Pivot points are a vestige of the days before electronic trading that were calculated manually in the past by floor traders. Pivot points are still a key element of technical analysis to many traders today and many pivot point strategies exist to take advantage of these important horizontal support and resistance levels. In this article, I’m going to explain how pivot points are calculated and show you 3 profitable pivot point strategies that you can use to take advantage of them. How Are Pivot Points Calculated? The pivot point (P) itself is simply an average of the high, low, and closing price of the previous day, week, or month (typically the previous day). P = (High + Low + Close) / 3 The first resistance (R1) and support (S1) levels from the pivot point can be calculated by multiplying the pivot point by 2 and subtracting the Low or High respectively. R1 = (2 x P) – Low S1 = (2 x P) – High The second resistance (R2) and support (S2) levels are calculated subtracting the Low from the High and adding or subtracting the result to/from the pivot point. R2 = P + (High – Low) S2 = P – (High – Low) Finally, the third resistance (R3) and support (S3) levels are calculated by subtracting the Low from the pivot point, multiplying by 2, and then adding the High or subtracting the pivot point from the High, multiplying by 2, and subtracting then subtracting the Low. R3 = High + 2(P – Low) S3 = Low – 2(High – P) If all of this seems a little overwhelming to you, don’t worry – there are pivot point calculators available online. Better yet, there are indicators for your trading platform that do the calculations automatically, like this pivot point indicator for MT4. 3 Profitable Pivot Point Strategies for Forex Traders Below are 3 profitable pivot point strategies. The examples are geared toward Forex traders but these techniques work in other markets as well. In these examples, I’m using candlestick trading techniques as entry triggers. Other trading techniques that take advantage of trends and reversals, like those taught in Top Dog Trading or Infinite Prosperity, will also work well with these pivot point strategies. Note: A trading system like Day Trading Forex Live will not work for entry triggers with these pivot point strategies because it works off of very specific stop run setups. However, price is more likely to reverse when pivot points line up with other trading signals, regardless of the setup. Pivot Point Bounce Strategy The pivot point bounce is a classic trading strategy. The idea is that if price is above the pivot point, the market sentiment is bullish. If price is below the pivot point, the market sentiment is bearish. The pivot point bounce takes advantage of market sentiment, buying or selling if price retraces back to the pivot point (which is historically a good horizontal support or resistance level). Note: In the example above, I used a morning star, which is a strong bullish candlestick pattern, as my entry signal. Pivot Point Trend Trading Strategy You can also use pivot points and the various support and resistance levels calculated from them for trend trading. The idea is to take advantage of retracements at significant levels after price has chosen a direction based on the pivot point. If price breaks through the first support or resistance level convincingly, and then retraces, you can buy or sell the bounce off of that resistance level. Note: In the example above, I used a bearish engulfing pattern, which is a strong bearish candlestick pattern, as my entry signal. Pivot Point Reversal Strategy Pivot point support and resistance levels can also be good places to take reversal trades. If price is showing signs of slowing down near the second or third support or resistance levels, these can be good places to buy or sell respectively – especially if these levels line up with previous market structure. The idea is that, at support or resistance levels 1 and 2, price is likely to be extended. Since these levels are also typically good horizontal support and resistance levels they are great areas to look for reversal trades. Note: In the example above, I used a shooting star with a confirmation candle (which is how I prefer to trade them) as my entry signal. The confirmation candle was a strong bearish candlestick that closed in the lower 1/3rd of its range. The entry was taken when price pulled back to the standard entry point. Final Thoughts These 3 pivot point strategies are just a few of the many pivot point strategies that traders use to take advantage of these strong horizontal support and resistance levels. In fact, regardless of which trading strategies you use, pivot points can be a strong addition – especially for intraday trading. Each level of your pivot point calculations can be significant on their own. However, these levels are particularly powerful when they line up with previous structure (support and resistance levels) in the market. I don’t recommend trading pivot points alone, but adding these pivot point strategies to your other technical trading systems or combining them with fundamental analysis can work very well. I hope you enjoyed these 3 profitable pivot point strategies. Be sure to backtest and demo trade any new strategies before live trading them. If you have any questions about these strategies or would like to suggest others, please leave a comment below.
Every trader in the Forex market has their own Forex Trading Strategy, but still they keep on looking for something new every now and then. They might be having the best one already with them, yet their psychology would make them look for a new one which leaves them loosing the valuable one they already had with them. Today I am going to share with you some Forex trading strategy that may range from basic to expert level. They may sound really odd, but can make some real money. (Note: All the below mentioned Forex trading strategy are modified from the basics and tested with several long time trades, yet I advice you to test it completely before you use on your live trading accounts.) 1. 40 Pips Pull back Trading Systems for Scalpers This Forex trading strategy is technically real simple one. If any major counter pair on Forex moves up to 40 pips in any direction from the market opening of the day, then you can simply go on with the opposite direction which would give you a minimum of 15 to 20 pips at most of the time. The reason behind is simple, you know that the market cannot move in one single direction. It always has ups and downs where we just catch up with the other side of the movement. 2. Buy Above and Sell Below Moving Average Strategy The moving average is familiar among all Forex traders, most of the traders approach moving average in his own way. Yet this is one more way, but a real nice one. Attach the moving average indicator to the chart with the following preset (MA method: Simple) (Apply to: Close) (Period: 34) When, a candle closes completely above or below the moving average without touching it, also the high or low of the candle does not touch the moving average, then you can go for the trade If the candle is above the moving average = Buy If the candle is below the moving average = Sell (Note: 15 min chart and higher time frame are recommended.) Take Profit (TP) you can have approximately 10 pip for 15 min chart signal, 20 pip on the 30 min chart signal. Test some back trades to have a proper idea about it. The Stop Loss (SL) should be opposite to the trade. To Buy, sell would be the stop loss and for Sell, buy would be the stop loss. 3. Three Day Average Fibonacci Forex Trading Strategy This is a little more complex, yet a powerful strategy. It’s not that easy to describe it completely in this blog. Please download the below PDF and learn everything about the strategy in detail. Trader’s Tip: Now it’s your turn. After learning every single strategy take your own time and test everything to find which one is working for you better. Get a clear idea of it. We can’t promise you with a 100 % result for the above strategies, but you can surely make some real money, if you approach in a proper way.
How many times have you entered into a trend only to find out that it has already run its course and you were too late? Many of the Forex trading strategies that we use help us predict which way the market is trending and whether to expect a bearish or bullish trend, but give little or no indication as to the strength of the trend. Sometimes these forex trading strategies will lead us to enter a trade and that trade will turn out to yield very little income, even though it went in the direction that we anticipated. ADX, or Average Directional Index, is a tool that is designed to help us anticipate the strength of a trend to avoid these kinds of situations. In combination with other Forex trading strategies the ADX can allow us to fully understand the trend and thus only enter trades that will yield big profits. ADX trading strategy is not a standalone Forex trading strategy as it only gives an indication as to the strength of the trend. It does not give any indication as to the direction of the trend and for that reason, it must be used along with other Forex trading strategies. Understanding the Average Directional Index is very easy. It ranges on a scale from 0-100, 100 indicating a very strong trend and 0 indicating a non-existent trend. If the ADX is very close to 0, expect a sideways moving trend, meaning the market will not go up or down but rather stay around the same value with small corrections. When the ADX is low it is a good time to consider closing the trade as you don’t stand to make a profit from a sideways moving market. On the other hand, if the ADX is very high, expect a fast moving trend which means that it is probably a good time to enter a trade. Don’t forget, the ADX is only an indication of the strength of the trend and does not indicate whether the price will go up or down.Values of ADX that are considered high are above 50. Whenever there is a strong trend, the ADX will be above 50. Weak trends are indicated by values under 20 on the ADX scale. This example clearly shows how we can use the Average Directional Index to analyze the trend: As you can see, in the first part of the chart there is a very strong bearish trend and the ADX (shown on the bottom) is very high. Once the trend ends, and the market begins a sideways stage, the ADX drops below 20. In this case, using the ADX could have helped us exit the trade when it had reached the end of the trend and not waste our time and resources on currency pairs that are not going anywhere. Combining the ADX indicator with your other Forex trading strategies can give you just the edge you need to increase your profits.
Price Action SwingsAny chartist that has spent considerable time analyzing candlesticks would agree: Market movements rarely take place in a linear fashion.Down-trends are often accented with ‘up-swings,’ as the chart below points out: The exact opposite can be said for up-trends, being accentuated with ‘down-swings.’ And of course, if we have a range, we can notice both up-swings and down-swings. Swings-Lows, or Down Swings, can be classified as a low point of price that is accompanied by a ‘higher-low,’ value in price on each side of the candle. The multiple swings exhibited by price behavior throughout the day can be used for a multitude of functions.For instance, for traders wishing to grade trend, they can often do so by observing ‘higher-highs, and higher-lows,’ or ‘lower-lows, and lower-highs.’ Taken a step further, traders wishing to manage risk can potentially look to these swings for stop placement. For example, in the chart below, the trader looking to take on a long postion can adopt the stance:“If price breaks this swing low, then I no longer want to be in my trade as the trend may no longer be to the upside.” And of course, once a trader is in a position – this same mindset can be used in position management. The chart below illustrates: We’ve covered 3 of the more popular mechanisms of ‘Swings,’ in the market, but we are just scratching the surface. There are numerous additional mannerisms in which these swings can be used by the price action trader.In our next piece, we will look at using ‘Swings,’ to enter into positions that may be amenable for ‘big,’ moves exhibited by the market; a market condition that many traders flock to when conditions are right: The Breakout.
Swing trading is a trade method in the gray area between trend following and day trading. A swing trader holds a stock for a small period of time and then will trade the stock when it’s in it intra-week or intra-month oscillation. A experience swing trader will generally choose a large-cap stock because of its broadly defined high and low extremes. The trader will ride the stock wave in one direction for a couple of weeks, only to switch to the opposite side of the trade when their particular stock changes direction. A swing trader is best in position to do this when that market is more on the stable side versus it being a bear or bull market. This is because those markets’ momentum generally carry stocks in one direction only (and for a long period of time). The success in swing trading is to be able to identify what type of market is currently being experienced. One of the best ways of doing this is looking at historical data of what was indicative of different markets in the past, particular prime swing markets. If a market is identified as prime for swing trading, but later turns out to be a bear or bull market, a swing trader can find that there are the same up and down oscillations than those that occur in a more stable market. This would ensure that best strategy would be to trade on a long-term directional trend instead of the quicker trends that many of the most experienced swing traders are noted for. Unlike many stock traders, swing traders are not looking to make it big with one particular trade, but are more concerned with hitting its baseline and confirm its direction. At the profiting level, a swing trader will want to exit the trade as close to the upper or lower channel line without being too close, which can cause a loss in opportunity. In a market where a stock is showing a strong directional trend a swing trader will usually wait for the channel line to be reached before selling, thus when a stock is showing a weaker directional trend, the trader will usually sell before the before it hits the channel line in the event the direction changes and the line does not hit on that particular swing. Swing trading is a great method for beginning traders, while offering a profit potential to advanced traders. A great trader will be able to know when the stock is ripe and what momentum their particular stock has gained before making a decision. Trend following plays a very important role in swing trading as well knowledge of the physics of the stock market. Like the physics of ocean waves, swings can be unpredictable but when a large wave comes rushing at the shore, then its prime time for swing trading, but remember that swing trading is never as predictable as the swinging of a clock pendulum.
