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dsalas

Reading Depth of Market

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HEllo Guys, i wanted to know if someone can help me up understanding how to read the DOM for ES or ZN, mostly ES. I have been trying myself but i cannot keep up with the pace, is too fast... IS there any resource you can recommend me or something you can help me with, I know the basics but not too much

 

thanks

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The dom is heavily manipulated with fake bids/offers but if you can learn to read the prints (actual filled orders) you can pinpoint entries and catch large moves in their infancy. Also the market is moved by limit bid/limit offer orders not orders in the queue.

 

The prints will be somewhere on your dom, on x_trader it is to the right and ninja it is in the middle

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Hello guys,I just know that when the total number of the last 5 bid prices in the ladder greater than the last 5 offer prices in the ladder,market could go up,also that a lot of games are played in the ladder,and that the market tends to seek value,not much really reading dom ,that's why I ask.bathrobe can u explain more on how to read the prints ... Please,thanks so much

 

I appreciate your help

 

Daniel

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The dom is heavily manipulated with fake bids/offers but if you can learn to read the prints (actual filled orders) you can pinpoint entries and catch large moves in their infancy. Also the market is moved by limit bid/limit offer orders not orders in the queue.

 

The prints will be somewhere on your dom, on x_trader it is to the right and ninja it is in the middle

 

Limit orders are orders in the queue i guess you mean market orders?

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We are among the beta testers of TradeStation 9.0 whose new data providers/objects allow you to access any data stream from any code module/indicator including all 10 bids and asked volumes/DOM programatically in Easy Language.

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blowfish, yes but on my platform if I place a market order it will get filled very far away. I always enter at bid/offer and always get that price, I always give up a tick on entry in the ES.

 

dsalas, I am by no means an expert as it takes some getting used to but it is done by having a level first and then watching the prints as price approaches that level.

 

I countertrend trade the es so I am looking for bids/offers that print to increase dramatically in size at levels or very close to them.

I would recommend you look elsewhere to trade successfully because many orders are filled in 2 lots over a range of prices by algos.

Edited by bathrobe

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Bathrobe, what do exactly look at? If prints are at te offer and you are looking for support?for example....this is what I need to know exactly ,can u guys help me out a bit

 

Thanks

 

Daniel

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Thanks bathrobe,can u explain me more about what do u look at in the prints,I also place my levels before,but I have not been able to get the feel in the Dom with the prints ,would u be kind enough to let me know ,which signs or things do you consider in the prints once price approaches a level u already have

 

Thanks a lot

 

Dan

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Something that was recommended to me and was inexpensive so I got it was no BS trading. I am loath to make recommendations but you might want to check it out, I think it has a money back guarantee fwiw.

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BathRobe, Although I am not new to trading the ES, I have never paid attention to DOM and all the extra numbers in there.. I have always been a technical chart guy. Just now getting into DOM and volume.

 

In previous post you mention to watch the prints. Just to be clear you mean this circled area in my attached pic?

 

xd9v83.jpg

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BathRobe, Although I am not new to trading the ES, I have never paid attention to DOM and all the extra numbers in there.. I have always been a technical chart guy. Just now getting into DOM and volume.

 

In previous post you mention to watch the prints. Just to be clear you mean this circled area in my attached pic?

 

 

You must also watch how the order book reacts to the prints. Are resting orders on the side that is being hit pulled or are they standing firm? Perhaps they are even being refreshed? How about on the other side of the book are traders bidding up to support those hitting the 'wall'? What about a level or two outside best bid and best ask? One other thing that is very important is the 'pace' what is it like? Is it changing?

 

It is all as much art as science imho:) As with most aspects of trading one thing can appear to be happening......until it's not. On this sort of scale this change can (and mostly does) happen in a split second. On the plus side a 'failure' (e.g. a level that looked like it was holding breaking) is often an opportunity in the other direction. Actually it seems that the opposite is quite common, a level appears to break, price moves a few ticks beyond only to be offered back down and the 'wall' to firm up again. I should say I am no expert but I always have a DOM on the screen to enter orders so over the years have spent many, many, many, hours watching it.

