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Put This on Your Trading Checklist

20 Years ago | May 13, 2014 12/11/23, 12:00 AM

Have you ever been long a currency in what looked like a good setup only to see the bottom drop out of nowhere? Have you ever been short a currency that setup nicely to the downside only to see it suddenly reverse to the upside? There is a term to describe this that I have added to my daily checklist that I reveal in the following article.  

I first heard the term “feels bid in an offered market” on the GVIForex (professionals) forum used by LA Mel, a valued member of our community. He used the term mainly for the EURUSD but it applies to all currencies and both sides of the market (e.g. feels offered in a bid market). I first heard this in 2001 and soon after added to my checklist that I still use today.

The reason I bring this up is that it is easy not to see the forest through the trees, especially if you only focus on shorter time frame charts and do not look at the broader trends. This is even more true in the current low volatility market where small moves in tight ranges can make a currency feel bid or offered and exaggerate swings in your sentiment. In other words, a 10 pip move can feel like 100 pips when the daily range is 25 pips.

So always keep the broader trends in mind and what it would take to change them. This is one way to avoid getting caught by a currency feeling bid in an offered market and vice versa. In addition, the forex market has changed as it is no longer dollar centric as cross currency flows are often the drivers of spot moves. As a result, one currency can be bid while another is offered and feeling bid when it is really offered and vice versa. This suggests when contra trading (i.e. trading against the trend) to take your profits sooner than when with the trend as you may be trading a currency that feels bid in an offered market or vice versa.

While this started out as a history lesson, it is still a term I use today and one you can use as well to put price action in perspective.

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