Hi RD,
I just wanted you to let you know I do not usually post here, but I am following this thread closely and it is very helpful.
You are not getting much feedback cause you haven’t written a tidy PDF like others, so people just see all your posts and do not feel like they want to start putting it all together like a puzzle. But for me it’s great also like that, and I guess also for people who take their time to read.
Maybe if you will post here when you enter trades and make it a live trade chat room people will get more interested.
Just keep the great work
Looking through your charts they all look pretty much spot on. Nice one. That will make your trading much easier.
That looks like the indicator that you need. It would be worth googling “pivot point calculator” and entering last months OHLC and see if it gives you the correct levels as some of those indicators don’t work as well as others.
Now you’ve got a chart full of lines the basic rule of thumb is this… Not all traders watch pivot points so the order of precedence for s/r is this… Strongest is the horizontal levels, they will be respected more often than the others. Then comes trend or channel lines. Then Fibonacci and only then pivot points. Pivot points will be respected or at least stall price movement only half the time so keep them in mind but don’t let them put you off a trade if everything else lines up.
UsdJpy has been a little messy recently, it wasn’t a smooth move up to the 94/95 area. It certainly seems to be holding below monthly S1 though. What concerns me is that the move down today (at this point in time)(nb I’m only looking at the chart now to answer your question and I have no trades open… ref to above post!) is quite large, a lot of the move is already done and there’s not far to go to S2 and the 92 level.
When this kind of thing happens it pays to consider what is going on with other pairs. Eurjpy is in a similar position to Usdjpy but take a look at GbpJpy. It has had a similar move down today but it has further to go before it meets any support and the Gbp seems to be weakening against all other currencies at the moment. There could be a quick 200 or 300 pip trade there but if you consider it don’t use too big a stop loss because although I think Gbpjpy will drop tomorrow there’s not much resistance above to put your stop behind. One idea is to watch the h4 chart for your entry. As we speak the current 4h candle has broken through S1, wait to see if price retests S1 from below and put a sell stop a few pips below the bottom of the current candle. If it retests S1 and then continues down it should do so with some pace and carry you down to around 151. Maybe use a 50 pip trailing stop on the trade?
Another thing to consider when you are trading the yen is the price of oil. The yen is very sensitive to oil prices as it has to import all of its oil. Oil is currently trending up at the moment which will explain the yen weakening over the last few days but I think it could be about to consolidate for a few days to a week which would allow the yen to strengthen a little all things being equal.
Overall I think I would prefer to watch from the sidelines and wait for a clearer set up with further to run, I know it can be frustrating waiting for that perfect trade but it pays big in the end.
Bear in mind that whatever i post here is just ideas, I am completely fallible too! You must make up your own mind about what and when to trade. I am pleased to be able to offer you my thoughts though.
No worries, I think maybe as I am new to the forum people are not as willing to take my advice. Time will tell.
I wrote the intro in seperate posts on purpose as I wanted to get over more of the philosophy of what I do rather than just giving people a trade set up and leaving them to it.
I intend to post trades a day after the event, I don’t want this to become a forex signals thread, I want everyone to think for themselves.
I’m glad some people are finding this useful anyway, thanks for reading and speak soon. RD.
Good to learn that. Can you please share the with us your source of information for the oil price? I mean, where do you go when you are checking the stats of the oil price?
I use a demo account with a broker who offers crude oil. Demo accounts are not always the exact same price as the live feed but all I need is the general idea. Another way is to google “live oil prices” or “charts” and use an online provider.
Another good currency commodity is Aud. It is somewhat sensitive to gold prices. Gold is seen as a safe place to put money in times of financial uncertainty. Australia being a producer of gold means the aud will rise in line.
If you haven’t already I recommend you to get a good book on fundamentals. I can’t recommend any book in particular but google will be able to help. I am basically a technical trader but I do take the fundamentals into consideration. If for instance oil is trending up sharply you can expect the yen to weaken and the cad to strengthen so if you have technical analysis pointing you in the other way it might just keep you out of a bad trade.
The main driver behind the longer term forex trends is interest rates. A pair that has a high interest rate differential will tend to trend in favour of the currency with the higher interest rate as investors, hedge funds and the like, buy and hold the higher currency to collect the interest swap.
An example at the moment is gbpaud. Selling gbp against the aud (in effect buying aud) yields you a small but significant return. It’s no coincidence that the gbp is relatively low against aud at the moment.
RD, I love your detailed answers, thanks for that!
I have read in the “babypips college” about the effect of oil on the CAD and the effect of gold on the AUD as well, but till now I didn’t pay such deep attention to it. I will use google to find a live oil price stats as you have suggested and use it when I trade the CAD and JPY (rising in oil price is good for the CAD and bad for the JPY as I understand, hope I got it right).