Edited by BlowFish

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You must also watch how the order book reacts to the prints. Are resting orders on the side that is being hit pulled or are they standing firm? Perhaps they are even being refreshed? How about on the other side of the book are traders bidding up to support those hitting the 'wall'? What about a level or two outside best bid and best ask? One other thing that is very important is the 'pace' what is it like? Is it changing?

 

It is all as much art as science imho:) As with most aspects of trading one thing can appear to be happening......until it's not. On this sort of scale this change can (and mostly does) happen in a split second. On the plus side a 'failure' (e.g. a level that looked like it was holding breaking) is often an opportunity in the other direction. Actually it seems that the opposite is quite common, a level appears to break, price moves a few ticks beyond only to be offered back down and the 'wall' to firm up again. I should say I am no expert but I always have a DOM on the screen to enter orders so over the years have spent many, many, many, hours watching it.

 

Well said Blowfish, completely agree that it is as much art as science.

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this chart shows the prints at bid and ask, you can see the buyers run out of steam and sellers come in in force very clearly in the areas I circled, this trade was from a few days ago.

 

dsalas, I would do what blowfish said and watch this along with your normal trading if you really want to trade this way.

 

 

attachment.php?attachmentid=22359&stc=1&d=1284770626

trade.PNG.418ea89c133b9bd229c2dbd4cd843687.PNG

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What are you using for charting bathrobe? Personally I find graphical representations like this much easier to look at than the constant flickering of the DOM.

 

I agree, I use Market Delta for charting with IQ Feed for data.

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What is "Shown" on a DOM display is not as important as what is actually "transacted" on TOS(time of sales) as displayed in a chart or the Vol/Price histogram feature displayed on some DOM modules.

 

This Histogram is essentially a concrete "market profile" history and more characteristic of real support and resistance (supply and demand), and consequently more important than the display of "CIC" limit orders.

 

Some software packages allow relative Volume Weighted candles with buy/sell ratios formulas which display fatter candles and Volume Vectors for an “easy read” graphic representation of distribution/accumulation scenarios.

 

There are a number of "TAT" strategies and tactics for trading the various histogram levels being formed. Some are simple and visual, others more complex and use software routines to calculate what is required volume wise to move price to a new level.

 

Then again what is being traded TOS on an electronic product, does not account for what is traded "open out cry" in the PIT, or other derivative products and thus is not representative of the market as a WHOLE.

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What is "Shown" on a DOM display is not as important as what is actually "transacted" on TOS(time of sales) as displayed in a chart or the Vol/Price histogram feature displayed on some DOM modules.

 

This Histogram is essentially a concrete "market profile" history and more characteristic of real support and resistance (supply and demand), and consequently more important than the display of "CIC" limit orders.

 

Some software packages allow relative Volume Weighted candles with buy/sell ratios formulas which display fatter candles and Volume Vectors for an “easy read” graphic representation of distribution/accumulation scenarios.

 

There are a number of "TAT" strategies and tactics for trading the various histogram levels being formed. Some are simple and visual, others more complex and use software routines to calculate what is required volume wise to move price to a new level.

 

Then again what is being traded TOS on an electronic product, does not account for what is traded "open out cry" in the PIT, or other derivative products and thus is not representative of the market as a WHOLE.

 

If I misunderstood your point, sorry. We were talking only about executed orders and not orders in the queue; that said, there is absolutely no way I can imagine to take into account orders executed above or below market for hedging purposes, etc. The es does not trade in a pit, and every print that made up the market delta chart I posted had a corresponding run in the time and sales.

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Actually we ARE talking about reading all the limit orders on the ES book, thats the "depth" in depth of market.

 

My next point was how "time of sales" the actual "tape" of transactions is more important than what is displayed as limit orders; and the histogram gives a better read... a "market profile."

 

My next point was that even the "tape" of the ES, is better than the limit orders, but still does not represent the S&P cash as a whole since there are other associated derivatives SP, SPY and their derivative options contracts.

 

Right the ES does not trade in a pit, but the SP does; and nothing can stop one from buying SP pit and laying off in the ES, or Buying the ES and Laying off electronic SP or the pit or both.

 

Take it a step further and "lay off" off exchange .... across to dark pools.

 

So you dont know the REAL exposure and commitment in the market as a whole...Maybe with the COT report on each Fri. and still its even a week old.

