The EUR moved precisely to your level and then continued in the predicted direction due to several potential market mechanisms and factors:
Liquidity Zones: The level you identified might have been a significant liquidity zone. Traders often place buy or sell orders at key levels, creating a concentration of orders. The market, driven by big players like institutions, often targets these zones to fill large orders due to the available liquidity, causing a temporary move opposite to the expected direction before moving in line with the larger trend.
Stop Loss Hunting: The market makers or larger players might have been engaging in a practice known as stop loss hunting. They push prices to common stop loss levels to trigger these orders before allowing the market to move in the expected direction. This momentary sweep helps them gather liquidity needed for significant positions.
Technical Resistance/Support Levels: Your level may correspond to common technical levels identified by other traders as support or resistance. When these levels are tested, they often experience a brief breach (sweep) before the market decides to continue its move.
Market Volatility and Noise: Markets naturally have noise and volatility, with short term price fluctuations often reaching notable levels due to large incoming orders, high-impact news, or emotional trading behaviors, leading to reversals or continuations.
Algorithmic Trading: The presence of algorithms in trading can cause swift and precise movements. If your trading level coincided with levels targeted by algorithms programmed to exploit short-term inefficiencies, this might have caused the sweep you observed.
Understanding these factors requires continual analysis and adaptation in your trading strategy to mitigate the impacts of such sweeps and improve trade execution timing.
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