Point : 28
Although I have said that there are only four clues that you have to look at for price direction – "bar reading," MACD divergence, pivot points, and trendlines – there is actually a fifth. It's called "price." Price is the number one indicator in the sky. It will tell you where it wants to go. Let it point the way. It's like playing cards. Wait for it to reveal its "hand." You just have to be patient and wait. It's called "following the leader."
Point : 29
I was asked recently about multiple lots – in other words, buying or selling more
than one lot at a time. You can either "load up the boat" at your entry point, or you can go at it one at a time – adding additional lot(s), as price moves through each successive pivot point, as it "reaches" for the end of its range. If you are confident that you are "with the trend," and are using good money management techniques, then there is nothing wrong with taking more position(s) along the way.
Or, you can do both – load up to begin with, and buy/sell more, as price progresses through pivot points in its tear to the finish line. Don't bail too soon. Remember, currencies trend well (especially the major trend), and price knows where it wants to go. Let it take you there. Use the "five" indicators – "reading bars," MACD divergence, pivot points, "price," and trendlines – to make your trading decisions.
Point : 30
Be careful about taking trades in between pivot points. This is NO MAN'S LAND, and dangerous territory. Better trades are made in and around pivot points.
Point : 31
Make sure to take the time to draw pivot points on your 15 min chart, which should be your main focus. This is like the radar screen in the cockpit of an airplane. It is difficult to trade (fly) without points of reference to look at. You don't need to draw them all. They probably won't all fit anyway. At least have those that are close to price action plotted on the chart. You can also plot lines on the 1 hr and 5 min, but you shouldn't be spending much time there, so it may be a waste of time. But, can't hurt.
You should also draw trendlines. Where price breaks a trend at a juncture with a pivot point, this is very powerful evidence that price is going the other way. Plot your MACD divergences. The more you see on the screen, the better your trades will be. Draw a line down the screen (on the chart of course) delineating start of session, and where you got your OHLC from to calculate the pivot points for the current session. I think you get the "point," pardon the expression.
Point : 32
Just to re-hash and beat an old drum, the 5 min chart is like the trim tab on a sailboat, for you sailors out there. It is small and insignificant, seemingly, but very powerful as it assists in "steadying" the course. Same too with trading, looking at the 5 min every once in a while will give you some insight into what is happening "underneath" the current 15 min bar that is forming. This is important, especially at the end of a run, where price might be trying to do an "end run" or "sneak attack" in the opposite direction to what you're thinking, while you're not watching, of course.
But, like I say, don't dwell in "5 min land" as ex-stock traders are wont to do. They are scalpers by nature, but will very quickly get scalped by the forex, as one of my new customers has recently found out the hard way. He now puts a trade on (with stop in place for sure), and goes to the airport to pick up company, or goes outside to clean the swimming pool – only to come back, and see how much money he has made by not obsessing over every little movement. I'm not saying don't pay attention, but what I am saying is too close is too close. Once you catch the trend, and enter a trade because you saw something in "reading bars," MACD divergence, pivot points, trendlines, or price action, let price steer the course, and "wait patiently" for the next event that will cause you to take action.
Of course, that action will be taken again because you saw something in "reading bars," MACD divergence, pivot points, trendlines, or price action. If you don't see anything significant, then DON'T DO ANYTHING. Sit on your hands. Don't press enter whatever you do! Oh, and before I leave this point, with a market maker I recommend, you don't have to leave the 15 minute chart to "peek" at the 5 min chart to see what's going on at that lower level, because they show the tick-by-tick action right on the 15 min chart, as the next 15 min bar is waiting to form.
Point : 33
I was recently asked how many signals he should wait for before pulling the trigger. As you recall, I earlier said that you should only take direction from "reading bars," MACD divergence, pivot points, trendlines – and price itself. Now, how many of these should fire before you engage your trade? Well, certainly, one is enough to set the tone – but all the more convincing where you have a couple or more all lining up and saying the same thing. For example, recently the Euro was in a downtrend from the session just ending, entering the new session still in a downtrend, when price did a double top at the nearest pivot point as the new session started. Well, there you have three things telling you what to do – go short, of course. We had the downtrend, the double top, and the double top banging its head up against the pivot point. Lots of evidence that price was southward bound. I think you get the point.
An analogy here: If you're sitting in your car at home waiting to go to work in the morning, and you are waiting for all the street lights to turn green on the way to work before you start the car, you will never get to work. So, the more green lights the better, but one is enough to get you going.
Point : 34
And now for some psychology. For you newbies out there, your self-esteem will grow the more trades you make. You will not always be right. You will make mistakes. That's only normal when you are first starting out, and even after you have been at it for a while. Don't beat up on yourself when you fail. Just say to yourself, "Next!" You must move on. If you are using wise money management techniques, like 20-30 pip stops, you will survive to see another trade. This is all about preserving staying power.
Don't second-guess your indicators (remember, "reading bars," MACD divergence, pivot points, trendlines, and price). You wouldn't dispute the dials and gauges in a plane, or you'd crash and burn. So, why doubt what your indicators are telling you. You must believe in them, and take "action" when they tell you to do so, BUT ONLY WHEN THEY TELL YOU TO DO SO! Have the courage to do so. And, now for the big one.
NEVER LISTEN TO ANYBODY ELSE. TAKE YOUR OWN COUNSEL. CLOSE YOUR EARS WHEN YOU ARE TRADING. IT'S YOU AND YOUR CURRENCY. YOU HAVE
NOBODY ELSE TO TURN TO. SO, DO IT. AND, STAY AWAY FROM NEGATIVE PEOPLE. DON'T TALK TO ANYBODY ABOUT THIS BUSINESS, UNLESS THEY ARE AS DEAD SERIOUS ABOUT IT AS YOU ARE. OTHERWISE, THEY WILL DRAG YOU DOWN. AND, BE HUMBLE. SAVE YOUR BRAGGING RIGHTS FOR LATER. THE FOREX WILL TAKE YOU DOWN, IF YOU TRY TO BECOME LARGER THAN LIFE. And, finally, focus on success.
Be careful what you think about. Your thoughts will
mould your actions and outcomes. If you are committed to the end result being successful, then you will get there. If you are always fearful, that affect your psyche. When you stumble and fail, just pick yourself up, dust yourself off, and get on with it. Don't be intimidated by a mistake, or a wrong decision. You will get better at this, especially if you keep a journal of all your trades, and study it to death. Be a professional. Be prepared.