 

So, the depth of market, DOM is best used as an order entry tool ( since some have sophisticated properties), rather than to gain insight as to purposed intent/exposure and direction in the underlying.

 

Finally, one of the best "READ" features of some DOMs are the transaction histograms, but again its just representative of the derivative on the DOM, and not the composite of the underlying.

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Actually we ARE talking about reading all the limit orders on the ES book, thats the "depth" in depth of market.

 

My next point was how "time of sales" the actual "tape" of transactions is more important than what is displayed as limit orders; and the histogram gives a better read... a "market profile."

 

My next point was that even the "tape" of the ES, is better than the limit orders, but still does not represent the S&P cash as a whole since there are other associated derivatives SP, SPY and their derivative options contracts.

 

Right the ES does not trade in a pit, but the SP does; and nothing can stop one from buying SP pit and laying off in the ES, or Buying the ES and Laying off electronic SP or the pit or both.

 

Take it a step further and "lay off" off exchange .... across to dark pools.

 

So you dont know the REAL exposure and commitment in the market as a whole...Maybe with the COT report on each Fri. and still its even a week old.

 

So, the depth of market, DOM is best used as an order entry tool ( since some have sophisticated properties), rather than to gain insight as to purposed intent/exposure and direction in the underlying.

 

Finally, one of the best "READ" features of some DOMs are the transaction histograms, but again its just representative of the derivative on the DOM, and not the composite of the underlying.

 

we use the tools in front of us to make the best decision possible, I only watch es I am unaware of buying/selling in the SP which works for me, the thread was called Dom reading, in my first post inthe thread I said how little I cared about the limit orders waiting inthe book, I am reading essentially the time and sales also, only in a different way, I do agree with you about the histogram.

 

The chart I posted was not of depth or limit orders, but aggressive buyers/sellers at the bid/ask, or the orders that actually move the market.

 

if you have found a way to trade the es taking into account the derivatives SP, SPY and their derivative options contracts good luck,

Edited by bathrobe

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Right, time for me to throw my two cents in....

 

 

The resting orders are only half the story and alone are not really going to tell you too much. What you also need on your order book is cumlative volume which shows the total amount of contracts traded at each price, so you can actually see how many contracts are trading.

 

Now typically, price will have a tendency to trade towards large bids and offers, so if we look at ES as an example, a large bid or offer in the that market is normally 2000-3000 resting orders. This is where the so called games people talk about take place... it's nothing new though and has been going on for donkey years. To keep it simple, say ES trades up to a hypothetical resistance level at 1100. When we get to 1100, if the offer is much larger than the bid with blocks of 2000-3000 lots resting, what a lot of people will try to do is lean on these resting orders to get short. What is actually happening is a large trader is putting up them large offers to make the market appear weak, which incourages people to lean on his orders as described above. What this does is cause the market to tick off lower where he can buy a lot more and smash price through the level by running the stops of the people who were leaning on his fake large offers.

 

What you have to do is recongize that this is happening, and as the market ticks off lower, you need to be looking at the cumlative contracts traded to see where that big fish is buying a lot more lower down.

 

So carrying on with the above example, lets say those people have started leaning on his large fake offers and the market has ticked down to 1098.75 where previously, 20,000 contracts have traded. Now as the market ticks off, if another 10,000 contracts trade there bringing the total to 30,000, and price keeps on bouncing on 1098.75 even though 10,000 contracts have just traded there, then you want to be buying there yourself and catching a ride on his tail as he smashes peoples stops....

 

If you're doing it properly, the market shouldn't really ever go more than 2 ticks against you in ES. If it does, just cut it.

 

If anyone has any questions, then feel free to PM me.

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86834,

 

Well said and well done.

 

So basic and so few get it.

 

While it is, to some, counter intuitive - oftentimes price does indeed trade towards size and it has been since forever that size and skilled operators have known how to "sell a few to facilitate buying a lot."

 

cheers

 

UB

 

 

Right, time for me to throw my two cents in....

 

The resting orders are only half the story and alone are not really going to tell you too much. What you also need on your order book is cumlative volume which shows the total amount of contracts traded at each price, so you can actually see how many contracts are trading.

