Reign in meteoric currency rates with institutional trade levels and zones
They call it a superbolide, or super missile, if your French is a little rusty. An extremely bright meteor, which is brighter than the sun and easily spotted over 60 miles away.
This was the Chelyabinsk meteor, and it was coming to say hello to Russia at a speed of 42,900 miles per hour. More of a fireball really as it streaked through the crisp morning sky, brilliant with intense heat to those standing on the ground. This one would leave a mark when it landed.
Anything can happen in a currency market at any time. Events range from a fly hitting the windshield of the market — essentially ignored the second they take place — all the way to meteors that shake the earth.
When this happens, you need to know what the institutional levels are, and how they’ll support a free-falling – or rocketing – rate. Institutional trade levels will give you those safety levels to watch both on the ground and in the currency pairs atmosphere.
Interest rate meteors that crush your trades every day
They called it a ‘wake-up call from space’. Ironically, the same day the meteor hit, the House of Representatives were going to hold a meeting to discuss asteroid threats to earth — and what to do about them. Impeccable timing.
Many retail traders get their ‘wake-up call’ only after it’s too late and a currency rate has taken off — either rising to the skies or plummeting to the earth. This is because they fail to factor the institutional activity that influences any given rate’s activity. When news hits the market, they’re caught off-guard.
This is further compounded when they try to participate in the volatility by entering a trade without any visibility into institutional trading levels. Like burning up over the atmosphere or crashing into the earth — these are the levels that rates hit and have to respect.
Fortunately, there’s a way to add institutional visibility to your chart.
Institutional levels meteoric rates respect
Heavier than the Eiffel Tower, the Statue of Liberty or Big Ben, the Chelyabinsk meteor had an initial mass of about 12,000-13,000 metric tons. It’s the largest natural object to enter the Earth’s atmosphere since 1908, and the only meteor to have resulted in a large number of injuries.
When a rate is ripping or dipping, you won’t have the benefit of the earth’s atmosphere to slow it down. But you will have long-standing historical levels that you can lean on — and stalk for entries. These combine a long-term historical institutional performance with short-term, intraday price rejection.
Simply put — it gives you a good idea of where a rate is going to bounce. Looking at the EUR/JPY coming out of this last week, there was a fair amount of activity as always. For you reversal/swing traders out there — these are the levels that you’ll be licking your chops on, regardless of how big or bright the rate screaming to you is.
Entering safely, without fear of injury or loss
Over 1,500 people were injured — not necessarily from the direct hit, but from the broken windows and damage created by the blast. Witnesses said that the city’s air smelled like gunpowder, lasting all day. Fortunately, there were no deaths reported.
Not the case when it comes to Forex accounts in the market that are unaware of institutional trade levels. Trading without visibility into where you could see institutional activity would be like standing in front of a meteor, blindfolded. Sure the air might smell weird, but you have no idea what’s headed for you.
You can make confident entries even in the most volatile of rate movements by following one basic rule: use the macro and the micro. Meaning, the best entry points are usually ones where you have both long-term and intra-day confluence.
When these come together, you have the makings for a great opportunity. You can then head to Order Flow Sequence Tracking for confirmation.
Looking at our same Euro/Yen chart, you’ll see that this prioritizes our opportunities — and would have made for some great entries! (Also note that when the EUR/JPY rocketed up towards the end of the period… no coincidence that it backed away from that institutional trade level.)
How to trade with confirmation, not hope
If you believe anything that you saw in Armageddon (the movie), then stopping a massive meteor is quite an undertaking. Impossible, most would argue (sorry Bruce Willis.) There are those who feel the same way about attempting to trade the bounce on a rocketing rate.
They would tell you that it’s tougher than it looks — and not worth the risk. You can quickly point out on our EUR/JPY chart that the rate plowed through a few institutional trade levels at least once before hitting the ceiling or floor.
This is where Order Flow Sequence Tracking comes in. Seeing the real-time activity between buyers and sellers will tell you if there are any signs of tapering activity. If aggressive buy or sell behavior persists and the rate is on the run — steer clear. If it’s backing off and you see Sequential Decline and/or Responsive Activity — get ready to make your move.
If you’re just staring at a typical candle chart looking to make your move — then yes, it’s far too risky.
Benefit when rates scream towards any level at top speed
Just over 7,000 buildings in six cities across the region were damaged by the meteor’s explosion and ensuing shockwave. Of course, this happened at the worst time — in sub-zero temperatures that can only be found in Russia during frigid Februarys.
Just like the Chelyabinsk meteor, there’s no telling when something is going to hit your currency pair causing account-clearing shockwaves. Be prepared by knowing where the rate will retreat to at an institutional level. It’s not the retail traders that are going to reign in a crazed spike or dip — it’s the guys who are driving 90% of the volume.
Add institutional trade levels and zones to your chart. Stalk these levels in layers at the rate that races to them. When volume starts to die down and Order Flow Sequence Tracking starts to show dying activity — get ready to make your move.
Don’t get flattened when currency rates soar or crash. Take your results alongside the pros.