I am a swing trader primarily working on H4 charts, and I trade in the Forex market. Currently, I am trying to deepen my understanding of technical analysis, particularly how to distinguish major highs and lows from minor highs and lows.
I’ve heard that some traders use Fibonacci retracements or other criteria, but it’s still a bit unclear to me. Are there any objective methods to clearly identify this distinction? If you have any strategies or practical advice, I would greatly appreciate it.
Currency Pair Correlations and Timeframes
Additionally, I pay close attention to currency pair correlations to refine my analyses. I regularly check the updated correlations on the Myfxbook website.
However, I have a question: since I trade on the H4 timeframe, should I also consider the correlations specifically based on the H4 timeframe?
Thank you in advance for your insights and advice!
To make sure you identify the major highs you can let the chart run on - the longer the time period building a high or low, the more likely it is to be a major one.
A system along these lines from years ago - to identify a major swing high -
look for a series of consecutive bars or candlesticks with a higher high and higher low than the one before - at least three
the third bar with HH and HL is a putative major swing high: of course you only mark it as a confirmed major swing high if price then drops, and what you’re looking for then is for the next bar to have a lower high and lower low
the idea was to set a sell order at the low of the third HH and HL bar so that if price dropped, the swing high was confirmed and a short position was opened - if price continued to rise with another HH/HL bar, you would simply move the untriggered sell order to the low of the new bar
an underlying rule was you would only want to sell from a swing high if price was already in a downtrend
To distinguish major vs. minor highs/lows, use trend structure: major highs/lows define trend reversals, while minor highs/lows are smaller fluctuations within trends. Fibonacci retracements can help, focusing on key levels (e.g., 38.2%, 61.8%). For correlations, focus on broader trends rather than specific H4 correlations.
First of all, I sincerely apologize for the delay in responding. I really appreciate the time you took to provide such a detailed explanation.
Your method for identifying major swing highs and lows makes a lot of sense, especially the idea of using a sequence of three consecutive higher highs and higher lows (or the reverse for lows) as an initial criterion. The concept of waiting for confirmation before marking a swing point is something I’ll definitely incorporate into my analysis.
I also find your approach of setting a pending sell order at the low of the third HH/HL bar very interesting—it’s a smart way to ensure confirmation before entering a position. I’ll test this strategy in my backtesting to see how it aligns with my trading style.
Again, thank you for your insights, and I truly appreciate your help!
I apologize for the delay in responding, and I really appreciate your input! Your explanation makes a lot of sense—major highs and lows being tied to trend reversals, while minor ones represent fluctuations within the trend, is a clear way to structure my analysis.
I’ll also pay more attention to Fibonacci retracements at key levels like 38.2% and 61.8% to differentiate them more effectively. Regarding correlations, your point about focusing on broader trends rather than just H4 correlations is insightful. I’ll integrate this into my approach to avoid over-focusing on short-term fluctuations.