Addicting Adrenaline Fueled Adult Cowboys and Indians….the FED Rate Decision (rules of pattern recognition #3)

Note, Darth Vader and the Dark Side connotation with the mouse image below ….

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My biggest LOSSES were back in the day trying to trade the FED Decision in the spot currency markets.  There I said it.

What I came to realize, for me – maybe not for you – is its addicting, adrenaline filled adult version of Cowboys an Indians.  I can’t even begin to estimate the number of people frantically clicking their mouses for BIDS and ASKS and seeing the easy money then evaporate into the losses but then turn into winnesr and then losers and then, ultimately, closing the position at the market and saying – “great I made money” or “I am so thankful I am out of the market.”  Come on, admit it, if your a trader you’ve more than likely jumped into the cage with the gorilla’s juggling dynamite.  (OBTW, the dynamite is lit – which means, it will BLOW UP)

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Go ahead, click that mouse at 2 EST and you might as well be throwing money up into the center of a tornado with an  insane idea that you know where the money will land. (hint: you don’t)

How big is the Spot FX currency market?

average-daily-trading-volume-2

(note, at any given time the “retail” market is able to trade roughly 1.5-1.8 trillion)

so, what do you do?  well you plan … you play “if-then” and look to enter the market long after the chaotic swings. Trust me, this takes discipline, letting 200+ pips move go in whatever way they are going to go and – sit on your hands.

#3 – as a discretionary trader and somewhat impulsive personality – I have a rule of life: DO NOT TRADE W/IN ONE HOUR of any major fundamental news announcement.  NO MATTER HOW BIG THE MOVE.

I’m not trying to preach here – I’m reiterating my gameplan for today at/around 2 EST.  Bottom line is there is no gameplan – I’m NOT going to trade a FED RATE announcement.  I will watch the chaos like a sniper and prepare my next move … why?

Well, as you can see over the past couple posts the USD is at/approaching a crucial juncture.  I honestly don’t know which way it will go but we have MAJOR patterns on the EURO, POUND, YEN, AUSSIE, KIWI that need to work themselves out.  The EURO has been in a trading range for a YEAR.  It’s also showing some similarities to the bottom that was formed in November 2000.

So, the charts below are going to be my gameplan for post-FOMC tonight around the Asian open.

CHEERS – Bart

EURO MONTHLY:

  • deeply oversold – the most ever since 2000
    • consolidation occurring like 2000.  should resolve soon
    • RSI butting up against resistance (polarity)

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EURO WEEKLY:

  • note the RSI has “recovered” but isn’t in the oversold region of the past rallies – it has “recovered” with no real move UP – it’s consolidating.
  • note the contracting triangle

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EURO DAILY: here’s my gameplan for the EURO in a nutshell

  • the PATTERN shows a consolidating triangle.  they occur in 5 waves a-b-c-d-e and the “wave” relationship should be .618 of the preceding wave.  the “bc” wave has done that and we have a very nice pattern for “cd” in/around 1.0644-1.0720.
    • would like to see that hold w/ a move up into “e” to complete the sequence.
  • IF we break hard to the downside and the pattern is broken then “assume” that “e?” was the end of the consolidation and get short looking for a daily close below lower trend line as confirmation.
  • IF we break strong to the upside then look for “breakout targets” and watch price action in/around these areas. If continually strong and a DAILY close ABOVE 1.171 then TRIANGLE THESIS IS WRONG. Adjust

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