Point : 35
I recently had a customer ask me what to do when price had headed north through all the pivot points for quite a run and lots of money in the bank, stalled at R2, and then continued its journey north. Answer: R2 is normally resistance. When price penetrated R2 headed north, and couldn't fall back through R2, R2 became support. It was a buy signal when price decided to continue its trek north. Remember, price is King. It will go where it wants to go. You must follow its lead, even if it already has put in quite a tear in one direction – even beyond its average daily range. It will keep going in that direction if it wants to.
Remember, currencies trend well. Don't buy too soon, don't sell too soon. Wait for convincing evidence that it has made up its mind. In this case, price played with R2, but never punched down through it with any sort of notion that it wanted to reverse course. Once it made up its mind to continue the journey north, all you had to do was follow suit. Don't fall prey to oxygen starvation at high altitudes like R2. Trust your indicators. Do what they tell you. This isn't about falling for your gut feel that price has gone "too far" up. It could go even further – a lot further, in this case – if it wants to.
Point : 36
You should not execute trades, as a general rule, in between pivot points. That area is NO MAN'S LAND. Wait for price to make up its mind on direction at a support or resistance level, supplemented by other indications of price direction – "reading bars," MACD divergence, reaction to pivot point, trendline breakouts.
Point : 37
Don't use MACD for anything other than divergence. Recently, MACD on the 15 was trending up, leading unsuspecting traders to believe that price was headed north. However, price did a u-e at the main pivot point, and headed south to find the other end of its range at S1. You wouldn't see this sudden shift in MACD, because it is a lagging indicator. So, to summarize, just use MACD for divergence and nothing else.
Point : 38
You should only take trades in and around pivot points – not in between, as stated previously. When price action centers around a pivot point, then take a look at the five minute to see what's going on behind the scenes. Because, you should have been focused on only the 15 min up to the point of price interaction with the pivot point.
Now, you want to pay attention to what price has up its sleeve. In the above example price faked out unsuspecting trades when it trended up through the main pivot point, only to tank as it did a price rejection bar on the 15 min chart. Of course, you wouldn't have seen this coming if you were only looking at the 15 min. You would have seen the price reversal on the 5 min, and been ready to head south with price.
Point : 39
The absence of divergence between MACD and price simply suggests that MACD is confirming that the price trend is intact. But, don't be fooled by this synergy. Please review strategy number 40 to see what I mean.
Point : 40
Resistance levels (M3, R1, M4, and R2) are levels (or sell zones) where sellers can be expected to outnumber buyers, and push price lower. Correspondingly, support levels (S2, M1, S1, and M2) are levels (or buy zones) where buyers can be expected to outnumber sellers, and push price higher. These expectations are based on my program's interpretation of buyer/seller interaction in the last session.
I think you will agree, after close inspection of the results of my pivot point calculations, that price hesitates, pauses, and decides on its course of action in and around pivot points. That's why you should never enter trades in between pivot points, while price is in transit, and in a state of transition.
Point : 41
Don't let anybody scare you off the forex by saying it is too risky. It is actually less risky than trading any other market, that is exchange-based. The forex cannot be "engineered," as stocks and commodities can be. Also, being a true seamless 24-hour market, there is less of a chance of your stops not kicking in. That's because the forex is highly liquid, trading ~US$1.5 trillion each and every day. It is the most liquid financial market in the world, bar none. And, you get good fills, with fast execution times.
Point : 42
On May 23, we have had a rather unusual day, in that price "reached" beyond its average range to put in 135 pips in two hours, just above R2, after starting its climb at the main Pivot Point. The Euro reversed course at the double top, and broke down through R2, to mark the end of its run to achieve its average daily range, or better in this case, within 12 hours of the start of trading for the current session. You would have noticed, of course, that the double top formation was also a "railway tracks" bar formation (if you just happened to have been looking at bars, instead of candles).
Those two patterns occurring at the same time are a pretty powerful indication that price has run its course. So, keep your eyes peeled for price patterns per se, but also for combinations of patterns occurring at the same time.
Thursday, May 17, 2007
Forex Strategy - B
Point : 14
When you are first starting out, pick one currency of the four major pairs (EUR/USD, USD/JPY, GBP/USD, and USD/CHF) to trade, and become a specialist in it. I would personally recommend the Euro, especially if you are going to be asking me questions, as that's what I focus on with my clients around the world. Get to know its rhythm. When you are doing well with it, then move on, and trade the other three major pairs, as you see fit. When you are in learning mode, you will have your hands full trying to figure out what to look for, and how to manage your trades – enough so that you don't want to be skipping back and forth between currencies.
Point : 15
Keep a log of all your trades – both good and bad. Analyze where you went right and wrong, and vow not to repeat those situations that could have been done better. This is all part of being organized as a "professional" trader - with good habits. This is not about gun-slinging and winging it with "Hail Mary" passes.
Point : 16
Important point here: If price action opens in the upper end of the projected range for the session (all the way up to R2, and beyond) – in other words, in the sell area (that area above the central pivot point) – and there are other suggestions that price is too high (such as a particular bar reading, MACD divergence, or trendline breakout), then price has probably achieved the upper end of its price range for the session.
The same holds true where price action opens in the lower end of the projected range for the session (all the way down to S2, and beyond) – in other words, in the buy area (that area below the central pivot point) – and there are other suggestions that price is too low (such as a particular bar reading, MACD divergence, or trendline breakout), then price has probably achieved the lower end of its price range for the session.
Point : 17
If there is nothing to do, then don't do it. Don't just do something because your "gut" tells you to. That can get you in a lot of trouble in this business. Only react to bona fide signals provided by the four indicators talked about above – "reading bars," MACD divergence, pivot points, and trendline analysis.
Point : 18
Only use an "industrial strength" market maker with the lowest pip spread in the industry
Point : 19
Occasionally, you will see a huge spike up in price, as we did 11 May 03. This just happened to be on a Sunday, shortly after re-commencement of trading, after the weekend respite. Ordinarily, I would take the OHLC numbers from Friday, but given the nature of the wild swing up that evening on one of the 15 min bars, I would then use the OHLC numbers from Sunday night's session close to get a better reading on support and resistance levels for the next session. This is, of course, if you are using a market maker that delineates its break between trading sessions in the late evening - anywhere between 20:59:50 and 24:00 (midnight).
Point : 20
Former stock traders take note: I say former because I don't honestly know why you would ever want to go back to stocks after having tasted the forex. Don't over-trade the forex. This is not a scalping market! If you have to scalp, do it in slow motion. Currencies trend well. Don't buy too soon in a downtrend, and don't sell too soon in an uptrend. Watch for trendline breakouts to know when to make your move.
