Trap sheep from March 2

Today euro dropped to 1.3435 before recovering quickly. We can call it a trap sheep. 

Many expecting a drop in euro following the revelations last week that most awaiting confirmation by the crossing of 1.3450, a lot of stops and orders are placed under the barrier. 

A psychological work must take place to lead the flock at best. 

What is this? 

The aim is to destabilize and weaken to lead the sheep where they wish. Sheep are eg funds management much smaller than the shepherd. 

How it works? 

Imagine that you have made a perfect analysis. Support is 1.3450 and the break is at 1.3440.This gives us a ten or twelve pips stop loss so it's okay. You decide to enter at the support responsible enough because you have confidence in your analysis, and then you realize that the market continues to grow vigorously. You don't wait and you cut. Here you see your loss (lever 10 is 1% of your capital). The market seems to want to go there and you can get your 10 pips in a few seconds. Then you launch a short at 1.3439 following your exit... 1.3435 is the lowest and we go back ... If you made this error, you probably do not even closed your pose and your account to -110 pip loss today. If you start to monetize your poses, your account will eventually fuel the rise even more quickly because it will eventually break. 

Once cleaned the Bears, the ratio of long / short is unbalanced in favor of the Bulls and the shepherds give a new impetus to the market. 

Why all this? 

Simply the best fuel to movements. More volume in the opposite direction there will be more movement at the right time. Movements upwards or downwards, will be powered by stops loss and new positions's opening in movement direction. The fear of being trapped again will made close winning poses regularly and create new poses. 

This behavior is not unique to Forex. You will also find on equity and other markets. 

Currently open positions on Oanda forex account: 

Blue: poses during Losers 

Green hauls in winning over