Wednesday, December 09, 2009

Transition Trade in Euro Currency Futures Market

Here we see a transition pattern in the euro e-mini futures (6E): high momentum/volume selling led to a drying up of selling pressure (click on chart and note decreasing rate of change in cumulative Delta; bottom row at bottom of chart) and then an influx of buying interest on renewed volume. These transition patterns work because traders caught in trend positions even when trends dry up have to cover their positions, leading to nice reversal moves.