Point : 21
You cannot succeed at trading the forex unless you are TOTALLY committed to trading, and trading it. This is not something to be played with. If you are not going to take it seriously, then try something else.
Point : 22
Put your emotions in your hip pocket. This is a business, and should be treated as such. If you have any bad habits, the forex will fix them real quick.
Point : 23
Important point here: If you deem the major trend for the current session, based on everything you have learned to this point, to be down, then think DOWN. Sell rallies. Don't look to buy, or you might get whipsawed to death. Likewise, if you deem the major trend for the current session to be up, based on everything you have learned to this point, then think UP. Buy the dips. Don't look to sell. Former stock traders fall prey to wanting to have it both ways. Maybe, when you get real good at this, you can try. But for now, think one way, and save yourself the grief.
Point : 24
Another important point here: The major rally for the Euro begins after two am New York time. These are the London hours – the busiest in the forex, bar none. The Euro always – session after session – puts in, on average, 76 pips during the first 12 hours from that time forward. Whether you want to believe it or not, the Euro, once it makes up its mind what the major trend is going to be during those 12 hours, will "drive" to the other end of its range (76 pips) within those 12 hours. So catch the trend, and ride it. Now, it won't be a straight line, of course. Even an airplane taking off or landing encounters some bumps along the way. Same too with the Euro. Once it picks its direction, it will meander all the way to the other end of its range.
This will "fake" the dumb money out. They never know what happens to them.
To conclude: If the Euro wants to have a down trend during those 12 hours, it will achieve its 76 pips south of where it started. So, think DOWN. If the Euro wants to have an up trend from during those 12 hours, it will achieve its 76 pips north of where it started. So, think UP. The Euro either goes up or down during those 12 hours – not both. Here, I am talking about the major trend, of course. Ah yes, there will be rallies or dips along the way, depending on the direction of the trend (down or up), but like I said earlier, SELL THE RALLIES IN A DOWNTREND, AND BUY THE DIPS IN AN UPTREND. That's all there is to it.
Point : 25
Something to think about: If you get the above strategy - number 26, then you're going to love this one. It will test your nerve. If you buy into the idea of the major trend unfolding during those 12 hours (check it out here every day, and you'll see living proof), then why not try to get in when it starts to unfold, and "ride it." That will take nerves of steel, because the Euro will go against you from time to time – but not enough so to take out your initial stop. From a risk/reward ratio point of view, you are risking 20 pips to gain 76.
Not a bad ratio. What I am trying to say here is why not just put your trade on, set the stop, and go clean the swimming pool while the Euro meanders its way to the end of its range. What spooks a lot of people out is when they stare at price action after they have engaged their trade, and they over-react every time the Euro hiccups. Just leave it alone. So, what's the worst that can happen? You can get stopped out right? Chances are you won't.
If you catch the major trend, chances are very much in your favor that you will be richer by at least US$760 per lot. If you trade the action all the way through the trend, you may get beat up real bad, and lose anyway. Let the Euro lead you, not the other way around.
Point : 26
Every once in a while, I would encourage you to step back from the daily intraday action, and have a look at it from 30,000 feet. Sometimes, we can get too close to it, and not see the trees in the forest. On the daily chart, if you plot trendlines and look for divergences, you will learn a lot about where price is going to go "next." Of course, that's what we all want to know, right? Not only do trendline breakouts and MACD divergences tell a "big" story, but where a daily bar closes will offer up a clue as to where price will likely go in the next session. Study the chart, and you'll see what I mean.
For those of you who don't know what this is all about, the little line pointing off to the right of a price bar is the "close" for the daily session. The little line pointing off to the left is the "open" for that session. In the forex world, the close of one session automatically becomes the open for the next session, as this is a very liquid market, and there are no gaps in trading.
I just thought it wise to pause and reflect at a higher level from time to time. Looking at things top-down is sometimes healthy, and a wise thing to do. We can sometimes get caught up in the minutiae of the daily flurry of price movements, and lose perspective of the bigger picture unfolding above us.
Point : 27
To reiterate, there are just a "few" things you have to watch out for, and be "patient" for set-ups to occur. Don't just pull the trigger because you "think" it's time to do so. Wait for bona fide "signals." There are only "four" clues you have to look for: "reading bars," MACD divergence, pivot point breakthroughs/tests/violations, and trendline breakouts. That's it folks. That's all it takes to succeed in this wonderful business called forex trading. No other bells and whistles or toys are required, contrary to what you may have learned before. The hardest part for you will be to "unlearn" everything you knew about trading before. Just give your head a shake, and it will go away.
When you are first starting out, pick one currency of the four major pairs (EUR/USD, USD/JPY, GBP/USD, and USD/CHF) to trade, and become a specialist in it. I would personally recommend the Euro, especially if you are going to be asking me questions, as that's what I focus on with my clients around the world. Get to know its rhythm. When you are doing well with it, then move on, and trade the other three major pairs, as you see fit. When you are in learning mode, you will have your hands full trying to figure out what to look for, and how to manage your trades – enough so that you don't want to be skipping back and forth between currencies.
Point : 15
Keep a log of all your trades – both good and bad. Analyze where you went right and wrong, and vow not to repeat those situations that could have been done better. This is all part of being organized as a "professional" trader - with good habits. This is not about gun-slinging and winging it with "Hail Mary" passes.
Point : 16
Important point here: If price action opens in the upper end of the projected range for the session (all the way up to R2, and beyond) – in other words, in the sell area (that area above the central pivot point) – and there are other suggestions that price is too high (such as a particular bar reading, MACD divergence, or trendline breakout), then price has probably achieved the upper end of its price range for the session.
The same holds true where price action opens in the lower end of the projected range for the session (all the way down to S2, and beyond) – in other words, in the buy area (that area below the central pivot point) – and there are other suggestions that price is too low (such as a particular bar reading, MACD divergence, or trendline breakout), then price has probably achieved the lower end of its price range for the session.
Point : 17
If there is nothing to do, then don't do it. Don't just do something because your "gut" tells you to. That can get you in a lot of trouble in this business. Only react to bona fide signals provided by the four indicators talked about above – "reading bars," MACD divergence, pivot points, and trendline analysis.
