Normally in such cases, I’d be uber-bearish, but I don’t expect a major trend reversal (just yet). In fact, after some short term selling, I’m expecting a resumption of the uptrend.

Why? 3 Reasons

1) Very much like in 1987, the index had an 89% rally over 186 days followed by a 9.1% correction over 6 months. This last run was 191 days over 7 months, and the drop yesterday was 9%. What followed the last drop – a rally that took out the prior highs. I suspect bulls will actually make a new high before we see topping and a reversal. Minimally, we’d likely see a LH (lower high) before the bulls give up control.

2) The trend leading up to the recent 16000 top was not parabolic. Although it was quite a prolonged non-volatile trend, it was not parabolic, which is a common climax price action formation before a sharp reversal.

3) Although there are likely medium and long term bulls taking profits – I suspect a short term liquidity vacuum will make it difficult for sellers to take out the selling lows from yesterday. This is because the move was so sharp and rapid, it will take time for the sellers to come back in sufficiently to create a ceiling to stop the bulls.

Normally such sharp moves are followed by a 2nd reaction from the bulls, so a pullback would be natural (to learn more about price action, liquidity vacuums and order flow, check out my recent video by clicking on the link).

Short term, I’m mostly bearish, and I suspect if the bears are going to take control, it will be via a shallow pullback of the days selling. For me, a good level to short would be at 14900 which is the 38.2% retracement of the heavily sell-off yesterday. As i’m writing this article over the last 10 minutes, selling has emerged off this level. It is certainly possible the last 20hrs was enough time for the sellers to form a ceiling at 14900. If so, then more aggressive selling is in store.

The downside key level for bears to take out is the 14430 which opens up 14030 and likely means an end to the uptrend. If the bulls can take out 14900, then this sets up a test of 15000 and 15223 before the next round of sellers will enter. If bulls hold the first level, then they will likely re-attack 14900, so plays on both sides here.

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Traders can look for intra-day price action signals off the .9709 on a weak pullback. If this level holds, then .9650 and .9600 are on deck. If it fails, then .9750 and .9843 become the next area for bears to re-enter as a with trend setup. Bulls will want to watch .9600 for possibly re-entry, so plays on both sides here.

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I’ll look for low key reactions off .9840, or a bit higher between .9912 and .9954 to get short and rejoin the trend. Even if the pullback manages to get past this, I suspect it will eventually be sold to re-attack the .9710 yearly lows, and likely a move lower towards .9600.

For those wanting to learn to trade price action, access to the traders forum, lifetime membership & more, visit my Price Action Course page here.

In this article, I am going to share 5 things all forex traders must avoid, but will wait to hear your responses as to what would be the solution to these traps which most traders fall into.

#1 Focusing on Obstacles
Do you come up with reasons why you cannot be successful? Blame the broker, or number of screens you don’t have, your background, your account balance? Do you come up with justifications why you cannot fill out your trading journal, follow your trading plan, or simply put – be successful at trading?

One thing you must avoid when learning to trade successfully is focusing on obstacles – particularly what is stopping you from trading successfully. Ask yourself how/if you do this in with trading now, and see if you can discover why it may be holding you back.

#2 Focusing Only on Your Sub-Conscious Ability
What is your favorite subject or type of article to read? I’m willing to bet its more often about trading and a particular strategy – perhaps about a price action system, or an ichimoku strategy. How much time do you spend looking at charts, studying systems, looking for systems, setups, and trading methods? Then ask yourself how much time you spend on risk management and your trading mindset?

Focusing on the former is only focusing on your sub-conscious mind, and by itself, no matter how developed it is, or how many hours of screen time you have, cannot lead you to profitability or consistency (by itself).

Ask yourself how much time you dedicate to this in relation to the other aspects of trading.

#3 Focusing on Problems
After a big loss, what do you spend your time thinking about? For the mistakes you make over and over again, where does your thoughts, mind and energy go to? Ask yourself how much time you spend focusing on the problem when it comes to your trading. Ask yourself how much time you spend focusing on what happened (in the past that you cannot change).

#4 Focusing on Outcome
I know, it’s hard not to focus on the results, the profits (or losses), your account balance, your accuracy and overall performance. But ask yourself how much time you spend focusing on the outcome, and what you think that does to your self-image and mindset about trading. How much time do you focus on the result of your trading for the day, on your lack of profits, success, or consistency?

#5 Not Protecting Your Capital – Your Mental Capital
There has been tens of thousands of words written by keyboard and ink about preserving your capital, but what about protecting your mental capital? How much effort and time do you spend protecting your mental capital, your self-image, and your trading mindset? What kind of effect failing to do this has on your mind, your confidence and performance?

In Closing
Take some time to really meditate on these things, how you may be doing some (or all) of them currently, and how they may be affecting your trading. Please do not hesitate to share your experiences around these as well as the info can be valuable for all.

Later this week, I will write a follow up article as to why it’s important to avoid these mistakes, how they impair your performance and growth, and then discuss solutions to avoid making these mistakes in the future.

Looking forward to your comments and thoughts about this.

Kind Regards,
Chris Capre

I suspect they will show up at the yearly lows and make a defense there, so bulls can look for price action signals at the yearly lows. Bears meanwhile can look for pullbacks to rejoin the trend, particularly watching the 20ema on the 4hr chart for sell signals.