A forex trader must master many analysis techniques and strategies to trade successfully. Studying chart pattern is one of the most common practices in Forex trading. These charts give reliable entry and exit points for the potential trade. Out of many kinds of charts, one of the most common patterns followed by the majority of traders is triangle pattern. It is liked and preferred by many as it is not only indicates good trade with low risk and high rewards, but also gives clear indications about the price objectives. There are three types of triangle patterns commonly followed by the traders. Let’s discuss them one by one. 1. Symmetrical triangle pattern: The first pattern is commonly known as the symmetrical triangle pattern. This kind of triangle pattern is result of the intersection of two trend lines of slopes similar to each other. The point of intersection of the trend lines is called the Apex. Usually in a symmetrical triangle, the rising trend line intersects with the down trend line. In case of a symmetrical triangle pattern, sellers cannot push the price of the currency lower and the buyers are unable to take the prices higher. Now all that happens is the coiling of the price between support and resistance which is termed “consolidation” in trading language. Due to consolidation, breakout is most likely to occur within the first 2/3 part of the triangle. This breakout is either above the trend line resistance or below the trend line support. As a result of which, either the buyers or the sellers take control over the trading day. Symmetrical Triangle Pattern Once the traders recognize a symmetrical triangle pattern on the chart, all they must do is wait for the breakout to occur. After the breakout, a stop is placed approximately 10 pips below the last swing low in the chart. Traders usually place the limit equivalent to the height of the triangle. 2. Ascending triangle pattern: Another triangle pattern commonly seen on the charts of the forex market is the ascending triangle pattern. It is very easy to recognize and traders do not need to emancipate a lot before recognizing an ascending triangle pattern. An ascending triangle pattern is formed when the rising trend line intersects with a flat resistance line on the chart. Traders often regard it as a bullish pattern in the Forex market. This triangle pattern is often regarded as a breakout above resistance level on completion. However, it is not mandatory and breakout can take place below the resistance pattern too in case the trend before the triangle formation was a down trend. In short, the trader should not get excited seeing a rising trend as resistance may be too strong for the buyer to push the prices higher and breakout may occur below the resistance line. In most cases, when an ascending triangle pattern is formed, buyers win the battle defeating the resistance but in case the buyers loose the battle, it can easily be seen that drop in price is equivalent to the height of the triangle. Ascending Triangle Pattern 3. Descending triangle pattern: The last triangle formation in triangle trading patterns is the descending triangle pattern. It is contrary to the ascending triangle pattern as in the descending pattern a down trend line intersects with a flat yet solid support line. On recognition of such a pattern by the chartist, they wait and expect a further down trend line. This triangle pattern is usually confirmed by a breakout below the area of support or close below the area of support. This breakout is a signal for the traders to short their position and put a stop loss above the top of the triangle pattern. In such a triangle pattern, sellers have a stronger position compared to buyers. In the majority of cases, price of the currency breaks the support line to move further downwards, but in some cases, if the support line is too strong to be broken, the price of the currency can bounce back and reach new highs. It will then become a lost battle for the sellers. Usually, investors place the orders above the triangle top and set a target equivalent to height of the triangle pattern formation with aim of generating decent profits. Descending Triangle Pattern Triangle pattern trading can be a very good tool for the trader. Once you know how to read triangle patterns on the chart or you get an expert to read the patterns for you, it becomes quite simple and convenient to judge the movement of the currency. It not only helps you judge the movement of the currency, but also where to place the order, how much risk has to be taken, and how much profit can be expected from the trade.
The term ‘price channel’ refers to a special graphical tool used by Forex traders to make buying and selling decisions. On the one hand, it is quite a complex tool, because the data it provides is influenced by a huge variety of factors. However, what makes price channels so useful is that they condense these variables into a simple visual representation. The price movements of a currency pair are plotted within two parallel lines. These lines represent the various up and down forces which affect price. The top line signifies resistance (downward pressure). When the price approaches it, most Forex traders try to sell before the support line is hit and value is lost. Descending Price Channel Conversely, the bottom line signifies support (upward pressure) and it works in the opposite way. If you are learning to trade with price channel, you should know that approaching the support indicates a good time to buy. Similarly, the idea is that traders try to buy at the right time before the resistance line is hit and the value stops climbing. Ascending Price Channel So, it is all about that space between the two parallel lines. The size of the space (or channel) is determined by the amount of price activity. If there is a lot of fast paced change within the market, the channel will be larger. If prices are moving slowly and there is no reason to expect rapid fluctuations, the channel is narrow. Price channels can point upwards, downwards, or remain horizontal. After a time, the direction of every channel changes. In some instances, this triggers a neutral period in which price activity remains fairly consistent. However, it may also change direction as the result of a channel breakout and this occurs more abruptly. Breakouts are defined by a sharp upward or downward trend which moves beyond the top or bottom line and closes strongly afterwards. Breakout Price Channel When this happens, price activity is no longer limited by the original channel. For example, if the price drops below the bottom line (and ‘breaks out’), it indicates that the bearish forces are powerful enough to disrupt the previously bullish tendency. After which, the bullish channel is replaced by a new bearish one. Skilled traders can use channel breakouts to predict and prepare for trend reversals. Trade with Price Channel in Five Simple Steps Step One: Pick Your Trading Conditions It doesn’t matter what direction your currency pair is trading in, because you can use a price channel to plot both downward and upward trends. It will also represent neutral movements (no significant price changes). This tool is compatible with all timeframes and can be used in conjunction with five, ten, and thirty minute charts as well as day charts too. Step Two: Open Your Forex Trading Account Open up your online Forex account or the Forex tracking software that you prefer to use. Launch a chart for the chosen currency pair (the euro and the yuan, for example) and select the desired time conditions. Navigate to the technical indicator list and hit the PRICE CHANNEL button. This will enable you to set the support and resistance lines. Step Three: Create the Price Channel Plot where you want the bottom line (support) to start and end. The system should automatically fill in the gap and establish the connection. Repeat the process for the top (resistance) line. The resulting price channel should now be contained within two parallel lines and contain most of the price activity. Step Four: Analyse the Price Channel The next step is to study the channel to determine whether it is a good time to buy or sell. Channels which point upwards are indicative of ‘rising’ or ‘bull’ tendencies. They are characterised by greater low and high points. Conversely, channels which points downwards signify a ‘falling’ or ‘bear’ trend. They are defined by smaller lows and highs. Horizontal channels are neutral and represent completion of a bull or bear phase. Step Five: Identify Your Next Move If the currency prices are contained within an upwards pointing channel (ascending), buy the currency pair just before the price hits the bottom (support) line. However, if the prices are contained within a downwards channel, it is a good time to sell the currency pair just before the price hits the top (resistance) line. If the price is range bound, wait until it hits either line to make a decision. Making Price Channels Work for You When learning to trade with price channel, don’t get tempted into trading against the trend, particularly if you don’t have much Forex experience. While it is possible to make a big profit, it involves a lot of risk and is generally only used by high level professionals. You should take care when analysing the activity within channels. They can be more complex than they first appear, because there are often internal variations within the main channel. To make the safest trading decisions, you need to consider all of the available information. This includes data from external sources like newspapers and expert forecasts. Forex trading is a dynamic and fast paced world. Trends can develop and disappear within weeks, so careful and consistent monitoring is essential. Use price channels as a supplementary tool.
There are a lot of misconceptions around about forex trading. Most people hear mention of the word ‘trading, ’ and they assume that it must be very complex. In fact, you participate in the forex market every time that you convert money into a foreign currency for a holiday. The term is an abbreviation for the ‘foreign exchange’ market. Consequently, it is something which has a direct impact on life whether you’re a day trader or a soccer mom. Forex is the gentle giant of the financial world. It isn’t as loud or lively as stocks and bonds, but it is substantially larger than all other capital markets. Despite operating on such a huge scale, the basic concepts are simple and accessible to any kind of investor. The Purpose of Trading Strategies Successful forex trading is all about discipline and patience. You have no personal control over financial conditions, but you can stay vigilant and learn how to spot the signs of a big opportunity. Trading strategies help to create this discipline because they form a series of guidelines which point investors in the right direction. They also work to identify and formalize trading goals, which are very important. You need to know why you’re making a particular trade and, ideally, have the technical and fundamental analyses to back it up. The same applies to your choice of currency trading pair. Don’t forget that major trading pairs are usually more liquid and have narrower spreads than less common currency options. There are all kinds of different methods to choose from, but the best forex trading strategy is one which enables you to carefully manage your funds. Most traders who like, to begin with, small steps and little risks. They build up to bigger trades over time, but generally stick to small-scale activities which deliver modest amounts, but on a regular basis. It is important to remember that no trading strategy is infallible. If you’re not prepared to tolerate losses, you probably shouldn’t be trading at all, because this game is all about calculated risk. The secret to long-term success is to observe and learn from your early mistakes. Also, set realistic targets, particularly when you are just starting out. Before committing to any new trading action, identify target take profits and stop losses. Five Common Forex Trading Strategies Day Trading Day trading is probably the most widely used forex trading strategy. It is sometimes called ‘spot trading’ or ‘active trading.’ It involves purchasing and offloading currencies within a very short window of time (as is suggested, within a day). Positions have to be taken and closed in the same twenty-four hour period. Positions cannot be carried over into a new trading day. The strategy is highly effective, but it tends to be better suited to those with a little experience. On the other hand, technology is speeding up the process and making decisions much more straightforward. So, it could be argued that day trading is a good choice for amateurs who are working electronically. Keep in mind that you could be subject to a penalty charge if try to carry a trade over into the next day. Scalping Like day trading, scalping is a fast pace forex trading strategy. Investors hold their positions for brief windows, sometimes as small as a minute long. The aim is to focus on modest gains at a consistent, regular pace. It means that even though individual profits are lower, there is a lot of money to be made from how regularly they develop. Scalpers try to avoid giving too much attention to any one position. Therefore, the downside to this strategy is that it requires a lot of time and effort. You’ve got to be fully dedicated to following the method through to completion. This involves keeping a very close watch on market fluctuations and price changes throughout the day. For this reason, it is not the optimal choice for part time traders. Trend Following This is another very popular method of forex trading, and it is remarkably simple. It has the potential to generate a lot of profit, but it should be limited to long-term activities. Trend following suits patient, disciplined personalities who prefer to be rigorously guided throughout purchasing decisions. Essentially, you’re watching the progress of a currency trend. You must be able to identify this trend using your previous evaluation of currency patterns and price actions, in relation to changing economic conditions. Make good use of resources like entry and exit points, moving averages, bar charts, and candlestick patterns. Trend followers try to minimize short-term instability and prioritize long-term price undercurrents. Range Trading The range trading method is all about the notion that, no matter what direction a currency pair moves in, it will eventually come back to where it started. This allows traders to make decisions based on the probability of prices trading at the same levels on multiple occasions. The aim is to maximize the value of a trade by taking advantage of price fluctuations more than once. The first stage of this forex trading strategy is calculating the resistance and support lines. Once identified, they can be used to pinpoint the best opportunities to make a profit. Range traders exploit scenarios in which currencies trade inside the resistance and support lines for an extended window. This is achieved by picking long positions at the bottom of the range and short ones at the top. Swing Trading Swing traders are, in many ways, the same as range traders. Certainly, the two strategies are closely connected. It involves exploiting levels of market indecision, but it also focuses on the resistance and support lines, as range trading does. The goal is to highlight brief patterns. The trader then sticks with them right up until the point at which the move ends. The big benefit of swing trading is that it can be used in conjunction with trend following and day trading. However, to make it work, you must be able to accurately locate short term ranges and trends. Selecting the Right Forex Trading Strategy These are just a handful of the forex trading strategies used by both amateur and experienced investors. Ultimately, only you can determine which method works best. It will depend on your lifestyle, how many hours you want to spend monitoring currency activities, how much profit you are trying to make, and whether you’re willing to tolerate big risks. Don’t forget that you can combine different strategies to create a more personalized approach.