Point : 18
Only use an "industrial strength" market maker with the lowest pip spread in the industry
Point : 19
Occasionally, you will see a huge spike up in price, as we did 11 May 03. This just happened to be on a Sunday, shortly after re-commencement of trading, after the weekend respite. Ordinarily, I would take the OHLC numbers from Friday, but given the nature of the wild swing up that evening on one of the 15 min bars, I would then use the OHLC numbers from Sunday night's session close to get a better reading on support and resistance levels for the next session. This is, of course, if you are using a market maker that delineates its break between trading sessions in the late evening - anywhere between 20:59:50 and 24:00 (midnight).
Point : 20
Former stock traders take note: I say former because I don't honestly know why you would ever want to go back to stocks after having tasted the forex. Don't over-trade the forex. This is not a scalping market! If you have to scalp, do it in slow motion. Currencies trend well. Don't buy too soon in a downtrend, and don't sell too soon in an uptrend. Watch for trendline breakouts to know when to make your move.
Point : 21
You cannot succeed at trading the forex unless you are TOTALLY committed to trading, and trading it. This is not something to be played with. If you are not going to take it seriously, then try something else.
Point : 22
Put your emotions in your hip pocket. This is a business, and should be treated as such. If you have any bad habits, the forex will fix them real quick.
Point : 23
Important point here: If you deem the major trend for the current session, based on everything you have learned to this point, to be down, then think DOWN. Sell rallies. Don't look to buy, or you might get whipsawed to death. Likewise, if you deem the major trend for the current session to be up, based on everything you have learned to this point, then think UP. Buy the dips. Don't look to sell. Former stock traders fall prey to wanting to have it both ways. Maybe, when you get real good at this, you can try. But for now, think one way, and save yourself the grief.
Point : 24
Another important point here: The major rally for the Euro begins after two am New York time. These are the London hours – the busiest in the forex, bar none. The Euro always – session after session – puts in, on average, 76 pips during the first 12 hours from that time forward. Whether you want to believe it or not, the Euro, once it makes up its mind what the major trend is going to be during those 12 hours, will "drive" to the other end of its range (76 pips) within those 12 hours. So catch the trend, and ride it. Now, it won't be a straight line, of course. Even an airplane taking off or landing encounters some bumps along the way. Same too with the Euro. Once it picks its direction, it will meander all the way to the other end of its range.
This will "fake" the dumb money out. They never know what happens to them.
To conclude: If the Euro wants to have a down trend during those 12 hours, it will achieve its 76 pips south of where it started. So, think DOWN. If the Euro wants to have an up trend from during those 12 hours, it will achieve its 76 pips north of where it started. So, think UP. The Euro either goes up or down during those 12 hours – not both. Here, I am talking about the major trend, of course. Ah yes, there will be rallies or dips along the way, depending on the direction of the trend (down or up), but like I said earlier, SELL THE RALLIES IN A DOWNTREND, AND BUY THE DIPS IN AN UPTREND. That's all there is to it.
Point : 25
Something to think about: If you get the above strategy - number 26, then you're going to love this one. It will test your nerve. If you buy into the idea of the major trend unfolding during those 12 hours (check it out here every day, and you'll see living proof), then why not try to get in when it starts to unfold, and "ride it." That will take nerves of steel, because the Euro will go against you from time to time – but not enough so to take out your initial stop. From a risk/reward ratio point of view, you are risking 20 pips to gain 76.
Not a bad ratio. What I am trying to say here is why not just put your trade on, set the stop, and go clean the swimming pool while the Euro meanders its way to the end of its range. What spooks a lot of people out is when they stare at price action after they have engaged their trade, and they over-react every time the Euro hiccups. Just leave it alone. So, what's the worst that can happen? You can get stopped out right? Chances are you won't.
If you catch the major trend, chances are very much in your favor that you will be richer by at least US$760 per lot. If you trade the action all the way through the trend, you may get beat up real bad, and lose anyway. Let the Euro lead you, not the other way around.
Point : 26
Every once in a while, I would encourage you to step back from the daily intraday action, and have a look at it from 30,000 feet. Sometimes, we can get too close to it, and not see the trees in the forest. On the daily chart, if you plot trendlines and look for divergences, you will learn a lot about where price is going to go "next." Of course, that's what we all want to know, right? Not only do trendline breakouts and MACD divergences tell a "big" story, but where a daily bar closes will offer up a clue as to where price will likely go in the next session. Study the chart, and you'll see what I mean.
For those of you who don't know what this is all about, the little line pointing off to the right of a price bar is the "close" for the daily session. The little line pointing off to the left is the "open" for that session. In the forex world, the close of one session automatically becomes the open for the next session, as this is a very liquid market, and there are no gaps in trading.
I just thought it wise to pause and reflect at a higher level from time to time. Looking at things top-down is sometimes healthy, and a wise thing to do. We can sometimes get caught up in the minutiae of the daily flurry of price movements, and lose perspective of the bigger picture unfolding above us.
Point : 27
To reiterate, there are just a "few" things you have to watch out for, and be "patient" for set-ups to occur. Don't just pull the trigger because you "think" it's time to do so. Wait for bona fide "signals." There are only "four" clues you have to look for: "reading bars," MACD divergence, pivot point breakthroughs/tests/violations, and trendline breakouts. That's it folks. That's all it takes to succeed in this wonderful business called forex trading. No other bells and whistles or toys are required, contrary to what you may have learned before. The hardest part for you will be to "unlearn" everything you knew about trading before. Just give your head a shake, and it will go away.
Forex Strategy - A
Point : 1
When you are just starting out, strive to carve out 20 pips per session, and that’s it. Then, turn it off, and study some more. When you get really good at it, you can then “graduate” to higher returns. So, set your goal at 20 pips and stick to it, until you are a grand master at this wonderful “business” called forex trading. I stress the word business. This is not a game, especially where your “hard-earned money” is involved.
Point : 2
When you first start out in any particular session, look at the 1 hr chart to get an overall perspective on trend from one session to the next, and what it’s likely shaping up to be at the beginning of the upcoming new session.
Point : 3
Only look at the 5 min chart if you absolutely have to see what’s behind the current 15 min bar – especially where the bar is elongated, and may have just penetrated a pivot point; in other words, is price reversing course on the 5 min chart, which would obviously not yet be reflected on the 15 min chart?
Point : 4
Don’t dwell on the 5 min chart, as it contains a lot of “noise” that will whipsaw you to death
Point : 5
MACD rules on the 15 min chart. Even if MACD is, say, trending up on the 1 hr chart, if it is trending down on the 15 min chart, that’s what you take your cue from. That’s not to say a shift in price direction is not in the works. It just means it’s coming, but not yet. In the meantime, you don’t want to miss what’s happening “in the now,” which is what is reflected in the 15 min chart
Point : 6
If MACD is trending down on the 15 min chart, and price is wanting to go north, price will sooner than later head south as it perhaps bounces off a pivot point, or gets turned around at a juncture caught by one of the other three “tools” you should be using (“reading bars,” MACD divergence, or trendline analysis). Same thing if MACD is trending up, and price is trying to head south.
