1. Trend
How do you pick the TREND of the Day or more important the TREND of the Market Session that you are trading in?
When you start your trading for the day, the first question you have to you ask yourself is: Which way am
I trading today? In other words: Am I buying or selling? Is the market going to go up or down?
If you don't know that answer within the first 2 minutes of looking at your charts, then you are guessing
and that means you will probably trade wrong and you will probably loose.
You need to understand that there are 4 trading sessions in each 24 hour day (Sydney, Tokyo, London, and New York).
Each session has its own characteristics in direct relationship with Daily Range, Areas of Support and Resistance also known
as (Swing Highs and Swing Lows) and actual Price Action Movement.
In order to properly determine the trend you have to look at multiple time frames at least (3) i.e. 5min chart, 15min, 1hr chart.
This will help you to see a longer term trend and a shorter term trend so that you can understand how to trade with and against,
meaning you will learn how to trade Counter Trend Trade as well as With the Trend Trade. This is very important because the market
does not move strait up or strait down.
You need a MENTOR that will teach you how to determine the TREND.
2. OSCILLATORS
To help you trade with the trend of the session you need to understand price action and how to use OSCILLATORS,
as they help to smooth out the trend.
Oscillators are momentum indicators that help us to see when the market is moving from an overbought or oversold position.
In other words they help us to see when the market has moved in one direction long enough to merit a retrace or pullback.
There are two types: Those that show Momentum and those that show Price Exhaustion.
Momentum Oscillators are typically some sort of Moving Average. There are: Simple, Exponential, Smoothed, and Linear Weighted to name a few.
These are supposed to filter out the "noise of the market" and help you to determine a more smoothed out trend movement.
Price Exhaustion Oscillators are available by the dozens like: Stochastics, Relative Strength Index,
Average True Range, Ichimoku Kinko Hyo, MACD and many, many others.
The problem with Oscillators is that they are all LAGGING, meaning that they follow price action as the market
moves up and down the Oscillator will follow the price up and down. They do not predict, they cannot predict,
they will never predict with accuracy the way price is going to move. In other words, there is no such thing as
a "leading Indicator".
They simply show us that a trend has been established and thus help us to pick the direction that we
should be looking to trade in accordance with Price Action.
As such you should never use more than 1 Momentum Oscillator and 1 Price Exhaustion Oscillator.
If you use multiple Oscillators you will always be behind the trade, meaning that the move up or down
will be over before you can react and enter trying to follow the trend. Multiple Oscillators create what
is known as "Analysis Paralysis".
Your MENTOR should show you which OSCILLATORS
to choose and how to use them properly.
3. FIBONACCI's
The thought is that a trader will be able to identify a strategic or specific point in a market
price pull back and in effect target price positions for stop losses or take profits.
While it is true that the above can and does happen, the truth of the matter is that NO one can tell
exactly which Fib Level (price point) will be the one that turns the market. When you look at them they all
look good. So what traders have done in an effort to find the magic fib level that will turn the market is to
employ other strategies to help them pin point the exact Fib (price point) that will be there target.
These strategies include: Looking in the past at previous price points of Support and Resistance.
They use Trend Lines that overlap on a Fib Level. They will look for overlapping Fib Levels. They will
look for Moving Averages and other Lagging Indicators to help them see which Fib Level is going to turn the market.
While there may be some success with using these techniques the reality is NO ONE KNOWS WHICH FIB LEVEL WILL TURN THE MARKET!
So why use them? The reason is simple. EVERYONE ELSE DOES. Banks, Institutional Traders, Big Corporations,
even Governments. In other words all the BIG PLAYERS use Fibonacci's.
The key to using them is not so much to identify reversal points or take profit points or stop loss points.
The reason to use Fibonacci's is to be able to see which price point (Fib Level) the markets will stall at.
Your MENTOR must teach you what the significance of stalling
at a FIBONACCI really means. Once you understand that, you can really learn to profit from FIBONACCI's.
4. SUPPORT & RESISTANCE
The last element for being able to trade profitably is being able to look in the past at previous SUPPORT &
RESISTANCE price points in the market. The typical method is to use a horizontal line to look at previous Swing
Highs or Swing Lows anywhere from yesterday to several years in the past.
A Swing High is defined as a 5 candle pattern with 1 candle higher and 2 candles lower on each side of the
highest candle (wicks are included in the high calculation). This is the true definition of Resistance.
A Swing Low is just the opposite. It would be: A 5 candle pattern with 1 Candle lower with 2 candles higher
on each side of the lowest candle (wicks are included in the low calculation). This is true Support.
These Swing High/Lows show us Probable Stall points; Possible Reversal points; but they will Always be at some Fibonacci level.
The information we are given is not so much that it is telling us to trade to previous Swing Highs/Low or even from them,
but that we can use the other 3 parts of trading to help us pick a proper direction to trade in.
If you would like help on these key principles please CLICK HERE
to speak with a proven forex MENTOR AND TRADER!