I utilized the FXCM “StrongWeak” app for quite some time, but ended up abandoning it.
It was a great tool which would aggregate all ticks (positive and negative) for a single currency, and chart it against 4 different timeframes. In essence, you can visually see in a matter of seconds what single currency was the strongest/weakest in the last 15 minutes, 1 hour, 4 hour, and 24 hours.
Problem was - Using 1h, 4h 24h analysis simply provided late entries. By the time I realized the JPY had lost 600 pts against all other majors, the move was near over and ready to turn back.
I learned that relying on any external factor, and even internal ones such as indicators/candelstick signals provides later entries and higher risk setups. They obviously work - there is no denying that, but, I feel that getting in @ levels is a more logical approach.
Keep posting though, I’d love to see you have some success- maybe I’d need to revisit using the app as a secondary tool (not primary).
Just to be clear correlation is integral but it only accounts for about 30% of my analysis.
When undertaking the analysis that I described on GBPJPY USDJPY (a trade I admittedly did not take as I considered it too risky) I was never in danger of missing the entry.
You don’t need to revisit that app you were talking about as it is very easy to read correlation with your eyes. Like I said in my reply to vijaim, I was able to see a strong move upwards on my 4hr chart for JPY weakness across my pairs.
Then I saw it retrace in motions of two on my 1hr. It did this on both GBPJPY and USDJPY. Unfortunately the motions downward ended up retracing nearly 100% of the original move upwards. Meaning very logically that the people who pushed GBPJPY downwards had approximately the same selling power as those pushed it upwards originally.
You seem like a highly intelligent person FOREXunlimited so I really hope you carry on following my posts.
Cheers and thanks for your correspondence. The more questions asked the better I can explain.
I see significant CAD weakness across my pairs and I am particularly interested in USDCAD and GBPCAD.
I see both of these pairs have moved upwards on my 4hr with GBPCAD breaking its recent high.
I am looking for a retracement in 2/3 swing motions on my 1hr timeframe. Down to the circle drawn on the chart.
Yes, i too see USD and GBP are getting stronger across pairs. Hope we get some trades soon…
In your next post,Could you pls explain how you draw the zones?.. thanks
The areas I look for the retracement to die are areas that are known as supply and demand or support and resistance.
If you have ever heard of supply and demand trading you will be up to scratch with why I am drawing these areas, but if your unfamiliar I suggest you do a little bit of reading around the subject. I think babypips have some content on supply and demand zones.
Lots of people claim to be successful with supply and demand trading. But the flaws in their strategy are visible on two main accounts.
Number1- They simply do not know whether their supply demand zone is going to hold. Sometimes it holds sometimes price crashes straight through it. (people will add bits and pieces like trading their zone only if there is news, exhaustion candles, etc etc etc.
People usually jump from idea to idea until they realise the new idea does not work. Forever trapped in a linear thought pattern until they simply give up and move on from this style of trading.
I was a victim to this myself. The scariest part is that even highly intelligent people get caught in this trap.
Number2- They do not know what their targets are and when to close their trades.
This means they have no idea of their RISK REWARD RATIO, the most important aspect of trading that a lot of people tend to neglect.
They simply make it up as they go along trailing their stops closing half their position and unbelievably adding to their position!
The way I analyse the charts involves these very areas that people trade but the difference being I have a much stronger chance of picking the ones that actually work.
Getting back onto topic after that rant :8:
A key factor why we want a retracement that comes down somewhere half way is so we have space to trade back up/or down to our recent highs/lows as our primary target.
If we retraced only a tiny bit, apart from our swing motions being more than likely more difficult to read, our risk/reward ratio would also suffer, as we have less space to target our recent highs.
Conversely, we should be cautious if our retracement comes down much past our midway point as happened on GBPJPY USDJPY where it retraced nearly 100%.
Nevertheless, as evidenced by the move north this can still be traded just riskier.
This is an element of the trading style I am still learning myself.
Sorry if this post is a bit lengthy I just love explaining this stuff. Oh and remember vijaim, we are primarily focused on CAD weakness across our pairs, not so much USD and GBP strength.
These two concepts sound similar, but are very different in application.
-S/R are horizontal lines on a chart based off areas where price reacts a number of times
-S/R is a single figure approach – i.e. “support is @ 1.6650”
-S/R theory maintains the more times a level is tested, the more reliable it is
-S/D are zones on a chart based off areas where the greatest imbalance between buyers/sellers exist
-S/D is a “zoned” approach – i.e. “demand is b/w 1.6650 – 1.6675”
-S/D theory maintains the more times a level is tested, the less reliable it is
No one knows for a fact whether or not any level will hold. That’s why trading is considered a skill of probabilities. Traders take positions based on analysis based on mathematics that “my level will hold more times than it will not” – thus , “I can be profitable”.