Trend lines are a useful visual tool for Forex traders. They provide a pictorial representation of which direction a currency pair is moving in, so that a trader can determine whether it is a good time to buy or sell. It really is that simple. If the lines on the graph are pointing upwards (towards higher figures), it is either a suitable time to invest in the currency pair or conditions are improving and it may become a good time for buying in the near future. Conversely, if the trend lines are pointing down, the trader should attempt to make a sale or exchange before too much value (or any) is lost. For this reason, trend lines are very similar to price channels, with the difference being that there is only one guiding line. Identifying Trend Types The price channel is a kind of visual ‘container’ for the activities and fluctuations of the currency pair. Two lines are plotted according to the highest and lowest values. The top line signifies resistance (downward pressure). When the price approaches it, traders attempt to sell before the support line is hit and value drops. The bottom line works in the opposite way. For successful Forex trading, you need to try and buy at the right time, before the resistance line is hit and the value stops rising. What a trend line does is visually connect the lowest and highest values. So, in a downward price channel, it would link the lowest low to the highest low on the graph. Trend lines have the potential to alert a trader when a pullback (a move against current the direction) is due to end and fall back to the previous trend. Or, they can pinpoint when a trend is starting to reverse or speed up. There are five main types of trend: Bullish Bullish trend lines extend upwards, from the left hand side of the graph towards the top right corner. They represent buy opportunities, because currency activities are moving closer to higher highs. When this happens, there is the potential for a currency pair to rise. Ascending Trend Line Bearish Conversely, bearish trend lines indicate a pessimistic trading situation. There is more chance of lost value here, so it is a good opportunity to sell. Bearish trend lines extend upwards from the bottom right of the graph towards the top left corner. Descending Trend Line Hawkish Hawkish trend lines indicate a positive change to interest rates. This is when rates are increasing and it is a fertile time to make a purchase. Dovish Dovish trend lines, on the other hand, represent a positive drop in interest rates and a good opportunity to sell. The thing to remember about dovish and hawkish lines is that, in either case, traders have been waiting to capitalize on the change, which is why they are referred to as ‘favored’ fluctuations. Flat/Ranging When the trend line is completely flat and horizontal, there is no valuable activity within the price channel. The currency pair is neither climbing nor falling. Crucially, ranging lines normally precede a trend reversal. So, they suggest that the previous trend is about to be turned around. Making Forex Trades with Trend Lines As they can indicate the future direction of a price channel or currency pair, trend lines are a popular forex trading strategy. Like all strategies, their rate of success depends on a combination of skill and good luck. As explained, the lines are used to link up the lowest and highest values within a channel. They may then be projected into future (predicted) channels as a way to make informed judgments about how the currency pair will change. By scrutinizing the prices and line extensions, forex traders can make tactical decisions regarding which currency pairs are the best for trading. The following are examples of how a trader might use trend lines: Swing Highs and Swing Lows This is when a trader is able to link up two low lying values (or high lying values) in an unbroken line (without price activity moving above or below). Once this happens, they can use the complete trend line to predict future price movements. If the currency approaches this level on another occasion, the trader may forecast a bounce by establishing entry orders and pinpointing the optimum time to jump into the trade. The downside to this strategy is that, when lots of traders use it, orders may get stacked and the price doesn’t reach the trend line. Forecasting the Future As mentioned, trend lines are a great way to make logical predictions about future currency movements. In simple terms, when a trend line is approached with a bounce, the trader knows that it is likely to be valuable for the market. Nevertheless, all trends come to an end at some point, so traders have to be just as vigilant when it comes to predicting their reversal. For a firm substantiation, you need to observe currency movements and take note if a price reacts from a trend line linking two points. If a third lowest low or highest low (or highest high and lowest high) is added, you can start to see a pattern emerging. In the future, there is a good chance that buying opportunities will develop whenever this trend is reached. Purchasing and Offloading Obviously, the perfect time to make a purchase is when a bullish trend line develops. Conversely, the optimal time to offload is when you can spot a bearish trend emerging. The thing to remember is that, if you can trade in conjunction with the movements and directions of established trend lines, you will benefit from a higher level of pips even if you don’t always make the winning trade. Ultimately, the ideas behind the use of forex trend lines are pretty straightforward. If you can link up at least two highs or two lows, without a break (upwards or downwards) from currency activity from the channel, you have an opportunity to make some lucrative decisions. Don’t forget that the inclusion of a third bounce is what you need to fully validate a trend line.
Commodity markets have always been a lucrative investment option for a lot of people. Since they offer an annualised return of around 18-24%, they are becoming a preferred source of investment for investors. Since the commodity market is still relatively nascent, there is a lot of development and return possibility within the asset investment variety. However, this goes without saying that as the market ages, the returns too will decline over a period. Unlike binary options strategies, commodity trading strategies are directed towards employing technical tactics. This way, commodity traders can enter and exit the futures and options market efficiently, which allows them to make profits off their trading transactions. However, each type of strategy has its set of pros and cons, which means that the traders will need to decide on their strategy for making the most out of their trading efforts. With this thought in mind, a lot of investors are looking at the commodity market from an investment perspective. To maximise profits, investors need to follow these strategies, when it comes to investing in commodity markets. 1. Trading breakouts: The concept behind trading breakout refers to the extreme variations in the prices of commodities being traded. This means that a commodity trader can buy a commodity when the price is extremely high or sell when the price is extremely low. This way a commodity trader can develop trends, which are clearly visible on the charts. Since commodities are volatile instruments, it does not come as a surprise that the prices of the traded commodities are doubled or halved in a short span of time. The idea behind this strategy is rather simple: a market can’t function with the same pricing trends; the fluctuations in pricing is what determines the patterns, which make the strategy work best in times of strength and durability. 2. Fundamental Trading: Unlike trading breakouts, Fundamental Trading takes us back right to the basics of supply and demand for the commodity being traded. For example: A trader might be interested in buying soybeans since the weather is not favorable for the growth of soybeans. In such a case, the demand for soy beans might be more, as compared to the supply. New commodity traders might find it difficult to get accustomed to the tricks of fundamental trading, since fundamental positions need a lot of time and patience for implementation. In order to make the most out of the fundamental trading strategy, it’s imperative to combine one or more strategies to get the most out of the commodity trading concept. 3. Range Trading: Through range trading, purchases are made around the bottom of the range, while the commodities are sold at the top of the range. The strategy works best when a commodity is bought and sold to manipulate the price in the market. The buying and selling of commodities push the market into an oversold mode, which means that the market has absorbed all buying and selling forces. These strategies can go a long way in helping investors deal with the commodity markets effective. However, the end mix of strategies needs to be decided by the traders themselves, based on the possibility of implementation.
Working full time? Can’t spend 8 hours or more a day watching markets? That doesn’t mean you can’t trade. With Vantage FX’s “1 Hour a Week” forex strategy there’s no excuse to not be trading profitably. Of course, the strategy requires a little footwork and study before you get going, but once you have put in the hours, the strategy can easily be completely automated. Trade them gaps for easy pips If you’ve been trading for a little while you’ve probably noticed that the market often “gaps” when the market opens for a new week. You’ve also probably noticed that these gaps get filled a lot of the time. Have you ever actually gone back over your charts and see how many gaps do get filled? You might be surprised with the results. So how can you make money of this phenomena? It’s simple: the basic idea is to open a trade when the market gaps with a target equal to last week’s close. Some week’s you won’t get any trades and you will get some losers every now and then, but a lot of the time you will make 100 pips on Monday and be done for the week! Backtesting is integral Welcome to the footwork. If you want to trade this strategy you’re going to have to spend some time studying charts, but this isn’t about finding trades though – it’s about finding the optimal parameters and best symbols to trade. Every currency pair has it’s own character and a gap trading strategy will work better on some pairs than others. The first thing you need to do is have a look at a few liquid pairs, take a look at the past 20 gaps and record how many were filled and how many weren’t for each pair. You should now have a pretty good idea of the most reliable pairs to trade this strategy on. How many pairs you choose to trade will depend on your risk tolerance, remember: a lot of these pairs will gap at the same time, so don’t trade too many pairs at once! Easy right? Well here’s the tricky part: it’s not as simple as blindly trading every single gap. What about your stop loss? Gaps usually fill, but they don’t always fill and often they drift a little further before filling. This part can get a little tedious – you’re going to need to find the optimal stop loss for the strategy. A good idea is to start with a hypothetical stop loss equal to the size of the gap. Automation saves time backtesting Finding the optimal stop loss settings over multiple pairs can be a real drag. You can shave off hours of study by making an automated strategy to backtest with. Note your automated strategy doesn’t have to actually be deployed live, the idea here is just to save time backtesting. Having said that, once you have made a basic strategy to test with, it really isn’t that much more work to implement money management and anything else you might need. The basic logic for this sort of strategy is: If Weekly Open is Greater Than Last Week’s Close, Then Sell OR If Weekly Open is Less Than Last Week’s Close, Then Buy You should be able to drum this up in some expert advisor design software (no coding required!) in less than half an hour, a few minutes if you’ve ever used the software before. You will also need variables for your stop loss and a minimum distance for the gap. Once you have this sorted, simply use the backtesting and optimization software in MT4 to find the most profitable parameters. Once you have identified the most profitable pairs and parameters, all you need to do is decide whether you will be trading the strategy manually or will take your automation a little further and get your robot ready to deploy live. Depending on your work schedule and where you live in the world, you may have to go the automated route as you are at work when the market opens each week. A few pips in spread can make all the difference Whether you plan to trade this strategy manually at the open each week or automate the entire strategy, a few pips can make all the difference. As such, you should be trading this strategy with an ECN broker like Vantage FX. The last thing you want is to be missing your gap close targets by a couple of pips because the broker you’re trading with has ridiculous spreads. ECN brokers don’t mark up there spreads which means the spreads on liquid pairs can be as low as 0 pips. Have fun!