I will also search for a gold price stats provider. I am now starting to look deeper into all this fundamentals analysis cause today I got a really bad GBP\JPY trade…and I think it is also because I didn’t pay attention for the fact that the Japanese banks were closed today. So I guess only technical analysis is not good alone.
I will also google to find books about all this subject.
By the way, I have another question that is referring to a completely different subject - what is “psychologically price levels”?
I saw that combination of words a couple of times, but I can’t find a clear explanation on google.
But looking at the GBPUSD chart alone there is no trading opportunity, right? Speaking about GBPUSD do you consider the trend to be bullish or bearish?
You have that right. Canada produces a lot of oil, Japan produces none.
Fundamentals can be useful but I don’t get too hung up with them. I don’t think the banks being closed would have had too much effect. Gbpjpy bounced really nicely from the 156 level and monthly S1 seems to be holding it down now. With the price of oil consolidating a little the yen has a chance to catch its breath now. In fact, looking at the chart this morning it is dropping more. I don’t know if you read the analysis I gave to Erdah but I felt pretty good about a short on Gbpjpy but it’s not the clearest of price action and I chose to leave it this time. In hindsight I probably should’ve taken the trade! This won’t happen all the time, I’m wrong plenty of times too!
I did take a trade last night which I’ll post the details of tonight when I check the charts.
Pyschological price levels are in a sense the same as support and resistance. Pyschology is part of why support and resistance occurs. It’s useful to know what drives the market to understand s/r and psych levels. The price is driven by order flow. Buyers buy and sellers sell and if there are more of one than the other the price moves in the respective direction.
A pysch level is when the majority of traders feel that it is good value to buy or sell at that level and that pyschologically they feel it won’t go any higher. The best time to use that expression as opposed to just calling it s/r is when prices are at historic highs/lows. If a currency pair is at an extreme level or at a level that it has not traded at for a long time it will often find s/r repeatedly at the same level or at the historic level. Take a look at Gbpusd at the 1.40 level. It touched in 1993, 2000-2003 and the start of this year. Price didn’t respect 1.4 exactly this year but it held above it pretty well. That’s probably because buyers and sellers saw the historic price action and sellers took profits at that level just as buyers saw value and stepped in pushing it higher.
Another good example is the 1.30 level on Usdcad recently, it couldn’t break above 1.30. That has acted as very significant s/r in the past so it represents a pyschological barrier to traders. Buyers will take profits at that level and sellers will see value.
Gbpusd has met resistance again just above 1.65. I don’t see it as an obvious trade though.
The trend is up at the moment but it and the other xxxusd pairs have been consolidating for the last few weeks. I’d be happy to take a long at or near to 1.6 if it gave me clear price action, especially as the trendline on my chart will be at the same point.
Sorry, I meant GBPJPY. You mentioned GBPJPY as a possible trade in post #22. But I couldn’t see any valid candlestick reversal pattern in that chart. That’s why I asked.
I’m glad you think so! I have to say, before I started the thread I didn’t read through all of the threads on the forum, to be honest perhaps I should’ve done. I noticed that Phil838 has a very similar chart analysis method.
[B]Phil838, if you are reading this (and I’ll probably email you this too) I want to point out that I am new to this forum and have never really posted on any other forums either. I reached the point in my trading that it would be nice to share what I have learnt. Please don’t think that I am trying to tread on anyones toes here, I know our methods are very similar with a few slight twists. This is not a bad thing, it shows that we have both been shown the light by other experienced traders as to support and resistance and price action.
I hope that we can work together to achieve what I believe to be our shared goal, to pass on knowledge of how to use s/r and PA on higher time frames to achieve steady, consistent trading profits. Like I said, I don’t want to tread on anyones toes and make it an either/or choice between our threads or methods. I’m happy to say here and now that I agree 100% with your PDF on your first page and although our styles differ slightly I still believe we are working towards the same thing.
Ok, you asked about Usdjpy and I said that I thought Gbpjpy was a better trade as gbpusd was looking like falling AND the yen pairs look bearish.
I will post an explanation of trading relative charts tomorrow.
I’ve attached a chart of Gbpjpy and of Chfjpy. Chfjpy was the trade i took last night.
It’s true to say that the price action on the gbpjpy chart isn’t fantastic which is why I’m staying out but it looks better than usdjpy, there’s further room for it move.
After some consideration I took chfjpy. The price action here wasn’t 100% either but it was pretty close, you’ve got the trendline coming down which is the third touch, the hold below 88, fibonacci at 75%. On the whole it looks a pretty good trade. I didn’t get the best entry as I had to get an early night and so entered a little early. It’s currently about 20 pips down but the 88 level showed signs of holding it too so I’m fairly easy with this trade.