Point : 7
Only use MACD for divergence, not for buy or sell signals. It is a lagging indicator, and as such is useless as a trigger. It is too slow for that in the forex world.
Point : 8
Again, MACD divergence on the 15 min chart is more significant than what you see on the 1 hr chart in the near-term. For those of you who don’t understand what divergence means, keep looking at my own personal forex trading examples on this page on a daily basis for examples of divergence. Basically, what it means is where you see MACD waves “waving” in the opposite direction to price action. That’s why I connect the top of the waves (in a downtrend) and the bottom of the waves (in an uptrend) to illustrate that the waves are “waving” higher in an uptrend and lower in a downtrend – in the opposite direction to where price is going.
Point : 9
Always “protect” your money by using 20-30 pip stops. Mental stops are okay, but not if you are dead serious about using a “disciplined” approach to managing your money. You will lose three out of ten trades. The three losses should be kept to 20-30 pips. Your wins will by far surpass your small losses, and that’s what stop-losses are all about.
Don’t be afraid to lose. Even professional batters strike out six out of 10 times. Lions are only successful 20% of the time in their chase for the kill. Professional golfers lose 95% of the time. Professional poker players lose 50% of the time. So, your chances are better at trading the forex, using my system of course, than in any other venue. Even businesses have “bad inventory.” And, life in general is not always “100%” for sure.
Point : 10
That all said and done, if you entered a trade close to a pivot point, or a particular significant bar pattern (like a double top, for instance, or a trendline breakout), place your stop on the other side (but not too close to) the event that caused you to take action. This is because price has a tendency to snap back to that situation that caused it to bolt away from it in the first place. If you follow the 20-30 pip stop rule, but a 33 pip stop on the other side of that event would safeguard you against such a reaction, then so much the better. So, yes the stop rule is 20-30 pips, but within reason of course.
Point : 11
Stops (read “stop-loss”) are for insurance purposes only – not necessarily for taking profits. However, you can most certainly employ “trailing stops,” whereby you keep moving your stop up (or down, whichever the case may be) to protect your profits, as price advances, or declines.
Point : 12
Only use “reading bars,” MACD divergence, pivot points, and trendline analysis in your forex trading toolkit. That’s all you need for this market. Be a technical bigot. Focus on pure technical analysis, and avoid funnymentals. Even news is factored into price action, so you don’t need to be up on it each and every nano
second.
Point : 13
And now for the tough part. I know my documentation says that the forecast low and high for the next trading session can be M1/M3 or M2/M4. However, trading is shades of gray. It is not a black and white business. If it were, the world would be paved in gold, and everybody would be rich.
Now, we wouldn’t want that would we? The forex would be nothing more than a Church at the end of a road connected to a river bank at the other end with nothing in between. The point I am trying to make is that the “actual” low and high for the next session could very well be any combination of M1, M2, M3, and M4. It could be M1/M4, M2/M3, or combinations of the other five pivot points.
The M1/M3 and M2/M4 calculations are just guideposts, but are not poured in concrete. Price is the number one indicator. It will determine what the low and high are going to be. And one other thing, you should use these forecasts in conjunction with the other three “tools” in your forex trading toolkit – “reading bars,” MACD divergence, and trendline analysis.
In other words, if price has been trending down from the past session into the current one, price is trading at, say, M3, and price is still going down, then M3 may very well be the high for the new session, regardless of the fact that my system may have called for M4 to be the high. So, use the pivot points in conjunction with other three possible signals – “reading bars,” MACD divergence, and trendline analysis.
I have seen it happen, as in the example just given, where price was trending down from one session to the next right through M3 at the open of the next session – simultaneous with the formation of a “double top” bar pattern. Well, there you have three indications that price was headed south for sure. And, I believe MACD was also trending down in that particular case. So, that was another clue that the high for the session had probably already been put in.
When you are just starting out, strive to carve out 20 pips per session, and that’s it. Then, turn it off, and study some more. When you get really good at it, you can then “graduate” to higher returns. So, set your goal at 20 pips and stick to it, until you are a grand master at this wonderful “business” called forex trading. I stress the word business. This is not a game, especially where your “hard-earned money” is involved.
Point : 2
When you first start out in any particular session, look at the 1 hr chart to get an overall perspective on trend from one session to the next, and what it’s likely shaping up to be at the beginning of the upcoming new session.
Point : 3
Only look at the 5 min chart if you absolutely have to see what’s behind the current 15 min bar – especially where the bar is elongated, and may have just penetrated a pivot point; in other words, is price reversing course on the 5 min chart, which would obviously not yet be reflected on the 15 min chart?
Point : 4
Don’t dwell on the 5 min chart, as it contains a lot of “noise” that will whipsaw you to death
Point : 5
MACD rules on the 15 min chart. Even if MACD is, say, trending up on the 1 hr chart, if it is trending down on the 15 min chart, that’s what you take your cue from. That’s not to say a shift in price direction is not in the works. It just means it’s coming, but not yet. In the meantime, you don’t want to miss what’s happening “in the now,” which is what is reflected in the 15 min chart
Point : 6
If MACD is trending down on the 15 min chart, and price is wanting to go north, price will sooner than later head south as it perhaps bounces off a pivot point, or gets turned around at a juncture caught by one of the other three “tools” you should be using (“reading bars,” MACD divergence, or trendline analysis). Same thing if MACD is trending up, and price is trying to head south.
Point : 7
Only use MACD for divergence, not for buy or sell signals. It is a lagging indicator, and as such is useless as a trigger. It is too slow for that in the forex world.
Point : 8
Again, MACD divergence on the 15 min chart is more significant than what you see on the 1 hr chart in the near-term. For those of you who don’t understand what divergence means, keep looking at my own personal forex trading examples on this page on a daily basis for examples of divergence. Basically, what it means is where you see MACD waves “waving” in the opposite direction to price action. That’s why I connect the top of the waves (in a downtrend) and the bottom of the waves (in an uptrend) to illustrate that the waves are “waving” higher in an uptrend and lower in a downtrend – in the opposite direction to where price is going.