What is Swing Trading?Swing Trading is a mid term trading strategy often utilised by FX and CFD traders.Swing Trading positions may be kept open for just a few hours, but Swing Traders can also choose to keep a trade open for much longer, under the right market conditions.Swing Trading aims to recognise and substantiate the existence of a trend in a particular instrument or market. Then to open a trade with the intention of capturing as much of that trend (or price change) as possible. This is achieved by running the trade until the trend comes to a natural conclusion or the end of the business day. That is if the Swing Trader does not wish to have overnight exposure.How does Swing Trading work?As we have already noted Swing Traders attempt to identify and confirm the existence of trends within the price action of the instruments they trade. These trends will fall into one of two broad categories - the Uptrend and the Downtrend. Those trends can be defined as follows:An uptrend is a series of higher highs and higher lows which reflect a rising underlying price in a given instrument. While a downtrend is defined as a series of lower lows and lower highs, it reflects a downward move in the price of the underlying instrument.The chart below shows a clear uptrend in the EURUSD pair that ran between the 13th of July to the 2nd of August 2017. Whilst our second chart (see below) contains a clear example of a downtrend in the GBPUSD pair, or Cable as it's otherwise known, that ran from late morning to mid afternoon on the 8th of August. In both cases, the trends are annotated by a yellow arrow. Charts such as these provide the trader with clear visual signals. It's for that reason that Swing Traders tend to use Technical Analysis as part of their strategy in order to identify trends, to confirm their validity and to highlight the potential entry and exit points for both stop loss and take profit levels in a given trade.Swing Traders will often want to see price action break moving averages, period highs or lows, or support and resistance levels (or indeed a combination of the above) before they action a trade. Swing Traders will also often employ indicators to alert them to any change in the "health" of a trend during its lifetime. Any deterioration in which may be a signal, that it is time to consider an exit, or least prepare for one.Swing Trading is a trend following discipline. Such that If the price of a financial instrument is in an upward or rising trend, then the Swing Trading Strategy employed would be to open long trades or place buy orders in that instrument. In the expectation that this uptrend (or move higher) will continue and the underlying asset price will rise above the trade entry price, allowing the Swing Trader to make a profit at the point that they close the trade.If however, the prevailing trend in that instrument is to the downside i.e. the price of the instrument is falling, Swing Traders, in the expectation that the price of this asset will continue to fall, are most likely to open short trades or sell orders as their trading strategy. They will aim to repurchase the asset at a lower price than their trade entry level and in doing so, close their short position at a profit.Swing Trading strategies can also involve trading the ranges within the price of an FX pair, index CFD or commodity contract. Ranges appear in a chart when price action lacks a clear directional impetus and instead trades between support and resistance levels while waiting for either supply or demand to get the upper hand. We show a simplistic example of just such a range below. Whilst trading such a range can be a fruitful exercise, it's the point at which the price breaks out from that range which really interests the Swing Trader. Simply because this kind of break out can signal the start of a new trend.The skill in successful Swing Trading is by identifying and confirming the start of a new trend or the continuation of an existing one. This is achieved through the scrutiny of price action and by only trading when there is a very high probability that a genuine trend is in place.Swing Trading activity tends to take place over longer time frames than those associated with scalping. Though Swing Trades are typically shorter in duration than those taken by positional traders, the duration of a Swing Trade is determined by the longevity of the trend it's following. Of course in a 24 hour 5 day a week market such as Forex, there is nothing to stop a trader raising a stop beyond their trade entry price in a successful trade. With a view to locking in a profit and letting that trade run. Be it that for several hours or even over a number of days.Of course, overnight exposure comes with its own challenges in terms swap charges and monitoring positions and price changes. For these reasons, Swing Traders may choose to close out or scale back on positions at the end of the day. Or during periods when they are not able to pay close attention to the market.Trader BewarePart and parcel of Swing Trading are so called false breakouts where moves in the price of an instrument "flatter to deceive". In the 15-minute plot of AUDUSD below, we have highlighted two examples of false signals with a yellow ellipse.In each case the price tests to and through an area of horizontal resistance. But very quickly the price reflects the move higher and retraces below the resistance. In the example, on the right of the chart, we can see this happens three times in quick succession. Each time it does this, AUDUSD posts a so called high wave candle. Of course, you will have noticed that right in middle of these two "false breakouts" there is a more concerted move higher. Though once again, this is a relatively short lived affair and it ends with rejection at another area of horizontal resistance. In fact, on reflection, it's clear that all three are false signals on the upside. Yet, at the same time, they are clearly suggestive of a move lower or retracement. The adept Swing Trader may have looked to open a short position or to "square and reverse" any long exposure on this kind of rejection signal.How can I apply swing trading strategies?The prices of financial instruments rarely, if ever, move in straight lines. Instead, they fluctuate, reflecting changes in supply and demand and investor sentiment as they do so. These variations in price combine to form the characteristic chart patterns which are the lifeblood of technical analysis. Technical analysis can be a complex subject.However, we can use a simple ready reckoner in order to determine if the price of an instrument is trending and to identify what this trend is.An uptrend can be defined as a series of consecutive higher highs and higher lows. In other words, it can be clearly seen on a chart that the price of the security is moving higher during the observation period, be that over a 5 minute,15 minute, hourly or even daily time frame.Conversely, a downtrend can be considered to be a series or procession of lower lows and lower highs. In this instance, the price of the security is moving to the downside over our observation period or time frame, whatever that may be.Charting software packages such as those in our MT4 and cTrader platforms continuously record information about a security's price action over a given period. Tracking and recording the Opening price, the High and Low prices printed during the time frame, as well as the Closing price at the end of the period. This data can then be represented in that securities chart.This is most commonly displayed in either a bar or candlestick chart format. These type of charts provide a Swing Trader with both a visual and a data driven view of a security or instruments price performance during the selected time frames.The chart below shows an hourly plot of Bitcoin with the MT4 data window open adjacent to the chart. We can see the HLOC (High Low Open Close) and in this case, the volume data for an individual candle or period of time. Confirming a TrendSwing Traders who are looking for an upside or bullish breakout will need to see upside momentum. This may come in the form of an initial move higher in the price of an instrument that is then followed by a pullback or counter trending price action. Which is itself, superseded by a subsequent move higher in the price once more.That subsequent move will be of particular interest if the price posts a new higher high, or indeed highs within this third leg.This type of move may often provide confirmation of the trend as far as the bullish Swing Trader is concerned. If that's the case, they will open a long position or buy, accordingly.The diagram below shows an example of this type of upward momentum and trend confirmation. Swing Traders will not wish to participate in a false breakout. But they will be alert to the possibility and will usually use a stop loss order as part of their Swing Trading Strategy to protect themselves, against such an eventuality. Having entered a trade on the long side after the type of confirmation noted above. The Swing Trader may well have placed a stop loss just below the counter trend low, as a pull back or correction to such a level (a lower low) would infer that this was indeed a false breakout.However, as we have already noted, a series of lower lows and lower highs also constitutes a downtrend. So while the Swing Trader may have seen a false breakout on the upside, the new lower low could identify the start of a new downside trend. Confirmation of this trend could come in the form of the price actions failure to trade above the new lower high, that was associated with the counter trend low. Followed by the print of a subsequent and new, lower low.This type of situation can be seen in the diagram below. It should clear by now that Swing Trading, in essence, is all about identifying and capturing momentum trends which is mostly achieved through the study of time series data as displayed on price charts. But as was mentioned earlier we can also adopt a data driven approach to monitor and identify emerging trends and momentum. One way to do this is to monitor price performance versus key price points such as period highs and lows or moving averages.Swing Traders will look for price cascades which can be thought of as a series of sequential price changes or prints. Each of which creates a new high or low for a particular period. For example 5 consecutive new 5 minute highs or lows.The periodicity of (or how quickly) price cascades occur can also inform the trader about the acceleration of the momentum/trend. Price cascades can often lead to what is known as price progressions. A price progression would be characterised a series of trades or prints which climb up or down a "price ladder". Printing, for example, consecutive new 1,5. 10,15 and 30-minute highs or lows.Swing Trading Strategy RecapPatience is a virtue remember you are looking to capture the majority of a move, not just a few pips.Always look for confirmation before jumping into a trade. Let the price action tell you that it's changing direction or breaking a key level such as long term support or resistance.Carefully consider the placement of your stop losses relative to recent price action. After all, you won't want to be prematurely stopped out. But neither do you want to expose yourself and your capital to undue risk.Remember you can raise or lower your stop loss behind a trade, as it moves in your favour if you can move stop ahead of entry point you are potentially locking in profits.Always keep a record of the reasons why you entered a trade. What your confirmation signal was, The points at which you placed any stop loss and or take profit orders etc. You can look back on this record and review what went right or perhaps wrong.Try to trade only when you believe the odds of success are very much in your favour.If not doing so already consider adding indicators such as Relative Strength (RSI) and or Bollinger Bands to your charts. Both of which can shed light on trend strength and likely longevity as well possible failure or breakout points.Alternatively, the more sophisticated Stochastic Oscillators can be used to track market momentum independently of price or volume. These indicators can be customised by users to suit their own strategy or style.Most important of all if you are new to Swing Trading then practise as much as you can and formulate your strategy before committing to real trading.
