How to make technical analysis work for a begginer?

Beginner Questions
1

Hello,

First of all, I know this title/questions isn’t the best or anything, but it just doesn’t seem to work on my side. When I see in the past, the market, when I analyze it, TA seems to be just perfect, it respects all supports/resistances, it make beautiful candlestick patterns, chart patterns and everything, but when I try to apply it, it just doesn’t for me.
Please don’t get me wrong, I’m sure is not about TA, it’s about me/ my system/ my analysis.
So this question is maybe a little bit personal, but maybe other beginner traders are having this issue.
I’ll just post here one of my analysis, what I saw on the chart, everything and if you please, just tell me what I’m doing wrong. What am I missing?
Why most of the trades I take are losses? :frowning:

I may be a little bit frustrated, I admit. But I just cannot figure it out and I need help!

Some details before continuing: 500 EUR acc(demo). 1:25 leverage.

So here it is:

I analyzed AUD/CHF?
Why?
Trading with AUD pairs seems to me they are more predictable, and pip value is lower, so if I lose 20 pips my loss is not that big.

Here is my Chart on Daily:

// I’ve put here image, but being a begginer I can only post one image
My thoughts:

  1. In an uptrend, so looking to go long.
  2. In a retracement, and even more, a “falling wedge” one. So perfect moment to buy(my thought…)

Going down deeper(4H chart):
// I’ve put here image, but being a begginer I can only post one image
3. On MACD(12,26,9) just had a buy crossing signal

Going down even deeper(1H chart):

4Hrs_AudChf
4Hrs_AudChf1917×941 60.9 KB

4.It was above the superior limit of the falling wedge
5.it was consolidating
6. There were no news on calendar that could change the course of price against all other.

Conclusion: was expecting to go long.

But as you can see in the charts… surprise…

I’m quite disappointed and I don’t know what to do further.
I see technical analysis working for other traders, I see it working in the past, I know it’s working.

So…I am sure I’m doing something wrong but I don’t know what.
Could you please guide me and tell me what I’m doing wrong?

Thank you in advance!

PS: if this is not the place for this post, feel free to move it where it belong, but please keep it open.

2

One thing that’s obvious right away is that you are trading on daily charts, yet your SL and TP are incredibly tight in comparison to daily price action.

Your SL is 33 pips below entry: your TP is 56 pips above entry. Yet the ATR20 for this pair is currently about 78 pips. So over the last 20 days, the average range that price has moved within any single day is more than 2 times your SL distance. It shouldn’t be a surprise when your SL is hit.

There is nothing to show that this pair is not now in an uptrend. But nothing moves upwards in a straight line, you must allow that price in an uptrend will pull back and/or go sideways. Don’t overfocus on chart patterns like wedges etc. they are not very reliable. And all TA is less reliable the shorter time-frame you use.

4 Likes
3

Thank you for your answer!

Ok, but that wouldn’t be against the rule of not risking more than 1% of the account?
78 pips with a microlot is around 7 euro, more than 4.7(which is my 1%).

I was thinking that somehow, trading on higher timeframes means indeed wider stop-loss but also wider TP, in order to have a good risk/reward ratio.
And honestly… I was thinking that I’m trading on 4H.
My thinking was:

  1. What is the general trend? I looked on daily.
  2. What is the current market position now? retracing(on 4H). So it could continue UP.
  3. Entry moment - looked on 1H to see how is behaving above “falling wedge”.
    Considering this, my thoughts were that I’m trading 4H :frowning:

but I understood now, so, taking into account my low balance(even if I’m on demo, trying to keep it as it were in real conditions) what would be the best timeframes for me? Maybe Daily + 4H? And how should I look over it? :frowning: And is it ok maybe to risk more that 1% of the account?
2% per trade would mean almost 80(not 150, sorry) pips… and… well, this kind of moves are hard to catch… never caught one. :expressionless:

thank you in advance!

4

Full marks for taking the time to demo trade and learn the rules of the game.

I maintain the set-up for either taking a trade or not taking a trade came from the daily chart. The lower time-frames just give you a more favourable entry price with potentially lower risk and greater profit.