EURJPY – Pullback To Key Level Plays Out
On May 13th this week, we talked about looking for a pullback setup on the EURJPY to rejoin the trend, particularly around the 131.12 level. The pair came within a handful of pips from here, then bounced over 130+ pips. Many savvy price action traders caught this move off the key level, so hopefully you did the same.

The pair is now approaching the yearly high at 132.76 after an inside bar setup and break higher. Should this pair take out the air up there, then 134.30 is up next which is a swing high level from 2009, but we remain bullish and are only looking for buy signals until the dynamic support and 20ema are taken out.

AUDUSD – Pairs Sells off +500 pips from Signal
Back on May 7th in my FX market commentary, we talked about how Soros was selling the AUDUSD, and to look for pullback setups at the key level around 1.0221. The pair pulled back to this level, went a little past, then sold off massively, and has been in an impulsive downtrend ever since, forming only one bull close in the last 10. From that sell signal, the pair has sold off over +500 pips, so hopefully you captured some of that move as many students in our price action course caught this, and many sell signals along the way.

The pair is now approaching a multi-year support level at .9630 and .9587, so we may see some stalling here. But I do not expect this trend to end anytime soon. So will look for pullbacks into .9800 and .9860 to rejoin the trend, but all bearish action here, so only looking for sell signals.

Spot Silver – Sitting Above Yearly Lows
Down almost 30% on the year, Silver is currently sitting above the yearly lows at $22.00, just two dimes above it at the moment. The pair formed a pin bar signal on Thursday at the yearly lows, but so far the precious metal has sold into almost all of it. This key level is quite critical for silver bulls, for below $22, there is really nothing until $20, so a break below here, suggests another $2 fall. Bulls can look for small longs off the yearly low, but should this break, best to look for sell signals towards the big figure at $20. Bears can wait for breakout pullback setups, or rotations back to $23.50 before selling again.

For those wanting to learn to trade price action, access to the traders forum, lifetime membership & more, visit my Price Action Course page here.

I was traveling for about 6 days internationally, but had a few hours and wanted to do some trading. My set and forget strategies were already running, but there were other opportunities coming, so wanted to take advantage of them.

I had a with trend trade setup, so put my order in and then kept watching the markets as there were a lot of good setups forming. After about 15 minutes, the trade got activated by .1 pip, then immediately turned and reversed and stopped me out on a quote hitting the newswires out of Europe.

It was quite fast, so was a little shocked, but in the end, it was a setup from my system, and I pulled the trigger because that is what I’m trained to do.

Now taking a loss and being stopped out so quickly can be jolting to the psyche. It’s easy to blame the broker, and think they targeted my stop, or spend time going over how I could have had a higher entry, or ponder a million other scenarios I could have done to avoid the loss.  But the bottom line is – none of this would have been useful to my trading mindset.

I cannot control many things, especially the market. Focusing on the things I cannot control is a waste of my mental capital. Instead, it is far more energetic to focus on what I can control, which is my mind, my thoughts, and how I react/respond to the situation. I could get upset, blame others, beat myself up – but this would not help me become a better trader, nor build the mindset needed to trade successfully.

It is far better to focus on what the market is doing right now, and it just so happened that right after me getting stopped out, another strategy was giving a signal on a different pair. Had I been focusing on what I could not control (the market, news, etc.), I would have taken my eye off the ball in real time, and likely made the situation worse. But instead, I decided to focus on what I could control – which was my mind/thoughts, and how I could find the next setup.

Ironically next trade turned out to be a winner, and erased all the losses from the quick stop out.

The take home point here, is spend your time focusing on what you can control, and don’t worry about what you cannot control. Instead, your thoughts and mental resources could be used for something else – finding another trade, or practicing/training to build your skill set and successful trading mindset.

So try not to focus on things out of your control, or get upset about them when it comes to the markets or trading. Trading is already challenging enough, so don’t get in the way of your natural skill set coming through. Just keep your mind focused on the price action in front of you. Focus on what you can control, and let the rest play itself out.

The pair took out the 1.5272, and once it did, it quickly went to our first target at 1.5320 discussed yesterday which savvy price action traders profited from. The pair did sell of heavily into the close, so the sellers maybe used this pullback to test the bulls. It is currently resting on support at 1.5275, and should this break, 1.5245 will be under attack, then 1.5200. Bulls will need to take out the daily highs at 1.5321 to bring in new longs and trip short term stops.

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The pair now is showing some signs of more two way order flow, and a possible transition as buyers are attempting to hold the 1.5200 level with only a false break below it. First up for the counter-trend bulls would be the same 1.5272 and 20ema. If this breaks, then 1.5320 and 1.5412 would be up next. If sellers come back in at the first two levels, then a retest on 1.5200 would be in order, so plays on both sides here.

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The first one is a more shallow level above at 1.5279, while the second is where a pin bar formed at a key level 1.5318, possibly lining up with the 20ema.

So until we get a few 4hr closes above the 20ema, look for the downtrend to continue.

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So I will look for a pullback setup towards this role reversal level at 131.12 to get long and rejoin the uptrend. The line of least resistance is up, and there are many layers below to support the pair, so look to get long into support levels, targeting 134 and 135.91 which go back to 2009 key swing highs.

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