GBPCHF setting up for a long, but first a short dropExpect to see a drop with some amount of momentum (ie a pretty quick, but short lived, fast drop). That is going to be the bottom. Once at the bottom, catch it for a nice move up.
Things that will confirm the setup:
1. We want to see that expected drop in a quick short fast burst that looks scarily strong--to the point where you might even think it would be crazy to go long with such a strong momentum.
2. When such a strong momentum all of a sudden reverses, we know that the liquidity has been thusly created (ie banks are trying to go long, but need to clear those stops at the bottom). Therefore, once the stops have been cleared, banks are ready to move this pair higher.
explanation of stop hunting and creation of liquidity: When large banks need to open a long position, they cannot just enter their entire position or it would push up the prices undesirably. Hence, they wait, patiently. Then, they push the price down to clear those stop losses at those lower levels. As each set of stops are cleared, the bank is buying up those liquidated positions. Then, the real direction comes in as Banks continue to push long with the rest of their planned moves.