Day Trading Strategies are used by investors to remove or limit overnight exposure, which can be seen as an additional risk to their capital. Though in truth this is less of an issue when trading Forex (where the market is open 24 hours a day five days a week) than it is for other asset classes. Nevertheless following a Day Trading Strategy allows a trader to end their business day flat. That is with no open positions. Thereby avoiding unpleasant surprises (that may result from negative overnight moves) when he or she returns to their trading screen the next day. By the same token of course they run the risk of missing out on any positive moves overnight, though this is seen as the lesser of two evils so to speak. Increasing popularity Day Trading Strategies became popular among the investing public in the internet boom of the late 1990s. As people’s houses and places of work were connected to the internet,so they were able to view and interact with information in real time. One of the most obvious things that individuals could interact with over their new internet connections, was financial markets data. As a result an increasing number of individuals decided that they wanted to take control of their investments and trade for themselves. A new generation of brokerage companies were founded to meet these new customer requirements of which Blackwell Global is one. Anatomy of Day Trading Strategies Day trading activity takes place intraday – that is inside one business day. Traders may buy and or sell numerous financial instruments in that time, but they will aim to end the day with out any open positions, having” squared their books” before the close of business. Those investors implementing Day Trading Strategies may finish the trading day well before the official close of business. If for example they employ monetary targets, as a far as profit and loss are concerned. For example if a trader has a profit target of £1500.00 per day and a maximum daily loss of £500.00, if he or she reaches or exceeds either of those figures, they could well decide to cease trading for that particular day. Rather than risk their profit or incur further losses. Examples of Day Trading Strategies Scalpers Both Scalpers and Swing Traders use Day Trading Strategies. Scalpers are frequent traders who hold a position for a very short time, while looking to collect or scalp a small profit from each trade they do. Or at worst to close a non performing trade for little or no loss. Over the course of a day they hope to achieve many more winning than losing trades, or to have winning trades whose cumulative profits exceeds their total losses, plus any costs incurred. A simple Day Trading Strategy that might be employed by a Scalpers is to monitor how a price respects a moving average, over a relatively short time frame. For example a 10 period moving average plotted on a 15 minute chart. We can see an example of this in the chart below, which is a 15 minute plot of EUR USD (Euro US Dollar) that has been drawn with a 10 period simple moving average in yellow (this line is quite simply the plot of the rolling average of 10 periods of price activity). You can see that we have highlighted two areas within the chart. On the left hand side an area where the price of EUR USD was unable to break above the 10 period MA line and having tested there,moved lower. The white or filled candles here indicate a 15 minute period,where the closing price in the period, was lower than the high.Which itself was often at or close to the 10 period ma line. Each of these failures at the moving average represented an opportunity to short (Sell) EUR USD as part of a Day Trading Strategy. Conversely to the righthand side of the chart we have highlighted an area where the EUR USD price viewed the moving average line as short term support. The price touches but does break below the ma line on consecutive occasions. Then the price subsequently moves higher away from the line, before breaking below once again on the third test of the line. These bounces away from the moving average would have provided an opportunity to get long or buy EUR USD, whilst the break below the MA would have signaled the end of the short term price support. Note though that the price goes on to test at and bounce from horizontal support and then moves back above the moving average once more. This type of short term price action creates a useful Day Trading Strategy that is exactly type of thing Scalpers can and do exploit. Day Trading Strategies for Swing Traders Swing Traders take a longer term view than their Scalper counterparts but many of them will employ a Day Trading Strategy, to mitigate their overnight risk exposure. Swing Traders are looking to identify swings or changes in price momentum. And once identified to capture as much of a move as possible within a trade. The chart below shows the UK 100 stock index drawn over hourly time frame. We have highlighted overnight gaps with white brackets (gaps are voids in a chart created by a sharp move in the underlying price, which can often be found between the closing and opening of a market) both lower,on the left hand side and higher on the right hand side of the chart. Having gapped lower the price action continues lower and forms a bottom (at a level it will return to on two subsequent occasions). Having formed the bottom the price begins to rally and moves into the gap, breaking above the lower of the two red dotted lines. Just like nature, price abhors a vacuum and it will always try to fill a gap in chart if it can. In this instance we did fill the gap, with the price of the UK 100 index moving through the second of our dotted red lines. The price then pushes on to a prior period high, before gapping lower once more on the following day. We should also note that prior to gapping higher (on the right hand side of the chart) the UK 100 index tested to and through the top of the gap lower, as indicated by the upper dotted line. The index closed above that level as well which was suggestive of a higher open on the following day. Implementing this Day Trading Strategy A Day Trading Strategy for a Swing Trader based on the Gap higher would have been to buy the UK 100 Index on the open or if they wanted confirmation,to buy the index at the point where the price made a new high, above that seen in the first candle of the day, after the gap higher.Then once long remain so whilst the price was above their entry level,. Then subsequently exiting their long position before the close of business. In fact the move to fill the gap lower, the three bottoms and the gap higher,which followed a close above the top of a prior gap, are all signals that a Swing Trader could use as entry points, as part of their Day Trading Strategies. Summary Whether you deploy a Day Trading Strategy as a Scalper or a Swing Trader you will need develop the discipline to make that strategy work for you. As a scalper you will need to get proficient at cutting non performing trades quickly. That means recognising you were wrong and moving on. As a Swing Trader you need to decide if a change in price momentum or direction is genuine. If it is you need act quickly to enter a trade and then manage that and any other positions throughout the day, trying to maximise your profits and minimise losses as you do so. If you don’t think Swing trading is right for you and it may not be. Why not read our article on Spread Trading. Remember that you should always choose a trading strategy that meets your investment objectives,experience,financial resources and risk appetite. One way that traders can gain valuable hands on experience of working with Day Trading Strategies, in realistic market conditions, is to make use of our demo trading account, in which you can create, practise with and refine your own Day Trading Strategies.
First of all I would like to recommend a great document out there - "DB Guide to Exchange-Rate Determination" which was written by Deutsche Bank in 2002 and is overfilled with FX rate determination, forecasting methods which can be used for all short term, mid-term and long term trading. If you haven't read it, look for it, download to your Kindle and take the time. It is worth reviewing. :) In the documents several FX trading strategies are described with reference to many academical papers and literature. One of them - the Forward-Rate Bias strategy. Its results are stunning for longer term FX trading and its sharp ratio has beaten the S&P500 twice. As the DB says: "This is the bedrock of Deustche Banks's Forward-Rate Bias trading system". Forward Premium and Discount It is necessary to understand what Forward Premium and Discount is before diving deeper in to this. Premium - Situation where the spot futures exchange rate, with respect to the domestic currency, is trading at a higher spot exchange rate then it is currently. A forward premium is frequently measured as the difference between the current spot rate and the forward rate, but any expected future exchange rate suffices. Discount - situation where the domestic current spot exchange rate is trading at a higher level then the current domestic futures spot rate for a maturity period. where N - represents the maturity of a given forward exchange rate quote d - represents the number of days to delivery P - is the premium (if positive) or discount (if negative) F - is the forward exchange rate S - is the current spot exchange rate Forward Bias Strategy - Trading the Bias "Favorite approach to trading the forward-rate bias is to adopt a diversified strategy to exploit the fact that currencies trading at a forward discount tend to outperform those currencies trading at a forward premium". The recommendation is "going long the three highest-yielding currencies in the industrial world and going short the three lowest-yielding currencies in the industrial world. Net long/short positions are put on at the beginning of each month and then closed at the end of each month. This process is repeated each month over time". Long Run Track Record for USD-Based Investors This is truly old backtest and I would be really interested whether it can perform this good in todays market. So if there was a demand for it, I would dive into that ;o) Write a comment if you want to see it.
Each trader applying technical analysis has many postulates he relies on in trading. Quite often it turns out that traders do not go deep into the matter, guided by their market experience only. However, there are effective theories applied to the markets which lack substantial ground. They can be proved by statistics only. This is the kind of theories Fibonacci number theory is attributed to. Originally, this trading instrument was used on a bull market. Traders had to plot Fibonacci retracement levels manually. The Fibonacci conception was gaining popularity. Permanent practice has revealed its many advantages. Fibonacci levels describe the interaction between trend and countertrend markets — 38%, 50% and 62% retracement from the reverse point. As a rule, percent ratios are applied after the trend is determined. Find out the points of percent levels crossing those of price by stretching a grid over the most apparent up or down waves. Great trading opportunities are ensured by converging patterns and retracement levels. It should be remembered that retracements are ineffective in vacuum. Keep an eye on highs, lows and moving averages to make sure a certain level is important. The discrepancy between a retracement and a basic pattern does not result but in a market noise, not to mention an expected profit. The patterns which contain incongruous analysis aspects are not recommended to use. Such incongruity leads to numerous abrupt reversals on price charts. On the contrary, the correlation between Fibonacci levels and patterns ensures highly predictable reversals at narrow price levels. The two examples below are to be of help to you in working with Fibonacci. Using these methods in trading is sure to make your trading profitable and convenient. The first rise/ first fall marks 100% retracement of a trend within a certain period of time. It can be regarded as a reversal warning. 100% retracement alters the major price movement which then terminates the trend it corrects. If a previous retracement level of 38% is broken through, then the old trend can reestablish itself. Most often traders tend to use this level to open positions against the old trend, which minimizes the risk. Overnight grids Find an active market instrument and start stretching a grid either from a low or high registered within the last hours of the session. Stretch a grid to the opposite direction to a low or high of the first hour of the following morning. This determines certain price waves a trader can use in order to find intra-day gaps, break-outs and break-downs. In addition, this type of grids is applied to morning gaps. Stretching across a key retracement, a gap will provide an opportunity of entry to the market with low risks at a pullback.