Never heard anything about “news / exhaustion candles” – please elaborate?
S/D zone trading is quite simple – the zone needs to be valid, and “Fresh” – you can base whether or not a trade will potentially work out by eliminating non-fresh zones.
Can’t argue that!!
Agreed for the most part – but I’d say your effective leverage is much more important. FXCM has even studied this and can actually quantify the notion with hard data. The bottom line, is that traders who leverage themselves out over 10:1, with small account balances, usually end up simply becoming a statistic (I’m paraphrasing – here’s the study: FXCM Study)
How so? Based on retracements into a level and potentially correlated weakness/strength for a single currency?
Very profitable strategy – taking a pull back, and targeting the recent high/low.
I’m still just a bit confused as to how you factor in event risk. I know you like to use correlations, but, it still doesn’t seem like you have an objective rule as to when they should be considered and when they shouldn’t.
Here’s another example:
Let’s say you found a long setup on GBPCAD (you’re anticipating a strong GBP and weak CAD).
It’s NFP Friday.
The figure is released (it’s severly negative for the USD), and a few hours afterward the USDCAD is down 150 points.
Looking across instruments as you claim, you’d see that the CAD vs. the USD has actually gain immense strength - but, what really drove the pair down? The GBPCAD really isn’t exposed to USD event risk so the pair would most likely not have such a violent move.
Wow FOREXunlimited I really appreciate your interest. I will go through each point one at a time whilst trying not to run the risk of making this response too long.
Completely agree with you on your explanation of supply and demand zones. I know that support and resistance are defined areas and supply and demand are seen as zones like you have explained.
I just wanted to quickly tell vijaim, and anyone else interested in this thread to go and read up on these areas in detail to know what I am referencing when I draw my zones. (I know I did not explain my self as competently as I should have lol)
I agree with your take on trading being a skill of probabilities based analysis. You mention the likelihood of areas working if you eliminate non fresh zones.
Now I also look for fresh amounts of capital being pumped into the market when I trade. And I agree with you that there is always a risk, as nobody knows for sure whether the area we see as originating the move will hold.
But have you FOREXunlimited or anyone else reading this ever seen what appears not such a fresh area actually turn the market round and blast it in an unexpected way?
Making you think 'hey this area was not supposed to do that as it had been tested lots of times and my buyers/sellers were not out of sync, what the hell just happened?
Only to explain it away with something like ‘oh well must have been the news or something I will just ignore that.’ 'Or maybe I will start factoring in the news on china or something else I saw that could have increased my odds of catching this next time. Or maybe that exhaustion candle was a contributing factor etc. etc. etc. This was all I was getting at on the point you wanted me to elaborate on.
Well, if you have you will see the beauty of my trading analysis is that it allows me to sometimes catch these areas. Based not just on how the area looks and how many times its been tested, but based on the strength that buyers or sellers approached this area, and how strong the currency originally pushed from this area across the board.
Therein increasing my probabilities like you say you look to do yourself.
Completely agree with you on the leverage, personally I will never trade more than 4% of my account balance on a particular trade.
My correlation is relevant based on one factor only.
How much selling or buying has taken place on my currency across the board for my given timeframe. I never factor in event risk. This sounds blasé and like I don’t seem to care, but trust me I used to factor in event risk all day everyday.
Making a bit of money here or there, sometimes going on long winning runs only to give all my money back to the market.
Now your final scenario on the NFP. First of all let me say that I had exactly the same type of questions as yourself when my mentor taught me what I am teaching here.
The key thing you mention here that I believe is central to the barrier that I am trying to overcome in explaining my analysis is this. ‘what really drove the pair down’.
What I believe really drives price hundreds of pips are, banks, institutions, corporations, and extraordinarily wealthy people who know exactly what they are doing.
Not people in the retail world buying off news releases. Don’t get me wrong this shifts price noticeably but not to the same extent that we are currently witnessing on our CAD pairs that is being sold by people with extraordinarily large amounts of capital this week.
Its the areas in the market were the average trader does not trade, that the people with the most capital will slam price.
Logically they don’t want to share their profits with the retail world so they will take out everyone’s stops and slam the market. If anyone reading this has heard of stop hunting this is also a topic I factor into my analysis which I will explain as trades unfold.