Point : 9
Always “protect” your money by using 20-30 pip stops. Mental stops are okay, but not if you are dead serious about using a “disciplined” approach to managing your money. You will lose three out of ten trades. The three losses should be kept to 20-30 pips. Your wins will by far surpass your small losses, and that’s what stop-losses are all about.
Don’t be afraid to lose. Even professional batters strike out six out of 10 times. Lions are only successful 20% of the time in their chase for the kill. Professional golfers lose 95% of the time. Professional poker players lose 50% of the time. So, your chances are better at trading the forex, using my system of course, than in any other venue. Even businesses have “bad inventory.” And, life in general is not always “100%” for sure.
Point : 10
That all said and done, if you entered a trade close to a pivot point, or a particular significant bar pattern (like a double top, for instance, or a trendline breakout), place your stop on the other side (but not too close to) the event that caused you to take action. This is because price has a tendency to snap back to that situation that caused it to bolt away from it in the first place. If you follow the 20-30 pip stop rule, but a 33 pip stop on the other side of that event would safeguard you against such a reaction, then so much the better. So, yes the stop rule is 20-30 pips, but within reason of course.
Point : 11
Stops (read “stop-loss”) are for insurance purposes only – not necessarily for taking profits. However, you can most certainly employ “trailing stops,” whereby you keep moving your stop up (or down, whichever the case may be) to protect your profits, as price advances, or declines.
Point : 12
Only use “reading bars,” MACD divergence, pivot points, and trendline analysis in your forex trading toolkit. That’s all you need for this market. Be a technical bigot. Focus on pure technical analysis, and avoid funnymentals. Even news is factored into price action, so you don’t need to be up on it each and every nano
second.
Point : 13
And now for the tough part. I know my documentation says that the forecast low and high for the next trading session can be M1/M3 or M2/M4. However, trading is shades of gray. It is not a black and white business. If it were, the world would be paved in gold, and everybody would be rich.
Now, we wouldn’t want that would we? The forex would be nothing more than a Church at the end of a road connected to a river bank at the other end with nothing in between. The point I am trying to make is that the “actual” low and high for the next session could very well be any combination of M1, M2, M3, and M4. It could be M1/M4, M2/M3, or combinations of the other five pivot points.
The M1/M3 and M2/M4 calculations are just guideposts, but are not poured in concrete. Price is the number one indicator. It will determine what the low and high are going to be. And one other thing, you should use these forecasts in conjunction with the other three “tools” in your forex trading toolkit – “reading bars,” MACD divergence, and trendline analysis.
In other words, if price has been trending down from the past session into the current one, price is trading at, say, M3, and price is still going down, then M3 may very well be the high for the new session, regardless of the fact that my system may have called for M4 to be the high. So, use the pivot points in conjunction with other three possible signals – “reading bars,” MACD divergence, and trendline analysis.
I have seen it happen, as in the example just given, where price was trending down from one session to the next right through M3 at the open of the next session – simultaneous with the formation of a “double top” bar pattern. Well, there you have three indications that price was headed south for sure. And, I believe MACD was also trending down in that particular case. So, that was another clue that the high for the session had probably already been put in.
Technical Analysis
Introduction to Technical Analysis
Technical analysis is research of market dynamics that
is done mainly with the help of charts and with the purpose
of forecasting future price development. Technical analysis
comprises several approaches to the study of price movement
which are interconnected in the framework of one harmonious
theory.
This type of analysis studies the price movement on the market
by means of analyzing three market factors: price, volumes,
and, in case of study of futures contracts’ market, of an open
interest (number of open positions). Of these three factors the
primary one for technical analysis is the prices, while the
alterations in other factors are studies mainly in order to confirm
the correctness of the identified price trend. This technical theory,
just like any theory, has its core postulates.
Technical analysts base their research on the following
three axioms:
Market movement considers everything
This is the most important postulate of technical analysis.
It is crucial to understand it in order to grasp rightly the
procedures of analysis. The gist of it is that any factor that
influences the price of securities, whether economic, political,
or psychological, has already been taken into account and
reflected in the price chart. In other words, every price change
is accompanied by a change in external factors.
The main inference of this premise is the necessity to follow
closely the price movements and analyze them. By means of
analyzing price charts and multiple other indicators, a technical
analyst comes to the point that the market itself shows to her/
him the trend it will most likely follow. This premise is in conflict
with fundamental analysis where the attention is primarily paid
to the study of factors, and later on, after the analysis of the
factors, to conclusions as to the market trends are made. Thus, if
the demand is higher than the supply, a fundamental analyst will
come to the conclusion that the price will grow. Technical analyst,
however, makes her/his conclusions in the opposite sequence:
since the price has grown, it means the demand is higher than the
supply.
The prices move with the trend
This assumption is the basis for all methods of technical
analysis, as a market that moves in accordance with trends
can be analyzed, unlike a chaotic market. The postulate that the
price movement is a result of a trend has two effects. The first
one implies that the current trend will most likely continue and
will not reverse itself, thus, excluding disorderly chaotic movement
of the market. The second one implies that the current trend
will go on until the opposite trend sets in.
The history repeats itself
Technical analysis and studies of market dynamics are closely
related to the studies of human psychology. Thus, the graphical
price models identified and classified within the last hundred
years depict core characteristics of the psychological state of
the market. First of all, they show the moods currently prevailing
in the market, whether bullish or bearish. Since these models
worked in the past, we have reasons to suppose that they will
work in the future, for they are based on human psychology
which remains almost unchaged over years. We can reword
the last postulate — the story repeats itself — in a slightly
different way: the key to understanding the future lies in
the studies of the past.
Technical analysis is research of market dynamics that
is done mainly with the help of charts and with the purpose
of forecasting future price development. Technical analysis
comprises several approaches to the study of price movement
which are interconnected in the framework of one harmonious
theory.
This type of analysis studies the price movement on the market
by means of analyzing three market factors: price, volumes,
and, in case of study of futures contracts’ market, of an open
interest (number of open positions). Of these three factors the
primary one for technical analysis is the prices, while the
alterations in other factors are studies mainly in order to confirm
the correctness of the identified price trend. This technical theory,
just like any theory, has its core postulates.
Technical analysts base their research on the following
three axioms:
Market movement considers everything
This is the most important postulate of technical analysis.
It is crucial to understand it in order to grasp rightly the
procedures of analysis. The gist of it is that any factor that
influences the price of securities, whether economic, political,
or psychological, has already been taken into account and
reflected in the price chart. In other words, every price change
is accompanied by a change in external factors.
