Tomorrow, or in the next couple of days, I’ll try to roughly outline how I analyze markets and how I pick my trades. My way of trading is discretionary, so it’s not going to be a do A, then B, then C sort of thing. More an attempt to make a rough outline of my method.
As for the project I’ve got going it’s a bit frustrating as i can’t properly back test it for lack of the data I’d need. All I can do really then is theorize and then forward test as I get the opportunity.
Hey Matt, and thanks.
Seems like everyone like beer but me. But then again I’m a dentist, so all can’t be right between my ears… 
I’m completely with you on that! And the stains are nothing that can’t be polished/bleached off again. (Unless you’re a professional wine taster maybe - I saw one on TV and his teeth were among the darkest I’ve ever seen…)
A nice wine is a real pleasure, not to mention a good whisky!
Glad to see you stick around MacGyver, and continue to contribute. 
I promised that I’d try to give an overview of how I analyze the market nowadays. I’ve been through many stages as is evident for anyone bored enough to read through this entire thread.
There’s a long list of books, threads and people I’ve been influenced by and no doubt that list will keep growing. But I do doubt that future influences will impact the foundation for my trading as much as in the past. I say that because I have since a few months felt that the foundation I’m standing on now is solid.
The funny part is that it’s also very simple. Much simpler than many of the things I’ve come across on the path leading here.
When I first started out in Forex I shied away from the concepts of support and resistance. Why? because it meant work and sweat and thinking! I, like most newbies probably, wanted to find something better, an indicator that would be right and that took care of things like long/short? enter where/when? get out where?
I spent some time looking for that indicator before realizing that it does not exist. Period. The closest things to that holy grail indicator is actually sitting between my ears.
So out went indicators and a painful journey began of learning and understanding the concepts of S/R. Why does it work, how to draw it, etc.
Making a long and not so interesting story short, my trading is now entirely based on support and resistance. Even more specific, I prefer horizontal lines. I haven’t managed to befriend trendlines even though I’ve really tried. Maybe it’ll come.
Here’s what I’ll do, starting a chart from scratch:
Bring up a chart, any pair. (I use MT4 for charting so this is adapted for MT4. Other charting software might require small changes)
Switch to weekly time frame and zoom out to one step from max. On my wide screen I can now see 18 years of data if I scroll the chart as much as possible to the right.
I will now look for horizontal levels on the chart where price has found support and/or resistance. The more times the level has acted in this role, the better.
The best lines will be those where price first finds, let’s say, support for a long time. Then suddenly it crosses below the level and on future tests that level now acts as resistance. After James16 fashion, I call such levels PPZs as in Price Pivot Zone.
Make note of the word zone. I don’t regard S/R as lines but rather as zones. Just because a candle protrudes across a line doesn’t mean that the zone has been broken.
After having placed those lines, which I tend to place at round numbers, such as 1.43, not 1.4316, I’ll zoom in one step on weekly which gives me a view of the last 9 years. Here I do the same again, adding any lines that weren’t obvious on the 18 year view.
After that I switch to a daily view zooming so I can see the last 21 months. Here’s where I can adjust the lines if needed to better fit recent price behavior. Maybe the 1.43 line actually is better placed at 1.44 or 1.425 when looking at the last 21 months of data. Remember that the big S/R lines will hold for ages, but they may migrate a little over time. It’s that migration we adapt to here.
We are now done placing these major lines. Now it’s time to choose a comfortable zoom and save the template for this pair.
Later when we’re analyzing we can add lines that we feel are important at the moment, but the major lines that last for years should all be there now.
I trade weekly and daily, and occasionally 4H charts. So now we simply wait for setups to form. What I do is that I look for candlestick formations to form, preferably rejecting one of my lines. If a formation forms where there’s no line, that’s when I take a look to see if there’s a valid shorter term line that it reacted against. If so, I’ll add that line, but I won’t save it into the template.
Let’s imagine that we have found a good daily candlestick reversal formation. That’s the basis for everything. Now what?
A couple of things have to check out before we want to take this trade:
Has the formation formed, rejecting one of our lines, or can we draw a valid shorter term line it has rejected. If no scratch the setup.
Is the setup in the direction of the overall trend? We can still take the trade if it’s counter trend, but the risk of failure increases. Judgement call.
Is there a reasonable risk to reward possible? If no, scratch it - there will be better trades later.
Is there space? That means, will the trade run into an area where there’s been a lot of ranging? If so it increases the risk that the trade will get stuck in there or even bounce from the rangeing area. The trade is still possible, but the odds are worsened. Judgement call.
What does the time frame below look like? Does it confirm our setup or is there reason for concern? What does the time frame above say? (I don’t look at monthly, so that rule doesn’t go for weekly trades)
Take a look at some of the other pairs, do they confirm the bias we now have? If we for instance plan on shorting the EURUSD, we wouldn’t want to find that the USD is showing weakness against other currencies.