Now whoever you are reading this (not referring to yourself specifically FOREXunlimited lol) can come back at me with what I am not denying are solid well researched scholarly studies about event risk trading and how important it is and we could argue the point all day. I don’t think this is wrong to do, I actually think your viewpoint is 100% rational.
Now my viewpoint on risk trading and the news is hopefully clear. With the utmost respect, I will not be answering any more
questions on the NFP or any other news announcements. If anyone is reading this and you do have a long term successful strategy trading the news, congratulations and all the best, it is just not compatible with my style of trading.
If anyone thinks I am being arrogant and you don’t like my viewpoint fair enough I cant say I blame your conclusion!
Its just difficult to get this point across without sounding like some kind of guru I am really not. I am not even long term profitable with my trading style.
So all I can say is this, follow my trades if you like, and you will see my successful trades will always be placed before the market slams. I will also have losing trades were I will completely fail to read the market and I will look stupid.
But judge me on my long term performance and I hope I will impress.
Once again thank you FOREXunlimited for your time and the questions, which have allowed me to explain in a way that I would not have managed otherwise.
Right then guys I see USD strength across my 4hr charts. I am particularly interested in getting a pull back on USDCHF and USDJPY . As updated yesterday I am still looking for a pullback on GBPCAD, and USDCAD due to CAD Weakness.
I am now also interested in a pullback on GBPCHF. This is due to the GBP strength I see across my 4hr charts.
So to summarise I am looking for a nice retracement so I can buy USDCHF, USDJPY, USDCAD GBPCAD, and GBPCHF.
Lots of potential trades setting up here guys, but remember they are only potential. I will scrap all of these trades if they either do not retrace or I consider my retracements too strong.
Here are my screen shots for USDCHF, USDJPY, and GBPCHF.
EURUSD H4 - Yesterday,the price had dropped impulse & created a new low(due to USD strength). Today, the price had retraced and headed down again. Could you pls look the retracement of EURUSD H1 and tell me whether this retracement qualify your criteria
Nice observation vijaim I see were on the same wavelength.
But the only way I am able to catch these retracements is when I can visibly see they are swinging.
So when we had our strong move down on EURUSD on our 4hr timeframe we wanted our buyers to kick in on
our 1hr time frame. As you can see our buyers were so weak on our 1hr they hardly retraced. Hence the way our sellers
slammed away from this area for motion two of the 4hr timeframe.
This was due to whoever was responsible for the initial push downwards waiting to get a better price on whoever was buying the retrace upwards (people who don’t understand this concept and just got stopped out. But for us to have taken the sell it would have been far too risky on two main accounts.
Number 1- We were not to know that the small initial retracement the buyers made (that turned out to be all they had to offer) was not the beginning of a stronger push upwards. Had we seen the buyers swing upwards before turning around in a v formation, or by forming a big exhaustion candle we would have a better idea they were failing. I would feel a lot more confident that they were finished. And I would consider selling motion two of the higher time frame downwards.
Number 2- I don’t trade solely off pattern analysis. Firstly I identify what the strongest pair is for the given time frame I want to trade. (by strongest I mean a pair that has had a lot of buying or selling pressure) When we made that push downwards on EURUSD, take a look at what are other EURO pairs were doing at exactly the same time. Not much right?
There was not enough selling on euro across my other pairs on my 4hr to get interested in selling it again on a retracement.
Therein, this trade did NOT meet my criteria status from either a pattern analysis or a correlation viewpoint.
My way of trading is simply about stacking as many variables as I can make sense of and using them to my advantage. I don’t know if my buyers or sellers will be finished on the retracement every time.
There will be trades were I get stopped out and lose. But I would like to think that long term and hopefully short lol, I can prove to you this style of trading can be profitable.
‘when you say EURUSD is not the stongest pair of given timeframe - is that because EUR is not weak enough?(based of our above analysis)’
Exactly vijaim Euro was not weak enough across the board at the exact time we moved down on EURUSD.
Sorry my description was badly worded I will edit the post from ‘from strongest pair’. Sorry for your confusion lol and
I am pleased that your following me on this.
hi forexsubscriber, very interested in your explanations so far, I also believe that the banks and large institutions run the show and fundamentals are not worth getting into. also thanks to vijaim and his constructive questioning and points of interest on the charts, I ( even as a newbie) am starting to get your concept. just waiting for your first setup to put what your teaching into practice. thanks for all your efforts so far
sorry meant to ask, are you concentrating all your teaching on this thread alone or will you be updating the (please judge me by my actions and results) thread for the higher time frame trade predictions