The main inference of this premise is the necessity to follow
closely the price movements and analyze them. By means of
analyzing price charts and multiple other indicators, a technical
analyst comes to the point that the market itself shows to her/
him the trend it will most likely follow. This premise is in conflict
with fundamental analysis where the attention is primarily paid
to the study of factors, and later on, after the analysis of the
factors, to conclusions as to the market trends are made. Thus, if
the demand is higher than the supply, a fundamental analyst will
come to the conclusion that the price will grow. Technical analyst,
however, makes her/his conclusions in the opposite sequence:
since the price has grown, it means the demand is higher than the
supply.
The prices move with the trend
This assumption is the basis for all methods of technical
analysis, as a market that moves in accordance with trends
can be analyzed, unlike a chaotic market. The postulate that the
price movement is a result of a trend has two effects. The first
one implies that the current trend will most likely continue and
will not reverse itself, thus, excluding disorderly chaotic movement
of the market. The second one implies that the current trend
will go on until the opposite trend sets in.
The history repeats itself
Technical analysis and studies of market dynamics are closely
related to the studies of human psychology. Thus, the graphical
price models identified and classified within the last hundred
years depict core characteristics of the psychological state of
the market. First of all, they show the moods currently prevailing
in the market, whether bullish or bearish. Since these models
worked in the past, we have reasons to suppose that they will
work in the future, for they are based on human psychology
which remains almost unchaged over years. We can reword
the last postulate — the story repeats itself — in a slightly
different way: the key to understanding the future lies in
the studies of the past.
Happy learning.
Forex Term
Types of Forex Order
Entry Orders: An order, stop or limit, initiating an open position and executed when a specific price level is reached and/or broken. The execution is handled by the dealing desk and the order is in effect until cancelled by the client.
Entry Limit Orders: An order initiating
an open position to sell as the market rises, or buy as the market falls. The
client believes the market will reverse direction at the level of the order.
Entry Stop Orders: An order initiating
an open position to sell as the market falls, or buy as the market rises. The
client placing the order believes that prices will continue to move in the same direction
as the previous momentum after hitting the order level.
Limit Orders: A limit order is an order
tied to a specific position for the purpose of locking in the gains from that position. A limit order placed on a buy position is an order to sell. A limit
order placed on a sell position is an order to buy. A limit order remains in
effect until the position is liquidated or cancelled by the client.
Market Order: An order to buy or sell
which is to be filled immediately at the prevailing currency price.
OCO (One Cancels the Other): A stop-loss order and a limit order linked to a specific position. One order, the stop, is to prevent additional loss on the position, and one order, the limit is to take profit on the position. When either order is executed, closing the position, the other is automatically cancelled.
Stop-Loss Orders: An order linked to a specific position to close that position and prevent additional losses. A stop-loss order placed on a buy position is an order to sell that position. A stop-loss order on a sell position is an order to buy that position. A stop-loss order remains in effect until the position is liquidated or cancelled by the client.
Hedge fund: A private, unregulated investment fund for wealthy investors (minimum investments typically begin at US$1 million) specializing in high risk, short-term speculation on bonds, currencies, stock options and derivatives.
Hedging: A strategy designed to reduce investment risk. Its purpose is to reduce the volatility of a portfolio by investing in alternative instruments that offset the risk in the primary portfolio.
Leverage: The degree to which an investor or business is utilizing borrowed money. The amount, expressed as a multiple, by which the notional amount traded exceeds the margin required to trade. For example, if the notional amount traded is $100,000 dollars and the required margin is $2000, the trader can trade with 50 times leverage ($100,000/$2000). For investors, leverage means buying on margin to enhance return on value without increasing investment. Leveraged investing can be extremely risky because you can lose not only your money, but the money you borrowed as well.
Liquidity: The ability of a market to accept large transactions. A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.
Long: A position purchasing a particular currency against another currency, anticipating that the value of the purchased currency will appreciate against the second currency.
Margin: Funds that customers must deposit as collateral to cover any potential losses from adverse movements in prices.
Margin Call: A requirement for additional funds or other collateral, from a broker or dealer, to increase margin to a necessary level to guarantee performance on a position that has moved against the customer.
Market Maker: A dealer that supplies prices, and is prepared to buy and sell at those bid and ask prices. All CFTC registered FCMs are market makers.
Pip (tick): The term used in currency markets to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).
Position: A view expressed by a trader through the buying or selling of currencies, and can also refer to the amount of currency either owned or owed by an investor.
Rollover: The settlement of a deal is rolled forward to another value date with the cost of this process based on the interest rate differential of the two currencies. An overnight swap, specifically the next business day against the following business day.
Short: To sell a currency without actually owning it, and to hold a short position with expectations that the price will decrease so that it can be bought back at a later time at a profit.
Spread: The difference between the bid and offer (ask) prices of a currency; used to measure market liquidity. Narrower spreads usually signify high liquidity.
Spot Price: Current market price. Settlement of spot transactions normally occurs within two business days.
Swaps: A foreign exchange swap is a trade that combines both a spot and a forward transaction into one deal, or two forward trades with different maturity dates.
Entry Orders: An order, stop or limit, initiating an open position and executed when a specific price level is reached and/or broken. The execution is handled by the dealing desk and the order is in effect until cancelled by the client.
Entry Limit Orders: An order initiating
an open position to sell as the market rises, or buy as the market falls. The
client believes the market will reverse direction at the level of the order.
Entry Stop Orders: An order initiating
an open position to sell as the market falls, or buy as the market rises. The
client placing the order believes that prices will continue to move in the same direction
as the previous momentum after hitting the order level.
Limit Orders: A limit order is an order
tied to a specific position for the purpose of locking in the gains from that position. A limit order placed on a buy position is an order to sell. A limit
order placed on a sell position is an order to buy. A limit order remains in
effect until the position is liquidated or cancelled by the client.
Market Order: An order to buy or sell
which is to be filled immediately at the prevailing currency price.
OCO (One Cancels the Other): A stop-loss order and a limit order linked to a specific position. One order, the stop, is to prevent additional loss on the position, and one order, the limit is to take profit on the position. When either order is executed, closing the position, the other is automatically cancelled.
Stop-Loss Orders: An order linked to a specific position to close that position and prevent additional losses. A stop-loss order placed on a buy position is an order to sell that position. A stop-loss order on a sell position is an order to buy that position. A stop-loss order remains in effect until the position is liquidated or cancelled by the client.
Hedge fund: A private, unregulated investment fund for wealthy investors (minimum investments typically begin at US$1 million) specializing in high risk, short-term speculation on bonds, currencies, stock options and derivatives.