Nearly every single technical based trading system will rely on you – the professional Forex trader, having the ability to correctly draw support and resistance levels on your price charts. Mapping out your levels is going to be the most important core skill for any serious trader. If you have trouble marking your S/R levels accurately, then your trading as a whole may implode… violently. What is built on a weak foundation will eventually crumble Everyone is going to have a slightly different approach to getting their charts marked out, but it is the end result which counts. I’ve seen some Forex sites posting up their opinions of support and resistance levels so you can just check in from time to time, clone those horizontal price levels on to your chart, and not have to think about the process at all. This is not the right way to go about becoming a legitimate trader. Marking support and resistance is Forex 101 – once you learn the easy process of marking out price levels, you won’t need anyone to supply you theirs. Think about it in this way; It’s really like cheating on a test – you could be copying the wrong answers, you don’t learn anything, and won’t grow as a trader. If you’re reading this, then you probably don’t want ‘a free lunch’ and have the thirst for knowledge with a goal to improve your own chart reading skills. Build good habits early and they will stick with you forever. I am sure you want to be able to independently, and confidently read a price chart – if you’re just piggybacking off of someone else’s opinions, you will never truly get there. So today, I am going to show you the processes I use to plot support and resistance. You don’t need any fancy tools – just your own eyes to scan the price charts. It will be a major determining factor in how successful you are as a trader! In this tutorial, I am going to cut through the confusion, and introduce you to the powerful basics of marking support and resistance. Stop Making Support & Resistance A Complex Task I see all these charts getting posted around on forums, and they look like a child’s finger painting drawing, or the NASA control panel for space missions. This is an epidemic with traders and it is really screwing with their ability to ‘read’ a price chart. Most truly believe that being complicated gives them a competitive edge over their fellow market participants. Sound familiar? With this sort of mentality, traders are really driven to go overboard in the hope they cover every technical basic possible, and make sure nothing ‘slips under the radar’. In order to gain any traction with trading, I truly believe the best place to start is with a clean price chart with some crucial levels marked out, and that’s it. Once you can read a chart using price action and S/R levels, your trading will improve no matter what other strategy you decide to use. Have a look at the chart example below – it’s a classic example of a Forex trader who takes things a little too far! This Forex trader has created an environment that is not practical, and just too difficult to work with. There is absolutely no need to over analyze like this – it’s extreme overkill. If your chart looks anything like this – you can fix this right now as a positive step towards better trading. If you are working with a Forex chart polluted with meaningless horizontal levels, and other unnecessary variables like: trend lines, channels, or even a stack of indicators – making a confident trading call is going to be extremely frustrating. A badly laid out chart is poison to your trading mind-set. It’s very hard to make logical, rational decisions from confusing data. You endanger yourself to falling prey to your emotions. The idea is to be minimalistic with the charts and the markets. In fact, you only need to mark out the significant levels that are surrounding the current price movements at the given time. In some cases we will only have 1 line marked on our charts – as you may have noticed in our Forex market commentary. You will find in most situations it only takes that ‘one well marked level’ to clearly map out, and help you clearly ‘read the situation’ on a price chart. Seriously, anything over 3 lines marked on the chart would start to be considered too ‘busy’ and need some cleaning up. By only marking out the important levels to watch you will keep your charts tidy, simple, and easy to read. This gives clarity back to the chart and to the trader – allowing the identification of good trade setups, and making the anticipation of future price movements much easier. Checkpoint Traders kill their trading at the very core by making a mess of their charts. There is no need to have too much going on, prioritize your support and resistance levels so only the really important ones are marked. This will help keep your chart clean – by doing this you eliminate self-sabotaging confusion and promote high precision trading. Understanding support And resistance Support and resistance levels are proven price areas where buyers and sellers find some form of equilibrium. We generally see a shift in the balance of power between buyers and sellers occur at these levels – this ‘power shift’ generates the classic price reversal patterns we are always on the look out for. Therefore true support and resistance levels are the major turning points in the market. Price doesn’t move in straight lines as you are most likely aware of – instead we see price swinging up and down, creating new swing lows, swing highs, or re-testing existing ones. The more often price does this ‘stop and reverse’ action at a specific level – the ‘stronger’ or more’ significant’ that particular S/R level becomes. Price is communicating to you that “this price level is being defended aggressively”, and could be a good area to look for reversal signals. It’s also worth noting that support and resistance levels that are clearly visible on the higher time frames are considered to be greater in value, and have an increased chance of becoming a price turning point. Just remember; the higher the time frame, the more significant the S/R becomes. When we draw our S/R levels – we work on the daily time frame the majority of the time. I recommend using weekly and monthly charts to mark out the more significant or ‘major’ levels in play. These weekly and monthly levels are really good areas to watch out for strong candlestick reversal patterns, like the rejection candle reversal – especially if you’re going counter trend. Intra-day levels are generally not worth worrying about, price cuts through these like a hot knife through butter on a day-to-day basis and don’t offer much technical value. This is one of the reasons intra-day or ‘day trading’ is much more difficult and has a very low success rate. You’re definitely trading on a shaky foundation when you ‘hone in’, or tune your analysis on those lower time frames – it’s not worth it. Checkpoint Support and resistance are horizontal levels the market has used in the past as a turning point on the chart. They can be found on all time frames, but are best sourced from higher time frame charts, such as the daily and weekly. The higher you go up the time frames, the more data inside the candles – therefore the more significant the levels become, and are more likely to act as a turning point in the future. Working with Support & Resistance in Range-bound Markets Lets get a little bit more practical and move into some technical demonstrations. Support is an area on the chart where the market demonstrates strong buying action, easily identifiable by price ‘bottoming out’ caused by bearish price action movement being overrun by bullish pressure at a consistent price horizontal level on the charts. Support is often referred to as the ‘floor’ that price bounces off, or has trouble moving past to the downside. Resistance is the opposite of support – it’s where you see price ‘topping out’ as the bullish price action movement is consumed by bearish activity at consistent price levels on the charts. Resistance is known as the price ‘ceiling’ that the market tends to fall off, or has difficulty pushing through to the upside. Support and resistance is fairly simple to understand when you look at ranging markets – they make up the major containment lines of range-bound systems. When a market is range-bound, the only levels you really need to have marked out are the upper resistance ‘ceiling’, and the lower support ‘floor’ of the range. We recommend to only trade buy or sell signals from these main upper and lower boundaries. Short signals are valid at range resistance, and long signals are to be targeted at the range support. Checkpoint Ranging markets are really easy to ‘map out’ on your charts. You need to draw your levels so that you highlight the upper resistance and lower support containment levels. These are the major turning points for a range and deserve your attention. The best trading opportunities will form here. Stay away from the middle of the range, it’s a ‘no fly zone’ that spawns a lot of bad signals and rough price action. Trending Markets Trending markets are identified by using swing patterns that are broken down into classic sequences higher highs, higher lows, lower highs and lower lows (not in that order). These key technical high and low points are called ‘swing highs’ and ‘swing lows’, and it is the order which they appear on the chart is vital to identifying trends, especially if you want to catch them in their early stages of development. During a bullish trend, price will step upwards in a zig-zag type pattern – almost like price is walking up a flight of stairs. Price will gradually step its way higher forming that ‘staircase footprint’ on the chart. Higher highs (or swing highs) in bullish trends is where the market finds resistance, and generally starts off a correctional move. Higher lows (or swing lows) normally are formed after a counter trend correction is terminated, and the market finds its footing (support). Trend momentum kicks back in here and generally pushes price into the next higher high to complete the next phase of the trend. During a downward bearish trend, the opposite is true. Notice the ‘staircase’ upward motion – price is finding support and resistance at the swing highs & swing lows, as it moves in the general upward direction. In trending markets, the critical levels that we recommend to mark, and watch are the ‘Swing levels’ – which is one of the main principles of swing trading. Swing levels are ‘hot zones’ for price reversals and trend continuation – so they want to have your full attention. They form when old resistance turns into new support, or vice versa. Basically, the level reverses it’s role from old support to new resistance, or from old resistance to new support. A very important technical event on the chart. Or if I put it another way – swing levels are when a swing high acts as a new swing low, or an old swing low is used as a new swing high. Study the chart above and you will see each swing level lines up swing highs and lows on the horizontal plane. Price Action signals that generate off swing levels during trends have a high success rate, that’s why I call them the ‘hot spots’. There are two main reasons for this; Firstly, there is already trend momentum backing the trade, secondly a swing level – which we know is a key turning point in the trend, adds to the chances that the trade will move in your favor. Here is an example of a bearish trend and its related swing levels. In this downtrend we have marked out the swing levels (where old support levels have turned into new resistance). See how in a bearish trend, the staircase footprint price travels through is inverted to the bullish trend – just think of someone walking down the stairs this time. Checkpoint Trending markets rarely move in a straight line – instead they ‘walk’ up, or down the chart leaving a ‘staircase looking footprint’ as price swings from highs and lows, but still moving in an overall dominant direction. During trending markets it’s the swing levels that are most important to have mapped out on your chart, because they are the critical turning points in a trending environment, which I call the hot spots of a trend. The Weekly and Monthly Support & Resistance On a larger scale, strong weekly and monthly support and resistance levels should be marked on your chart when the current price is the vicinity, or approaching those levels. These weekly price levels that are dominant from these higher timescales are major turning points in the market, and want to be paid close attention to. Strong daily price action signals that occur at significant weekly or monthly S/R can be the catalyst for a strong reversal move – and create very profitable trades if you have the discipline to hold a trade open for a longer duration. In the GBPUSD chart above – you can see how this support level was acting as strong weekly support, and had been a key turning point in this market. Now because price has broken through this important level – the best course of action is to wait and see if the market will now respect this old weekly support as new resistance. We can confirm this if a bearish price action reversal signal forms when price retests the old support. It’s all about letting the price action tell you where it wants to go. Don’t assume something is going to play out the way you think, and take action too early – the market will teach you a harsh lesson for doing that. In the examples above, we’ve identified the key support and resistance levels on the chart without cluttering up the template with any indicators, trend lines or other chart tools. Only mark out the important levels that market is currently reacting with at the present time. I don’t think the market cares too much about levels from 10 years ago. Just concentrate what’s going on in the ‘now’, because support and resistance levels do change over time. Remember – the market is not static, it’s a dynamic environment. Support, resistance & swing levels will change as the market dynamics change. By sticking with the levels the current market is respecting, you can keep your hand on the ‘market pulse’, tuning you in to current conditions. Do this and logical, confident trading decisions will flow much easier, so long as you are basing your decisions on what a simple price chart template is communicating to you. Checkpoint Weekly levels are major reversal points in the market. Watch for any approaching weekly, or monthly support or resistance and mark them on your chart, so you can pay special attention to them and watch for any strong reversal signals. Very lucrative trading opportunities can develop from these levels if you’re willing to hold your trade. Support and Resistance Take Home Notes A few points to remember from today’s tutorial… - Mark upper resistance and lower support in range bound markets - When price breaks a support or resistance level – mark it on your chart and wait for a signal to confirm it as a new swing level - During trending conditions – mark higher highs and lower lows and wait for them to be confirmed as a swing level via a price action signal or a price bounce. - Mark the support and resistance levels on your chart that are dominant on the weekly and monthly chart, but only around the area where current price is located (no need to go back years and years ago). - Remember the higher the time frame, the higher the significance, the higher chances are of success. I truly hope today’s guide to identifying support and resistance levels has given you some new insight on how to structure your charts, and plan your trades more effectively. Don’t expect to nail it immediately just from one pass of this lesson. The ability to draw levels correctly is learned over time and with patience – so don’t give up, learn to avoid common mistakes when traders draw support and resistance. If you’ve stuck with crowed price charts that are overloaded with a horde of support and resistance levels (and indicators to boot) – then you’re going about it the wrong way. Scrub your chart clean, start again and use the methods discussed here today to keep trading nice and simple. Acquiring the skill of correctly marking out support and resistance is obviously very important for any Forex trader – but we’ve only scratched the surface here in today’s introduction. If you’re serious about learning how to read plain price charts to anticipate future price movements, and make high probability trade calls – you would greatly benefit from our war room membership for aspiring price action swing traders. The War Room is our private membership area where you will learn more about price action strategies, and gain access to advanced ‘war room’ only material – like our 1 hour video presentation on identifying and using support and resistance levels. There is also the Price Action Protocol course and the community aspect, like the chat room and forum where we are bouncing trade ideas off each other all the time. I hope to see you on the other side, cheers to your future trading!
