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I have been involved with Forex trading for about 6 years now and after being disappointed with mainstream indicators I discovered price action trading relatively early in my career. Since then I have made price action the focus of my Forex trading, embracing it with a passion. I don't like... More
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  • EURNZD Looking Top Heavy - Potential Mean Reversion Trade 0 comments
    Oct 30, 2013 7:28 AM

    Looking at the EURNZD today, where the market is looking very top heavy. Price has recently rallied aggressively and 'gaped' away from the mean value on the daily chart.

    There is a strong 'magnetic' force if you will between price and the mean, they always want to sit close together. We price gaps away it creates strong tension and they pull themselves close together.

    These large gaps can create good opportunities for mean reversion trades. The upper wicks on the daily candles already suggest that moves into higher prices are being rejected by the bears, a strong sign of bullish exhaustion here.

    (click to enlarge)eurnzd bullish exhaustion

    If the market moves below the low of the previous daily candle it will fire off a bearish breakout trap and reverse trade. Once these mean reversion trades get moving they can really see price move like a hot knife through butter.

    We will be watching the nearby support level for any bullish price action to confirm this level is going to act as support and use it as an exit signal.

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