Hedging: A strategy designed to reduce investment risk. Its purpose is to reduce the volatility of a portfolio by investing in alternative instruments that offset the risk in the primary portfolio.
Leverage: The degree to which an investor or business is utilizing borrowed money. The amount, expressed as a multiple, by which the notional amount traded exceeds the margin required to trade. For example, if the notional amount traded is $100,000 dollars and the required margin is $2000, the trader can trade with 50 times leverage ($100,000/$2000). For investors, leverage means buying on margin to enhance return on value without increasing investment. Leveraged investing can be extremely risky because you can lose not only your money, but the money you borrowed as well.
Liquidity: The ability of a market to accept large transactions. A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.
Long: A position purchasing a particular currency against another currency, anticipating that the value of the purchased currency will appreciate against the second currency.
Margin: Funds that customers must deposit as collateral to cover any potential losses from adverse movements in prices.
Margin Call: A requirement for additional funds or other collateral, from a broker or dealer, to increase margin to a necessary level to guarantee performance on a position that has moved against the customer.
Market Maker: A dealer that supplies prices, and is prepared to buy and sell at those bid and ask prices. All CFTC registered FCMs are market makers.
Pip (tick): The term used in currency markets to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).
Position: A view expressed by a trader through the buying or selling of currencies, and can also refer to the amount of currency either owned or owed by an investor.
Rollover: The settlement of a deal is rolled forward to another value date with the cost of this process based on the interest rate differential of the two currencies. An overnight swap, specifically the next business day against the following business day.
Short: To sell a currency without actually owning it, and to hold a short position with expectations that the price will decrease so that it can be bought back at a later time at a profit.
Spread: The difference between the bid and offer (ask) prices of a currency; used to measure market liquidity. Narrower spreads usually signify high liquidity.
Spot Price: Current market price. Settlement of spot transactions normally occurs within two business days.
Swaps: A foreign exchange swap is a trade that combines both a spot and a forward transaction into one deal, or two forward trades with different maturity dates.
Moving Averages
Moving Average
Moving averages are one of the oldest and most popular technical analysis tools. A moving average is the average price of a financial instrument over a given time. When calculating a moving average, you specify the time span to calculate the average price. For example, it could be 25 days.
A "simple" moving average is calculated by adding the instrument prices for the most recent "n" time periods and then dividing by "n". For instance, adding the closing prices of an instrument for most recent 25 days and then dividing by 25. The result is the average price of the instrument over the last 25 days. This calculation is done for each period in the chart.
Note that a moving average cannot be calculated until you have "n" time periods of data. For example, you cannot display a 25-day moving average until the 25th day in a chart.
The moving average represents the consensus of investor’s expectations over the indicated period of time. If the instrument price is above its moving average, it means that investor’s current expectations (i.e., the current price) are higher than their average ones over the last 25 days, and that investors are becoming increasingly bullish on the instrument. Conversely, if today’s price is below its moving average, it shows that current expectations are below the average ones over the last 25 days
The classic interpretation of a moving average is to use it in observing changes in prices. Investors typically buy when the price of an instrument rises above its moving average and sell when the it falls below its moving average.
Advantages
The advantage of moving average system of this type(i.e., buying and selling when prices break through their moving average) is that you will always be on the "right" side of the market: prices cannot rise very much without the price rising above its average price. The disadvantage is that you will always buy and sell some late. If the trend does not last for a significant period of time, typically twice the length of the moving average, you will lose your money
.
Happy Trading.
Krisman
Moving averages are one of the oldest and most popular technical analysis tools. A moving average is the average price of a financial instrument over a given time. When calculating a moving average, you specify the time span to calculate the average price. For example, it could be 25 days.
A "simple" moving average is calculated by adding the instrument prices for the most recent "n" time periods and then dividing by "n". For instance, adding the closing prices of an instrument for most recent 25 days and then dividing by 25. The result is the average price of the instrument over the last 25 days. This calculation is done for each period in the chart.
Note that a moving average cannot be calculated until you have "n" time periods of data. For example, you cannot display a 25-day moving average until the 25th day in a chart.
The moving average represents the consensus of investor’s expectations over the indicated period of time. If the instrument price is above its moving average, it means that investor’s current expectations (i.e., the current price) are higher than their average ones over the last 25 days, and that investors are becoming increasingly bullish on the instrument. Conversely, if today’s price is below its moving average, it shows that current expectations are below the average ones over the last 25 days
The classic interpretation of a moving average is to use it in observing changes in prices. Investors typically buy when the price of an instrument rises above its moving average and sell when the it falls below its moving average.
Advantages
The advantage of moving average system of this type(i.e., buying and selling when prices break through their moving average) is that you will always be on the "right" side of the market: prices cannot rise very much without the price rising above its average price. The disadvantage is that you will always buy and sell some late. If the trend does not last for a significant period of time, typically twice the length of the moving average, you will lose your money
.
Happy Trading.
Krisman
Trendlines
Breaking through support or resistance levels results in a change of traders’ expectations (which causes supply/demand lines to shift).
This type of a change is often abrupt and «news based». Such changes may have a certain trend. A trend represents a consistent change in prices. Trends differ from support/resistance levels in that trends represent change, whereas support/resistance levels represent barriers to change.
An Uptrend is defined by successively higher low-prices. A rising trend can be thought of as a rising support level: the bulls are in control and are pushing prices higher. A Downtrend is defined by successively lower high-prices. A falling trend can be thought of as a falling resistance level: the bears are in control and are pushing prices lower.
Just as prices penetrate support and resistance levels when expectations change, prices can penetrate rising and falling trend lines. Volume increases when the trend line has been penetrated. As with support and resistance levels, it is common to have traders’ remorse following the penetration of a trend line. Again, trading volume is the key to determining the significance of the penetration of a trend.
This type of a change is often abrupt and «news based». Such changes may have a certain trend. A trend represents a consistent change in prices. Trends differ from support/resistance levels in that trends represent change, whereas support/resistance levels represent barriers to change.
An Uptrend is defined by successively higher low-prices. A rising trend can be thought of as a rising support level: the bulls are in control and are pushing prices higher. A Downtrend is defined by successively lower high-prices. A falling trend can be thought of as a falling resistance level: the bears are in control and are pushing prices lower.
Just as prices penetrate support and resistance levels when expectations change, prices can penetrate rising and falling trend lines. Volume increases when the trend line has been penetrated. As with support and resistance levels, it is common to have traders’ remorse following the penetration of a trend line. Again, trading volume is the key to determining the significance of the penetration of a trend.
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