Drawing key levels is a core part of technical analysis. The problem is the technique can be so confusing to newbies, because marking a them on a chart is very subjective! It is mainly due to the amount of conflicting information out there, traders get really frustrated with getting the process right. If you give two traders the same chart, and ask them to each plot a line – you will probably see two very different results. In this guide, I am going to show you my way of drawing a trend line, and give you a demonstration on how I use them. What Are Trend Lines Really Used For in Technical Analysis? These guys are going to pop up in all your ‘chart analysis 101’ text book material. Their basic function is to highlight linear support and resistance. Quite often when the market is on the move (making new swing highs and lows), price will tend to respect a linear level – which we identity as a trend line. Bullish markets will tend to create a rising linear support level… Notice how all the counter trend movements are terminating at this structure? When they appear, we can use these lines to anticipate the next reversal point in the market, and look for bullish reversal signals there. The opposite is true for a bearish scenario… So obviously the bearish situation is just a role reversal . Counter trend rallies terminate at clear line as it they as a linear resistance level. We can use it as an anticipate reversal point. Therefore this common type of technical analysis involves inperpreting these lines as linear support and resistance. When a line is broken, the market often can come back and re-test it as a new support or resistance level. Above: An example of one which once held as resistance is then respected as new support as the market pulls back down, and re-tests it. What I’ve shown so far is the basic functions, but we can do a lot more with them. In the rest of the article, we will walk you through other trend line events such as… - Counter-trend breaks (flags) - Classic breakouts - Example of reversal signals at linear structures - Consolidation structures created (good and bad) Checkpoint The basic text book definition is a collection of swing highs or lows, that create a linear support or resistance level. They have many traders uses, and many strategies are developed around them. How Do You Draw Trend Lines – The RIGHT Way? Firstly, we need to cover a consistent rule-set to encourage (what I believe), is the correct way of identifying quality levels. Most of the re hashed tutorials out there just instruct you to mark two swing highs or lows together… only two. This is really crude advice, and can leave you the trader very confused to where to draw the damn line. Tips such as these set traders on the path to extreme over analysis. Following the commonly preached text bool method (of only using two anchor points), opens up the door for hundreds of possibilities on one chart! You don’t want that, you need better quality control… other wise you may end up with charts like this… I know this is an extreme, and humorous example – but I think this guy has connected every two swing highs and lows together… A line with only two anchor points really just an ‘unconfirmed’ level on your charts. The example above shows a trend line marked with two swing lows as the anchor points. It is an aggressive, low quality way to go about it. It is only really a catalyst which may turn into proper level – but at this stage it is just a pending line. You can mark these pending lines if you think it is appropriate, and wait to see the line is respected again – but most of the time it is just going to clutter your charts, and skew your technical analysis. The ‘trick’ to drawing quality lines is to use *3* clear anchor points… then you’ve got something worth occupying the real estate of your chart! When I say anchor points, I mean swing lows or highs that line up in an obvious linear fashion. See in the chart above, we used 3 swing points. Using a minimum of 3 anchor points, we build a quality trend line that actually matters to technical analysis. When you just use two anchor points, your level is basically ‘unclear’, or only partially constructed. You never know if you have it marked in the correct place. The series of charts below will illustrate the frustration of someone who only uses 2 anchor points… Seems legit, until… All of a sudden the market doesn’t respond as expect… better ‘adjust it’, yeah? OK, now I think I’ve got it… The comic shows the trader ‘chasing the line’. Which is frustrating and unproductive analysis. Don’t waste your energy… use 3 anchor points. It’s much easier, and provides a confirmed trend line in the market. Don’t chase price, mark what you can clearly see! Above: Using 3 swing highs rule. No more chasing our tail, three data points line up – we’ve got what we need. Above: The more anchor points we have to build the line, the better – it just becomes more obvious and makes the trend line more significant! Checkpoint Most guides tell you to use two anchor points for plotting. This can leave you struggling with your charting, as you chase pairs of highs and lows looking for where a linear level is forming. To resolve this frustration, only mark the ones out clearly showing a line up of three clear anchor points. Don’t Let Fake Outs Throw You Off One thing that throws a lot of traders off, are false breakouts. We won’t always get the perfect text-book scenario for our charting, false breaks do occur often – making a mess of our picture perfect idea of a trend line. To ‘filter out’ the fake-outs, I use something which I call the common denominator approach. The goal is to line up the common data points that create some obvious consistency, and just ‘makes sense’. Let me show an example… Above: We’ve drawn the line that conforms well with the lows here in a consistent manner. We cut through the fake outs by basically ‘connecting the common dots’. We can see how the level holds as support here well – the fake out creates an inconvenience we need just to slice straight through. Let’s look at a bearish example… Lining up the common swing highs here for identification. The fake out becomes obvious when you work with the consistency of the market. Marking these out isn’t an exact science, you’re just looking to mark out the general structure so you know when price approaches this important technical level. Keep the process simple and obvious. If it isn’t obvious and you really struggle to line up the level – then it is probably not a structure level worth worrying about. Checkpoint When drawing and trading trend lines, fake outs may throw you off. Use the common denominator approach to connect swings highs or lows that line up in a linear fashion to plot the line. Just cut through any spikes and dismiss them as fake outs as shown in the examples. Trend Line Reversal Trade Opportunities Because we know they are anticipated to act as reversal points, we can target reversal trading signals here. We use candlestick reversal patterns a lot for our trade setups, so we heavily focus on those. Here is a bullish market example with some candlestick reversal signals… We had a clear obvious structure here, which was holding nicely as a linear support. It is only logical to target it for buying opportunities via bullish reversal patterns. This chart had a bullish outside candle, and a bullish rejection candle (both reversal signals), form off off the level, communicating to us that the the trend line once again was holding as support. Both trade setups worked out nicely Check out the chart below… Above is a nice bearish example, acting as resistance which did see a nice bearish reversal candlestick signal form off it. The bearish rejection candle signals it was still being respected as resistance, and that we should expect lower prices to follow. The setup produced a nice sell off! It is just really simple, logical thinking – just the way I like my trade ideas. You’ve got a linear line structure where you know price is expected to reverse. Simply combine that with a reversal signal to form your trade opportunity. Checkpoint Wait for bearish or bullish reversal signals to form off your level to signal that the market is going to respect it. Watch for bearish patterns on declining lines, and bullish patterns on rising lines. Trend Line Breakouts! We know so far these are key market structures with strong supportive and resistive properties. Whenever some form of market structure is broken, a violent breakout can occur. A common strategy is to catch breakouts in trend line trading. There are many ways to do this, but I prefer the ‘close confirmation’ method. I recommend you wait for for a candle to break through, and close on the other side of the line before reading the situation as a breakout. The reason for this is because price can often pierce through the line, but not close beyond it. These are known classically as ‘fake outs’, and are notorious around important structures. Many traders get cremated by fake out events, because they are too ‘trigger sensitive’ and slam the buy, or sell button at the first sign of any kind of sign the market is breaking out. So we can see price breaking through the line here. Many breakout traders would jump on board this, mostly fueled by greed to try catch the breakout early… but this can come at an expensive cost. The main point here is the candle hasn’t actually closed yet… In the chart above – when the candle does finally close, it closes back under – revealing a breakout trap! Those who were too quick to act have been ushered into a bad position. Now their money has been taken by the market, and flows into the pockets of more disciplined traders. It is very common for trend lines to be temporarily broken by price, even by just a few pips – only to turn around in the opposite direction. That’s why trading an ‘in the moment’ breakout is a risky strategy. When you focus on the candle close, your chances improve of catching a true breakout. We can see if the pic above, the candle actually closed above the level, indicating a breakout is underway… The market actually followed through with the breakout move! This is a good example of waiting for the candle closes gives a much better read on the situation. Trading candles ‘on the fly’ is simply a dangerous game. Checkpoint When trading trend line breakouts, I recommend making your decisions on the candle closes. Generally the 4 hour chart is good for catching earlier breakout candle closes. Channels Channels are best described as two linear levels that run in parallel to one another. They look like and sometime are referred to as ‘railway tracks’. You can get rising, and falling channels. A rising channel is made from linear higher highs, and higher lows. The two lines running in parallel create the support, and resistance of the channel structure. Like a ranging market, price bounces between these two lines and reversal signals can be picked off here. The downward channel is made from two parallel descending lines, which line up lower highs and lower lows. Reversal signals can be targeted at the channel boundaries. We can see in the pick above that there were some reversal signals at the channel resistance. They signaled continuation of the channel and were good trade opportunities. Checkpoint Channels are pretty easy, they are just line a ‘trend line sandwich’, created from price swings highs and lows. Target reversal signals at the boundaries. You can also target breakout trades when price moves outside the channel structure. Remember to wait for a close confirmation! Price Squeeze Consolidation Structures Linear levels can be used to highlight a consolidation pattern that I call a price squeeze. It is a scenario where you get lower highs, and higher lows converge in on one another… creating a ‘squeeze’ scenario. Notice how the higher lows and lower highs created two linear support and resistance levels that converge in on one another. This ‘compression’ of price is a strong catalyst for a breakout. Generally when the market breaks, and closes outside the squeeze pattern – you get very strong moves. The above shows the bullish and bearish pressure tightening price into a squeeze, then forcing a breakout. These patterns can breakout upwards, or downwards, so be prepared! Checkpoint Squeeze patterns are a catalyst for powerful breakouts in the market. They are basically created by two converging lines that force price into a compressed state, then… boom! Watch Out for the Megaphone Pattern! This pattern is the opposite of a squeeze pattern. The megaphone is an expansion pattern which can be identified by two diverging lines. Stock traders know this pattern as the ‘broadening top’, and it shows that the market is increasing in volatility – in an unstable kind of way. Megaphone patterns are usually created by a market phase called distribution – where big traders are dumping their positions, and violent up and down swings occur. You will see this pattern on your charts when the market creates higher highs AND lower lows. Notice how the swings keep becoming larger apart as more and more volatility stacks into the market. Checkpoint Megaphone patterns are known more by stock market traders as a expanding volatility pattern. They show an increase in volatility on each advancing swing, and signal a change is on the way. Flag Patterns (Counter Momentum Trend Lines) The flag pattern is created mainly in a trending environment. Flags appear when a counter-trend line forms against the prevailing trend momentum. The opposing trend line acts like a dam, holding back the main pressure… Above: See how the counter trend line backs up the trend pressure. It is the flag break you’re looking for here – a good trend continuation signal. Flags really work the best in a clear trending environment, and show up more regularly on time frames like the h4 – h8 charts. Above: Demonstrating the ‘dam wall’ effect here on a bullish market. The upward momentum encounters resistance in the form of a counter momentum line. Once the dam breaks, boom! Checkpoint Lines that form against the macro environment tend to create temporary ‘barriers’ in the core trend. Once the barrier is overcome by a breakout candle, the trend energy is release and the market continues. Alerts With My MT4 Battle Station The battle station is my an MT4 tool I made for those who are into price action trading, especially traders who use candlestick patterns, or Renko charts. I have a ‘trend line’ filter added into the program that will basically alert you to any reversal patterns that form off any levels that you’ve drawn on your chart. This can be useful if you’re waiting specially for a signal to form off technical points you’ve drawn on your chart… Above: I set the battle station to only be concern with reversal patterns it detects off levels I’ve drawn on the chart. Notice how it has highlights some reversal patterns at the levels by drawing the tan line through them (colors can be customized) The battle station can be extra useful here as it will also alert you when it finds these patterns off your t- line. The alerts come in 3 different ways so you don’t miss a trade: - Smart Phone Notification - Email Alerts - Metatrader Internal Program Pop-up Alerts More information on the Battle Station: trend line alerts. Checkpoint My Battle Station program for MT4 can help scan for trade opportunities with trend lines. It can pick up reversal opportunities by flagging down candlestick reversal patterns that only form off lines you’ve drawn Take Home Points From This Lesson - Trend line analysis can be very subjective – don’t fall into the over analysis trap - They act as linear support and resistance levels in the market - Use the 3 anchor points strategy to make sure you only draw quality lines - Use the common denominator method to ‘cut through’ fake outs when drawing trend lines - Price Action traders can target reversal candlestick patterns at well defined lines - Watch for when a candle closes beyond a clear line for breakout trade opportunities - Lines that run in parallel to each other create channel structures - Converging lines create price squeeze patterns – a potent breakout catalyst - Diverging lines create a high volatility pattern called the megaphone! - Trend lines that form against trend momentum can create the flag pattern (dam wall effect) - Watch for candles to close beyond the flag pattern as a trend continuation signal Hopefully you’ve enjoy this tutorial! In the comments below, please let me know what you thought, or if you would like me to expand on any of the topics discussed here. If you would like to learn more about trading with trend lines using candlestick reversal, and candlestick breakout patterns – check out the war room for price action traders. I wish you all the best on the charts! Don’t forget to leave your comment