The other reason I took chfjpy is because it has plenty of room to fall, we could easily see 4 to 600 pips here and usdchf looked like bouncing from it’s monthly S1 which should have taken chfjpy down more in relation to the other yen pairs.
I am happy to hold this trade open to see what happens. At the end of the day it’s just one trade, some win and some lose.
Regarding your other question, I believe that Gbpjpy is in a trend reversal at the moment, it was trending up on the daily but looks like it’s going to start trending down. Of course I could be entirely wrong!
RD, IMO their is nothing wrong with your method to be similar to Phil’s. For me, it is a good sign that also your method, Phil’s method and NickB’s method are quite similar. There are little changes but the concept and tools are the same. If the three of you really developed that method by your own and it was successful foe each one of you individually, that is a great sign. I think all of us in this forum have the same target - making pips! Helping each other and sharing personal knowledge can have only a positive effect on all of us…team work!
Don’t worry about stepping on my toes!! It wouldn’t bother me if 50 people starting teaching methods similar to mine…
The truth is that none of us really “invented” our trading methods. The tools we’re using have been around for decades (centuries for candleticks!), we’re each just combining them in different ways. And like Ben said, the fact that we developed nearly identical trading styles independently just helps to show that the methods work!!
Glad to hear that you’re not put out by a “newb” coming in and muscling in on your method
I agree completely, I learnt what I know by reading every, and I really mean every, book on trading that I could get my hands on, lots of forums, systems I paid for, systems I found online and any other source of information that could help me be successful trading forex or anything else and I put all of that together into something that works for me. I’m sure you did the same. Hopefully together we can help out a few newbies to trading from blowing their accounts and getting fed up with the whole damn thing.
I think we can agree that major s/r lines/zones and good clear candlestick patterns near them on 4h or above charts give you the highest probability trades? The details around that are neither here nor there.
Looking forward to working together towards the same goal RD
This is nothing to do with Einstein! I can’t remember offhand the actual term for this bit of theory but it’s good to know.
Any pair can be analysed a number of ways but one way often overlooked is the “relativity” between the pairs.
I’ll do best to give an example… I took the chf/jpy trade the other night for a few different reasons but part of it was that usd/chf looked like making a bounce upwards and usd/jpy looked like dropping making chf/jpy a really good move.
Think about it, chf/jpy is a direct calculation of usd/chf and usd/jpy…
usdchf up = usd up AND chf down
usdjpy down = usd down AND jpy up
Put the two together and you get chfjpy down.
This isn’t foolproof as it depends on the relative move between the two pairs but if they both go the way you expect the cross between the two will go your way.
So, if you have two majors giving you likely but unclear and therefore untradeable signals, check the cross, it may just give you a nice trade.
RD, yesterday after reading your post, I thought about going short.
The thing that stopped me is the very nice PinBar which touched the 5.00 Fibonacci level (second candle from the right in the pic).
If it was an uptrend I would take long, but in this case, long is against the trend, so I have just left it until there will be a good sign for going short.
If there will be a bearish pinbar with a nose that reaches the 61.8 fibonacci level I will probably go short.
I think there is maybe too much noise occuring now to take a trade from it. When I took the trade the chart did look okay and with the other factors I was considering I went ahead. Obviously this trade hasn’t worked out as well as I would have liked but that’s trading.
This represents a good example of why a large stop loss is sometimes better. I am still in this trade even after todays big spike up as I put my stop loss at 150 pips, comfortably above the trendline and the point which the other 2 candles a few days ago reached.
This certainly means that each losing trade will be slightly bigger but it can work in your favour. If chf/jpy breaks back below 88 and carries on in my direction I’ll be glad I used that size stop loss.
A good rule of thumb is to put the stop loss behing the s/r you are trading from and at an area where you really don’t expect price to go. By the time your stop loss is hit it should be obvious that your trade is definitely not going to work out.
Whether this trade will go my way or not isn’t too much of a concern for me, trading is just a numbers game, my winners outweigh my losers and therefore I make money.
Of course, I would’ve prefered my first trade on the thread to be a nice comfortable winner
The price is getting hard time breaking the 61.8 Fib level. This is the third high that touches it and go down instantly. Also the 15th candle from the right has it’s high touching that level and trends down instantly. I will say that it is a good scalp line. The bulls really need some extra power to break it.
I hope to see the current candle ending as a bearish pin bar, and after it will break the 5.000 Fib level dramatically, I will consider going short.
BTW, You have a good point there with the USD\CHF\JPY pairs