 

Now typically, price will have a tendency to trade towards large bids and offers, so if we look at ES as an example, a large bid or offer in the that market is normally 2000-3000 resting orders. This is where the so called games people talk about take place... it's nothing new though and has been going on for donkey years. To keep it simple, say ES trades up to a hypothetical resistance level at 1100. When we get to 1100, if the offer is much larger than the bid with blocks of 2000-3000 lots resting, what a lot of people will try to do is lean on these resting orders to get short. What is actually happening is a large trader is putting up them large offers to make the market appear weak, which incourages people to lean on his orders as described above. What this does is cause the market to tick off lower where he can buy a lot more and smash price through the level by running the stops of the people who were leaning on his fake large offers.

 

What you have to do is recongize that this is happening, and as the market ticks off lower, you need to be looking at the cumlative contracts traded to see where that big fish is buying a lot more lower down.

 

So carrying on with the above example, lets say those people have started leaning on his large fake offers and the market has ticked down to 1098.75 where previously, 20,000 contracts have traded. Now as the market ticks off, if another 10,000 contracts trade there bringing the total to 30,000, and price keeps on bouncing on 1098.75 even though 10,000 contracts have just traded there, then you want to be buying there yourself and catching a ride on his tail as he smashes peoples stops....

 

If you're doing it properly, the market shouldn't really ever go more than 2 ticks against you in ES. If it does, just cut it.

 

If anyone has any questions, then feel free to PM me.