The falling wedge is a falling wedge but its only at the head of a minor upward move - hard to say that’s a bullish uptrend, it doesn’t break the prior swing high, price falling back as it reaches just below it. But the falling wedge is a weak bullish continuation pattern at the best of times. It looks like you did wait to get a candle with a close above the wedge’s upper boundary before entering, which is correct: however, you’ve got such a short time-frame that there was almost bound to be a bullish close that would give you an entry signal. Reducing time-frames is a good way to get whatever signal you want. I’d recommend trading off one time-frame until you have consistency.

As for risk, yes, 1 or 2% of account capital is the maximum that should be at risk per trade. Size your positions (and account) accordingly). If you put $10,000 into your account, the $10,000 is not at risk from this or that trade, let’s say just 1%, just $100: but the larger account allows you to risk just this small amount.

1 Like
5

Hi Lukuss. The chart indicates a shorting opportunity. As of the middle of May 14, Stochastics are pointing downward as is the MACD. On the 1H the trend also looks like a downtrend. Price is making lower highs and lower lows. Just before your entry, price was reacting to a resistance area (the previous swing high).

Not sure why you thought price would go higher. Is it because of the breakout of the channel that you’ve drawn? I recommend that you don’t utilize diagonal lines in your analysis. They are meaningless and serve no purpose other than to cause confusion.

I would trade on demo only until you become more consistent in your analysis.

1 Like
6

Hi mate, I understand it’s very easy for us to find fault in your analysis in hindsight so dont take it to heart. Just try to learn.

The daily had a recent lower high. Therefore it is not in an obvious uptrend. Could be reversing or entering a range. Either way we dont know so dont guess.

You have stochastic on the chart. And within that descending wedge everytime its overbought price sells off. But the 4th time its overbought you decide to buy… if you dont use it you should remove it off your chart. As that itself was a reason not to buy if you use indicators.

Also you bought because price rallied and stay above your upper wedge trendline so why is your stop loss so far away. Either you trust that trendline in which case when price goes back below you should close out or you dont trust it in which case you should remove it. Only keep on the chart what you use.

Then look for reasons to buy and if you get a mixed picture dont do anything. Just sit patiently for a time when everything makes sense.

1 Like
7

Remember, the smaller your position size, the more room your trade has between price and your SL. That’s all I wanted to add, you’re on the right track and you’ve gotten some top notch advice here.

1 Like
8

Thank you very much for taking time to analyze my trade and reply. It helps me a lot, and in fact here is a list with what I think I learned from your posts:

1.The fact that the last high was lower than the previous high should have been indicating me that the trend might not be continue or that ** it could be ranging.** This is an answer that I’ve been looking for for a while because I was afraid to trade even with the trend thinking that: what if the trend is actually reversing now?

  1. If setting the entry point based on something, then the SL/TP should also be set according to it. My mistake was that the entry was based on the falling wedge but the SL wasn’t just under the superior limit of the pattern, it was way lower.

  2. Consider indicators if decided to use it. Lately I’ve been reading/seeing lots of articles/video that were saying that the price is the main goal, and the indicators should only confirm it. My mistake was that I didn’t consider them for this trade(except for MACD on 4H).

  3. I should use the ATR. Not sure quite exact how to incorporate it…

  4. Have patience is things are unclear.

@QuadPip Indeed, for the 1H I didn’t consider the indicators, because on 4H the MACD had a buy crossing signal. And yes, I considered mostly the falling wedge pattern. Thanks for the tip.

@tradeforex077 Don’t worry, I’m not taking it to heart, I’m actually happy that you share your knowledge. I usually use indicators, mostly Stochastic but I somehow considered that “price is more important” and I neglected the indicators…

@MattyMoney I trade the smallest size my broker allows me to. and that is 1 microlot(0.01). I wish I were on the right track… I have 7-8 months on demo and I’m still not on the winning side… All accounts started with 500 euros and all finished under.

If it is ok with you all, next week I’ll try to take some trades(or at least one) and post it my result. I would glad to have your support from time to time here… I really want to become profitable. I’ve invested too much time on forex…

2 Likes
9

Good luck on your journey mate, ive just started learning myself, will be interesting to see your progress.

1 Like
10

@lukuss, give this system a shot.

