets assessment of value is constantly changing due to news events and the fundamental macroeconomic situation.