I'll be doing a breakdown of the macro principle behind the narrative. Position traders take advantage. A couple of dms asking about how and what gives us the confidence to hold trades for weeks... Months... And we even looking forward to a year soon.... Yes the keys would be released thorough the face of the Euro tonight
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Basically the DATA consist of three groups of market participants. The commercials (the red line), the large funds/speculators(green line) and finally the small speculators (the blue line) which according to MJH, are wrong 90% of the time . The large speculators however are always right and tends to ride the entire wave of a trend and only gets hurts where there's a reversal.
Our attention should be shifted towards the commercials (the red line). The are the market. In essence they create the market within which we speculate. Their sole aim is not a profit motive but creating liquidity (which essentially is what the market relies on). How do they do they create the market. They do so in real life. They hedge all of their positions. The idea of hedging if you'd ask is simply putting two opposing orders in the market place at the same time such that they offset the risk of each other.
In essence, during a buy programme (which unfortunately we didn't see the whole of this year in the euro due to interest rate differentials and inflation), we expect market to be Bullish. What the large speculators will do logically in a bull market or buy program as MJH calls it is to flood the market place with buy orders making the overall open interest Bullish net. But the commercials would rather flood the market place with sell orders during the buy program. Anytime the market rallies higher, they wait on a retracement to sell (counter trend). They continue doing this until the commercials and large specs reach a diametrically opposed point. At the other end of the curve, which is a sell program, they begin to decrease shorts used in hedging and start to increase long positions into the sell program
Now this shorts being injected in the buy program begins to offset the risk of the longs being initiated with the sell program. They do to neutralize of offset the risk of their hedge.
YOU MAY ASK HOW THIS RELATES TO TRADING... Well we'll visit one more concept called the seasonal tendency before I even proceed to answer the chart aspect