11

Thanks. I have now on my charts 200 Ema, 100 Ema and 50 Ema, for long, medium and short-term trends. I’m planning to use this along with Stoch/MACD and resistance/support areas. The plan(if not to ambitious) is to take 50pips/day. I’ve scouted my favorite pairs but I have not seen a good opportunity so far, so I’m waiting.
I’ll use microlots and a R/R of 1-1, at least.

Let see how this week goes…

12

My first trade:
Pair: GBPUSD;
Time-frame: 1H;
Type: Short;

With purple: Daily support/resistance
With red: hourly support/resistance

GBPUSD - 18May2020
GBPUSD - 18May20201917×735 37.8 KB

Entry reasons:

1.down-trend
2.stochastic was in overbought
3.MACD was in a hidden bearish divergence considering the current and previous highs
4.on the next lower timeframe(30M) It was the first bearish candle and first decrease in momentum according to MACD. I guess it was a mistake… I was suppose to stay on one time-frame only.

Now… what I know I did wrong:

1.SL was right above the resistance I’ve drawn… It seems that price stopped right after my SL.
2.I didn’t wait for some confirmation on my trading time-frame.
3.even if it was overbought, there was no entry signal on stochastic.
4.macd had shown no signs of losing momentum or weakness.
5. forgot to use ATR

If you guys see some more mistakes, please feel free to post it below.

I had one more trade, I’ll post it later.

Edit: This trade was a losing one. Somewhere around -40 pips.

13

Hello your really putting yourself in a bad situation. Just looking at the pair from the 1H & 4H the pair started reversing up around the 1.21 mark. Nothing in those last few hours warrants a short position yet IMO. Yes the pair will eventually retrace back down but not yet you have to ride the momentum. The bullish pressure continued to increase you put a SHORT on the wrong area. You should actually wait for the move to start materializing before you actually open a position. For example that large bearish candle would’ve gave me pause to see if the pair was ready to start reversing. After the next candle in my head the pair is either exhausting running up and it’s taking a pause and might move sideways for a bit or it’s possible it maybe gearing up for a potential reversal but I still would’ve waited for a more concrete view before proceeding. Also -40 pips on GBP/USD is WAY TOO TIGHT. This pair can easily move 40-90 pips in 1 hour. If your looking at daily charts you need to widen your areas it’s way too short unless you’re trying to be a scalper.

14

I analyzed AUD/CHF?
Why?
Trading with AUD pairs seems to me they are more predictable, and pip value is lower, so if I lose 20 pips my loss is not that big. to be honest this your main mistake limiting your opportunity. ive not been trading that long but i would nt trade that chart. there so many other pairs to view and the futures

15

Trading AUD is the same that trading any other cross currency, except country risk factor. Aussie is commodity dollar so its very sensitive to swings in commodity prices as well as demand on raw materials from China. I prefer to avoid trading AUD during late phases of the economic cycle. But now I think it’s excellent pair to trade because commodities are on the rise.

16

@momoisnyc, Dissapointed that you seeing it as “putting myself in a bad situation”, but anyway…gave up trading pound for now.

@greenscorpio Actually, I tend to disagree partially here.
You are right probably when talking about people like you, or other experienced traders. But personally, watching too many pairs at a time it’s exhausting and there is a higher probability of doing mistakes(at least on my side).

@ontario, agree with you on that.

Anyway, for now, I have decided to stay on 2 instruments only and lowered the target to 10 pips a day.

17

im not that experienced, though i would say one of the most vital things for becoming successful is going through the charts at the beginning week and accessing the charts at the different time frames.i would nt recommend “day traders” having more than two trades open at a time anyhow, but that just my opinion

18

yes, just learned the 2 trades at a time rule today. My broker closed the third one automatically because of margin lack(I think).

Anyway, 2 trades today: one winning one losing.
At least they are not both losing ones… still a progress :smiley:

19

Hi! So did you make an overall profit or loss?I hope profit!

20

Loss.

So I had initially 2 trades, then the price went lower and I find it as a good opportunity to re-enter long.
At this point I had 3 trades long. Then the price fell even lower, and the broker closed automatically one of my trades at minus ~1.5% of the account.
The second trade I closed in with profit of around 1.2% and the third one at one point it was at 2% profit, but didn’t close it nor secure it(moving stop-loss at least at BE). Fatal mistake of course, because then it fell and I’ve lost another 1.5%.

So right now, my (demo) account just suffered a negative resize of about 1.8%.