bforex
Junior member
- Messages
- 16
- Likes
- 0
USDJPY:
Whether you day trade off a tick chart or look at the market once a day from a daily chart, you need a perspective representative of price but not always actually price itself. Focus on just the candles on the chart below. Although the trend is apparent in hindsight, it would be very difficult from a pure price perspective to identify trends and patterns. Look at the area where the arrow is pointing to. You may have thought that sentiment was reversing course and taken yourself out of a short JPY position at the worst possible time. Aside from a stop loss tied to a fixed amount or a percentage you are willing to loose on a trade, most traders when identifying exit points on a position tie the exit to a moving average. The blue line is a 20 simplified moving average (SMA). If point X on the chart represents your exit and your exit triggers when the 20 SMA rises above point X you would have gained at least 10 more big figures on your JPY short. Had you used price as an exit above point X you would have exited at the worst possible time.
USDCHF:
In our segment yesterday we looked at the CHF from a weekly perspective and saw that the CHF has been range bound since early March. It is also apparent on this daily chart below having formed a double top and triple bottom. A common tool used in range bound markets is the MACD. Similar to the SMA mentioned above the MACD looks at price action with a slow and fast moving average and then essentially averages out the daily differences between the two averages over “x” number of periods. When the histogram widens, or diverges (in either direction), prices are trending hard and when it narrows, or converges, price action is beginning to slow. Notice how the MACD behaves as the CHF trades the range, it essentially is erratic and non committal on its direction. Look at the 20 SMA it looks relatively flat during the same period of time. With the use of these tools and techniques that smooth out price action it can prevent you from getting faked out as well as make you a more disciplined trader.
NZDUSD:
If you follow a particular moving average for a period of time you can actually create your own version of price convergence and divergence similar to that of a MACD mentioned before. Notice on the chart below as the NZD is rising against the USD we have used a 30 MA to follow or act as Support for the NZD. When price separates, or diverges, to far from the MA we expect that it will return, or converge, back towards the mean, or the average. You can see the 30 MA has a nice clean slope, smoothed if you will. To define a change in trend you can wait for the moving average to be at a level lower than it was over a specific number of periods as marked on the chart at point “A”, lower prices follow the move down from that point. Lastly you can define the velocity of price by looking at the slope of the moving average. In other words a steep slope implies a strong trend whereas a horizontal moving average implies a pair is trading the range. You can then adjust your trading style to the prevailing market condition. Lastly, and somewhat obvious, when a trader defines slope it should be done by analyzing the rise or fall of the slope by the relative price from one period to the next. Do not merely make a visualization because often the appearance is distorted by the display of chart.
Whether you day trade off a tick chart or look at the market once a day from a daily chart, you need a perspective representative of price but not always actually price itself. Focus on just the candles on the chart below. Although the trend is apparent in hindsight, it would be very difficult from a pure price perspective to identify trends and patterns. Look at the area where the arrow is pointing to. You may have thought that sentiment was reversing course and taken yourself out of a short JPY position at the worst possible time. Aside from a stop loss tied to a fixed amount or a percentage you are willing to loose on a trade, most traders when identifying exit points on a position tie the exit to a moving average. The blue line is a 20 simplified moving average (SMA). If point X on the chart represents your exit and your exit triggers when the 20 SMA rises above point X you would have gained at least 10 more big figures on your JPY short. Had you used price as an exit above point X you would have exited at the worst possible time.
USDCHF:
In our segment yesterday we looked at the CHF from a weekly perspective and saw that the CHF has been range bound since early March. It is also apparent on this daily chart below having formed a double top and triple bottom. A common tool used in range bound markets is the MACD. Similar to the SMA mentioned above the MACD looks at price action with a slow and fast moving average and then essentially averages out the daily differences between the two averages over “x” number of periods. When the histogram widens, or diverges (in either direction), prices are trending hard and when it narrows, or converges, price action is beginning to slow. Notice how the MACD behaves as the CHF trades the range, it essentially is erratic and non committal on its direction. Look at the 20 SMA it looks relatively flat during the same period of time. With the use of these tools and techniques that smooth out price action it can prevent you from getting faked out as well as make you a more disciplined trader.
NZDUSD:
If you follow a particular moving average for a period of time you can actually create your own version of price convergence and divergence similar to that of a MACD mentioned before. Notice on the chart below as the NZD is rising against the USD we have used a 30 MA to follow or act as Support for the NZD. When price separates, or diverges, to far from the MA we expect that it will return, or converge, back towards the mean, or the average. You can see the 30 MA has a nice clean slope, smoothed if you will. To define a change in trend you can wait for the moving average to be at a level lower than it was over a specific number of periods as marked on the chart at point “A”, lower prices follow the move down from that point. Lastly you can define the velocity of price by looking at the slope of the moving average. In other words a steep slope implies a strong trend whereas a horizontal moving average implies a pair is trading the range. You can then adjust your trading style to the prevailing market condition. Lastly, and somewhat obvious, when a trader defines slope it should be done by analyzing the rise or fall of the slope by the relative price from one period to the next. Do not merely make a visualization because often the appearance is distorted by the display of chart.
Last edited by a moderator:
) and charge zero commission before anyone on 'ere gives you guys a chance buddy...