A low-risk approach for better profits; one-minute forex scalping strategyScalping is not an uncommon term in the world of forex trading. You might have come across scalping strategies at least once, even if you are a newbie in this field. The end goal of scalping is to make a small profit through the small price movements, which are common throughout the day. A forex scalper buys or sells an asset and then holds it for a short period to generate the profits. However, you will have to be willing to dedicate a few hours of a day if you plan to step into this strategy. A 1-minute scalping strategy is an approach that needs a bit of time and concentration put into to be successful despite the name having the words 1 minute on it. Number of exponential moving averages (EMA)This forex scalping strategy, like many other of its kind, relies on exponential moving averages. An average trader typically uses two or more moving averages to gain a general trend of price movement. This helps to better understand the main direction and to trigger more precise entries or exits in the market. Our strategy uses three moving averages to monitor short, medium, and long-term market trends. This allows us to estimate the trend’s intensity from multiple time frames. one-minute forex scalping strategy This is a 1-min chart of Euro-Yen with the three exponential moving averages: the 50, 100, and 150-period averages. The 50 period EMA shows us the short-term trend while the 100 and 150 periods EMAs show the medium and long-term trends. Using longer-term EMAs somewhat eliminates the inevitable market noise. But you don’t have to use this exact setup. Any number of ema combinations can be used here. The types of Entry setups you are looking for, and the timeframes you are trading are the factors that determined that. So, feel free to use Every other moving averages. If you look at the first part of the chart, you will notice that the price stays above the 50 periods EMA the entire time. The fact that all three EMAs are trending higher at around forty-five-degree angles during the first part of the chart is significant. Here all three moving averages are in agreement, in line, almost parallel, with strong trend consensus. This is the kind of behavior we’ll look for on our chart. PullbacksIn the mid part of the chart, the price eventually brakes and falls below the 50 periods EMA. This signals a short-term weakness, but it soon resumes the uptrend at the 100 periods EMA. This confirms the medium- and long-term strength of this chart. The strength of the trend will always remain intact until the price breaks below the 150 periods EMA. After we identified the main direction of the chat, we need to wait for a pullback to locate undervalued and overvalued entries into the established trends. Our goal here is to find opportunities when the price is considered overvalued or undervalued, as this presents excellent opportunities to “buy low in uptrends, and sell high in a downtrend.” The goal of the pullback trade is to take advantage of situations when all three moving averages are indicating the same direction. The price is in an established trend, either bullish or bearish. Any pullback to the first or second EMA offers a buying or selling opportunity. This setup is effective because it makes you buy below the price and sell the above price while keeping you disciplined to the current trend. How to enter a trade? 1-min-forex-ema-scalping-strategy The vital part of entering a trade is to identify the current trend of the market. All three EMAs must be trending in agreement in a bullish or bearish manner. A slope ranging from 30 to 60 degrees is enough. But it is much better if all three EMA’s trending at a 45-degree angle. That kind of slope identifies a strong trend. The next step involves waiting for the market to show a pullback towards either the 50 or 100 periods EMA. As said before, price should go down beyond the 50 periods EMA, but make sure it doesn’t go too low beyond the 100 EMA. It must go below 150 EMA. Once the price moves beyond either of the moving averages, we need price confirmation. The entry should happen when the price moves back in the direction of the current trend, just beyond the 50-period EMA. How to manage the trade.Many exit tactics can be used for the pullback trade. The room for error is tiny when you are scalping as you are trading with high leverage while looking for a small profit. one min forex scalping strategy The ugly truth about scalping is that it’s unpredictable, and any price swing can hit your stop loss. It is better to move your stops to break-even as soon as possible to diminish your risks. When this is done, you will get stopped out a lot at break-even, but it’s always better to have several trades in a row with zero profit, than the same number of losing trades. This is also why it is wise to look to play the break-even trade when you are 5 to 6 pips in profit. There is a good chance that the market will hit your stop loss and continue in your initial direction when you have 5 pips in profit. However, this will protect you in the long run and save you more than you could have lost. one minute easy forex ema strategy Yet, if you have a more significant risk aversion, having a traditional trailing profit stop and a fixed profit target as well as exiting at the next support and resistance levels, or at a fibo extension if you trade with fib numbers, are other tactics you could use too. forex one min scalp strategy This is a chart where all the three EMA’s are trending lower at 45-degree angles is a good example of choosing a currency pair during a strong trend. As mentioned before, this behavior of EMAs show the strength of the trend, and trading in the direction of such an established trend increases your chances for a profitable outcome. We should wait for the price to break above the 50 EMA in order to have a much profitable “sell” in this chart. Once price dips above the first EMA, we look for price to close back below the 50-period average in order to trigger a long position, which occurred several times in this chart. You can use any period moving average you like to manage your trades here too. You could and should adapt the period of the EMAs to fit your style of trading. How does this strategy work?We do this scalping strategy by merely waiting for the price to come up or go down as of the direction since it went below the 50 EMA. But many other traders, especially the novice ones, immediately short the market when they see the price closing below the 50 EMA as they don’t care about the general trend. They are the reason we wait for the price to return above the 50 EMA. We want to have trapped traders below us, to fuel our long positions. The stops of the traders shorting below the 50 EMA are above the 50 EMA. So, when the price returns above the moving average, our scalping trade gets an extra boost from the stop of trapped traders. So, what we do here is taking advantage of those novice traders who are shorting the market below 50 EMA. Things to keep in mind• Being impulsive is one of the most undesirable traits for forex scalping. One should always improve their self-discipline and self-control before entering the world of scalping. The line between scalping and gambling is fragile. It is common to see excited traders on a winning streak abandoning their own rules in pursuit of fast money and lose everything.• Scalping needs solid risk management. It is one of those trading methods that are often performed with a bad risk-reward ratio. The market provides many opportunities to enter high probability setups that can make high profits for a scalper. But this trading style could also wipe out profits of days and weeks with ease. So, it’s better not to risk more than 0.5% of your total balance. Remember, it’s not 5% but 0.5%.• Keep your lot sizes lower. Small lots help you to keep losses down until your trading improves and is consistently proﬁtable. The smaller the forex lot size you have, the lower the risk you will face. You could always increase your lot with the experience you gather. Scalping has been proven to be an extremely effective strategy where risks are low, but the profits are frequent. Yet, it is vital to understand that scalping is not easy work. Scalpers are rewarded according to their amount of efforts. To be successful in this strategy, it is important to be sure whether it matches your trading style and abilities.
The symmetrical triangle, which can also be referred to as a coil, usually forms during a trend as a continuation pattern. The pattern contains at least two lower highs and two higher lows. When these points are connected, the lines converge as they are extended and the symmetrical triangle takes shape. You could also think of it as a contracting wedge, wide at the beginning and narrowing over time.Trend: In order to qualify as a continuation pattern, an established trend (at least a few months old) should exist. The symmetrical triangle marks a consolidation period before continuing after the breakout.Four (4) Points: At least 2 points are required to form a trend line and 2 trend lines are required to form a symmetrical triangle. Therefore, a minimum of 4 points is required to begin considering a formation as a symmetrical triangle. The second high (2) should be lower than the first (1) and the upper line should slope down. The second low (2) should be higher than the first (1) and the lower line should slope up. Ideally, the pattern will form with 6 points (3 on each side) before a breakout occurs.Volume: As the symmetrical triangle extends and the trading range contracts, the volume should start to diminish. This refers to the quiet before the storm or the tightening consolidation before the breakout.Duration: The symmetrical triangle can extend for a few weeks or many months. If the pattern is less than 3 weeks, it is usually considered a pennant. Typically, the time duration is about 3 months.Breakout Timeframe: The ideal breakout point occurs 1/2 to 3/4 of the way through the pattern's development or time-span. The time-span of the pattern can be measured from the apex (convergence of upper and lower lines) back to the beginning of the lower trend line (base). A break before the 1/2 way point might be premature and a break too close to the apex may be insignificant. After all, as the apex approaches, a breakout must occur sometime.Breakout Direction: The future direction of the breakout can only be determined after the break has occurred. Sounds obvious enough, but attempting to guess the direction of the breakout can be dangerous. Even though a continuation pattern is supposed to break out in the direction of the long-term trend, this is not always the case.Breakout Confirmation: A break should be on a closing basis for it to be considered valid. Some traders apply a price (3% break) or time (sustained for 3 days) filter to confirm validity. The breakout should occur with an expansion in volume, especially on upside breakouts.Return to Apex: After the breakout (up or down), the apex can turn into future support or resistance. The price sometimes returns to the apex or a support/resistance level around the breakout before resuming in the direction of the breakout.Price Target: There are two methods to estimate the extent of the move after the breakout. First, the widest distance of the symmetrical triangle can be measured and applied to the breakout point. Second, a trend line can be drawn parallel to the pattern's trend line that slopes (up or down) in the direction of the break. The extension of this line will mark a potential breakout target.
Trading with MACD indicator is widely used by Forex traders.Let's take a glance at the very basis of currencies trading with MACD indicator. We will need only MACD indicator with standard settings: 12, 26, 9.Any time frame as well as any currency pair can be used. Entry rules: When the MACD lines’ crossover appears – enter (or wait for the price bar to close and then enter).Exit rules: when MACD lines next crossover occurs. Advantages: very simple approach and can give good profitable entries. Traders may want to change MACD default settings depending on the currency and chosen time frame. For example, traders may test next MACD set ups: USD/CHF MACD (04, 07, 16), EUR/USD MACD (02, 03, 20), GBP/USD MACD (02, 03, 04) for different time frames. Disadvantages: you will need to sit and monitor it again and again. MACD has little use in sideways trading market. It is also never used alone, but rather in combination with other indicators.