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    • Date : 25th November 2021. Market Update – November 25 – Solid US data lifts USD, Stocks, & Yields. USD (USDIndex 96.70) holds on at 16-mth highs; Strong set of US data yesterday GDP (2.1%) up a tick but missed by a tick, Claims (199k) at 52-yr low, PCE (0.4% m/m & 4.1% y/y), in-line & largest since Jan.1991, along with a big beat (5.9%) for GDP Price index, Durable Goods (0.5%) in-line, Personal Spending (1.3%) a big beat, Personal Income (0.5%) a beat, Trade balance a big beat (14.6%) on strong Exports, Inventories (-2.2%) a big miss, but shows demand is strong. Consumer Sentiment a beat and New Home Sales flat (745K) and missed. Stocks & Yields pushed higher, Oil held onto gains and Gold tested 3-week lows.   The FOMC Minutes showed (1) there could be a faster taper than the $15bn/mth currently planned, (2) Inflation could indeed be “persistent” (3) Clear division over 2022/23 rate hike cycle, Doves hold sway for now. US Yields 10yr trades at 1.644%, down from yesterday’s 1.694% high. Equities – Gains into the Holiday USA500 +10.76 (0.23%) at 4701 – USA500.F trades higher at 4713. USOil – peaked at $78.53 Inventories +1.0 vs -1.7 weakened prices – now at $77.65 Gold found a floor at 1782, but struggles to recoup $1800 at $1790. FX markets – EURUSD now 1.1216, having broken 1.1200, USDJPY now 115.36, from 115.50 & Cable back to 1.3350 from 1.3315 yesterday. Overnight – JPY PPI (1.0%) hit a 10-yr high, German GDP and consumer confidence both missed (1.7% vs 1.8% and -1.6% vs -1.0%) respectively. European Open – December 10-yr Bund future up 16 ticks, while US futures are slightly in the red. Bunds already outperformed yesterday, as EZ spreads widened in the wake of hawkish leaning ECB comments & confirmation that German finance ministry will go to the liberal FDP, which likely means more resistance to debt mutualisation across the EZ & more pressure on ECB to limit asset purchases. DAX & FTSE 100 futures are currently up 0.4% & 0.3% respectively & US futures are posting gains of 0.3-0.4%, suggesting markets are coping quite well with the prospect of less accommodative policies. Indeed, it seems to an extent that they welcome the CB’s acknowledgement that inflation risks could be less temporary than previously thought. Today – ECB Minutes, ECB’s Elderson, Schnabel, Lagarde and BOE’s Bailey Biggest FX Mover @ (07:30 GMT) CADJPY (0.20%) The rally from Tuesday’s low under 90.00 has been sustained with 91.25 being tested earlier today. MAs aligned higher, MACD signal line & histogram rising & over 0 line, RSI 61, H1 ATR 0.077, Daily ATR 0.707. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HotForex Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Date : 24th November 2021. Market Update – November 24 – USD & Yields Higher, Stocks Mixed, Oil Recovers. Trading Leveraged Products is risky USD (USDIndex 96.50) holds on at highs; EM currencies under particular pressure. (TRY lost 15% after Erdogan refused a rate rise). RBNZ raised rates but NZD fell (like the last time they raised rates!) JPY Inflation 2 ticks better than expected. USDJPY at January 2017 levels around 115.00. PMI data better across the globe, Stocks mixed in US & Asia, Yields bid, Oil recovered significantly and Gold pressured by yields. Biden invites Taiwan to its “Summit for Democracy”, WHO talks of additional 700k Covid deaths across Europe (Slovakia latest to talk lockdowns). US Yields 10yr trades at 1.667%, down from yesterday’s 1.684% high. Equities Mixed. Musk sold more stock, Banks & Oil majors lead. USA500 +7.76 (0.17%) at 4690 – USA500.F trades lower at 4684. USOil – rallied over 3% to $78.20 highs despite global strategic reserves being sold to cool prices. Gold found a floor at 1782, but struggles to recoup $1800 at $1790. FX markets – EURUSD down to 1.1245, USDJPY over 115.23, earlier now at 114.88 & Cable back to 1.3375. European Open – December 10-yr Bund future up 26 ticks, US futures also broadly higher. RBNZ delivered expected rate hike & markets seem to be scaling back fears of escalating inflation as even dovish leaning BoE & ECB members highlight risk of second round effects. ECB VP Guindos highlighted overnight that the drivers of inflation are becoming more structural, which adds to signals that the CB is finally ready to start reining in stimulus. DAX & FTSE 100 futures currently up 0.3% & 0.2% respectively. Today – Big data day ahead of Thanksgiving Weekend. – German Ifo, US Weekly Claims GDP, PCE, Durables, FOMC Mins. & ECB speak Biggest FX Mover @ (07:30 GMT) NZDJPY (-0.77%) RBNZ in-line but Dovish, sank from breach of 80.00 yesterday to 79.24, and 79.40 now. Faster MAs aligned lower, MACD signal line & histogram falling & below 0 line, RSI 35 & weak, Stochs OS. H1 ATR 0.17, Daily ATR 0.70. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HotForex Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • EURUSD HOVERS NEAR MULTI-MONTH LOW, UNDER 1.1250 LEVEL   EURUSD Price Analysis – November 24 Throughout the session, the EURUSD pair remained on the losing side and was last seen moving with considerable losses around the 1.1250-36 level. The announcement that the White House has opted to reappoint incumbent Fed Chair Jerome Powell for a second term sparked the recent strong dip. The spot is trading at 1.1253 at the time of writing, down 0.25 percent on the day. Key Levels Resistance Levels: 1.1525, 1.1422, 1.1300 Support Levels: 1.1200, 1. 1150, 1.1100 EURUSD Long term Trend: Bearish EURUSD has sunk to fresh multi-day lows, as seen on the daily chart, after extending the recent breach beneath the moving averages 5 around the 1.1300 level. This exposes the possibility of a deeper pullback and a re-test of the psychological support around 1.1200. Under the 1.1200 level, the euro’s underlying bullish attitude is in jeopardy. Overall, the EURUSD stays bearish while trading under the major horizontal support turned resistance and significant level at 1.1422. A breakout of the 1.1300 level, on the other hand, would aim for the 1.1350 level on the way to the 1.1400 zones. The fall of the 1.1200 zones, in the alternative scenario, is viewed as a bearish continuation indicator. EURUSD Short term Trend: Bearish The risk is weighted to the negative on the 4-hour chart, as the pair is developing below the firmly bearish 5 and 13 moving averages. Technical indicators have shifted to the downside, with negative levels. However, in the present scenario, the RSI has not yet reached oversold territory, allowing for more selling. On the upside, a break over the modest resistance level of 1.1300 might shift the intraday bias to neutral. On the downside, the 1.1200 zones provide initial support. The next important level of support is around the 1.1150 mark. If there are any more losses, the 1.1100 extension level of the low decline may be tested. Source: https://learn2.trade 
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