GBP/USD Tanks Into Overall Lows – 2/23/16 Forex Market Forecast
EUR/USD Follows Pound Down
The EUR/USD played follow the leader today and followed the GBP/USD to the downside. Overall it was a very uneventful day for the Euro given the lack of lower manipulation points. Our upper levels really didn’t matter as the price never made an attempt to push above the Asian session highs. When we came into our one and only lower manipulation point from yesterday, the price simply blew through it and never produced a valid trade setup. This is exactly what we want to see if the price is going to blow through a listed level. For today I will be treating the EUR/USD as though we have a first push to the downside and I will only be looking for the second push to the downside. At this point I have one upper level from which I would look to take a stop run short for the second push. For those of you who are members be sure to watch the daily market preview video for more info on the possibility of an additional level and exactly what it is going to take for that to become valid.
Pound Tanks On Bearish Comments
The GBP/USD was the active pair of the day in regards to actually producing valid trades. The first trade was from our second lower level. The EUR/USD did what I want to see when a level is going to hold but the Pound did not. The GBP/USD produced a valid long setup from that level only to get stopped out for a -2% loss a little over an hour later. Yesterday I didn’t mention our final lower level around the 1.4090 level as it was so far past the ADR. We did however manage to reach that level and made up for the earlier trade with a valid stop run reversal long at the beginning of the day that resulted in a full 4% take profit. Today was a great example why reward to risk ratios are critical for trading success.
On the day we had a 50/50 win loss ratio with an overall 2% profit. That’s why I say I’m happy to win 50% of my trades as long as my reward to risk is better than 1 to 1. There are two ways to become a successful trader. The first is a high win/loss with a lower reward to risk and the second is a high reward to risk with a lower win/loss. The truth is, if one increases the other will decrease without fail. Therefore you have to choose what you are going to focus on, win/loss ratios or reward to risk ratios. When you look at all the scam products out there what do they all preach? For the most part they say things like ” 90% win rate”, “do you want to win 95% of your trades”, ect. Why do you think they focus on win/loss ratios? The reason is, the uneducated retail forex trading masses think that is where success comes from and they know most people will buy a crap product if they promise unrealistic win/loss ratios.
In Tony Robbins new book titled, Money Mater the Game: 7 Simple Steps to Financial Freedom, he interviews some of the wealthiest investors in the world. He talks to people like Warren Buffet, Ray Dalio, and Carl Icahn. Not a single one of them focuses on win/loss ratios with their investments….but would you be surprised to hear that literally every single one of them made a point to focus on reward to risk ratios. They literally qualify whether an investment is good or not based on what they risk vs what they stand to potentially gain. Think about this for a second. The most successful investors in the world focus on reward to risk and the retail market chases win/loss ratios. What group would you like to be part of? If you want to be part of that group of successful investors then you need to be doing what they do. If your not using a forex trading strategy that is specifically designed to focus on reward to risk then you should be going back to the drawing board! That “drawing board” can be found by clicking on this link to our DTFL Forex Bank Trading Course <——–shameless plug 🙂
Ok enough about that. With the move on the GBP/USD today being so far beyond the ADR I will continue to have an open directional bias. At this point I have two upper and one lower manipulation point from which I would consider any valid stop run.
Forex Market News For February 23rd 2016
UK Inflation Report Hearing 5:00 AM Eastern: To be honest I really don’t remember the price action that tends to come out around this release. If you are in a Pound trade it might be worth getting out just ahead of the release for a few minutes. After you see the volatility you could choose to get back if all is tame in as this is a bit of a unique situation. Any inflation number or talk tends to be high impact as inflation is a CPI measurement, and CPI directly reflects interest rates (in a normal market).
US Existing Home Sales & Consumer Confidence 10:00 AM Eastern: In August Existing Home Sales did have a 15+ pip spike so I would reluctantly sit this one out. Remember just last week we had a news even that only had 1 spike over 15+ pips and by sitting out until the release it turned a loser into a full take profit trade for us. This is one that I might consider holding into if I was 15-20 pips in profit but any less than that I would close out ahead of the release. Home Sales is expected at 5.4 and Consumer Confidence is expected at 97.5