Can we draw a fib and find confirmation for our trade? For instance, a reversal occuring at a 61.8 fib level doesn’t worsen the odds.
Those familiar with James16 will see that I’ve been strongly influenced by him, but many of these things were in my arsenal even before I came across his work.
Well, this is roughly how I go about finding my trades and understanding the charts. It works and no doubt will I continue to evolve my trading, but this is a pretty solid foundation to stand on. So, all i use really is S/R lines and candlestick formations. Simple huh, still it’s taken it’s sweet time for me to get here.
The only pair that look interesting to me this weekend is EURNZD short. I’m already in that short on IBFX.
The pair formed a bearish medium sized pin bar on weekly and there’s room to move further south. It did also reject the 2.10 level I have on my chart. The thing that makes me feel so and so is that it has already been going in this direction for a long time.
I’m not going to enter the trade on my main account and on IBFX I’ll look to move stops to BE asap on both this and the EURAUD short.
In other words, nothing compelling me to trade tonight.
I’ll look at any pair as long as there’s many years of historical data available and the spread isn’t completely crazy.
For instance, since I’m Swedish I’d love to trade the EURSEK or the USDSEK, but the spreads are out of this world unfortunately.
I look for trades where it’s reasonable to get at least 1R.
As for trailing the stop I’ll do that when it’s possible to hide it beyond a swing high/low, for instance on the 4H chart if the trade was taken on a daily chart.
I’d rather get stopped out at BE and miss a winner, that’s my style.
Looking over the charts tonight I’ve found three potential trades, although I haven’t decided on any of them yet.
AUDJPY and CADJPY longs and GBPCAD short.
All three are showing reversal candles with some space to move in and all three seem to offer at least 1R.
Will post again if I decide to place orders
Yes, I’m leaning towards it as well. GBPCAD is scratched anyways, didn’t like look of the 4H chart.
I think I will place a traditional pending order to buy at the break of todays high, with a stop just beyond the low.
Annoyingly IBFX doesn’t have this pair, so it’s not going to show in Currensee.
Uhuh
Let’s see what I did today…
Closed out my CADJPY long at BE about one hour before the move started. Ouch.
Scratched the sweetest move of today - GBPCAD.
Am I annoyed? No, I followed my plan and I didn’t lose any money, so I’m happy. Actually I made ever so little on a EURGBP short that I closed out before it turned.
The lesson here is twofold - patience, don’t micro manage your trades, and second, stick to your plan.
I need to work on the first, the second is under control. That’s something I guess.
No chart analysis tonight.
Sadly forex has to be interrupted by a social life sometimes…
I think I would close. At the very least take partial profit and move to BE on remaining part. We’re supposed to let winners run, I know. But I see sometrouble ahead:
Price is close to hitting the falling daily trendline and it has also moved into the 85.0 zone where there’s going to be resistance to a further move.
I can’t really tell you what to do, just make sure you protect your profit and never let a winner like that turn into a loser. If you think there’s potential for more pips then take partial profit and let the rest run with the stop at BE. Or close out a winner and sleep like a baby
Your choice.
Yet another far too short weekend is almost over. Weather has been wonderful for this time of year so no complaints.
Having had a look at the charts gives me one and a half potential trades.
First we have AUDCAD where the second top in a double top seems to be forming on weekly and on daily there are several upper wicks in recent days suggesting up isn’t where price wants to go. Both tops have rejected the strong 0.93 PPZ.
I’m placing a sell stop at 0.9240 which is just below the recent price chop and just below last weeks low. SL above last weeks high. It seems reasonable to expect that price could reach at least 0.9170 where some resistance can be expected.
Then there’s the half trade. It’s GBPJPY where price has managed to break through and close below the 150 PPZ.
I’d like to see a retest and failure to break back above 150. I’ll be watching for that this week to see if we can be offered a setup to short this pair.
Other than that I didn’t find anything really appealing on the pairs that I watch.
If it’s an obvious swing high or low then one bounce may be enough. For instance I generally mark the all time highs and lows on the charts and they’re usually one touch lines.
The more times the better of course and the very best is if we get the support becomes resistance or vice versa sort of line.
I’ll post up a chart or two to show examples of where I’ve put my lines. It’s important to remember that it’s part art and part science, so no two traders will probably choose the exact same lines.
As I’ve placed more and more lines I’ve noticed that I seem to agree with myself more and more. In the beginning I could do the same pair twice and then compare and the lines wouldn’t match between the charts at all. Nowadays they do and that’s a start.
Haven’t found anything that makes me want to risk my money.
EURCHF is forming a pin bar but there’s a bit of traffic and price is in the middle of a 1.50-1.535 range so not a good location.
GBPCHF and GBPUSD are worth keeping an eye on, maybe there will be setups tomorrow night. Not tonight though.
My AUDCAD order is still pending and since it’s placed from a weekly chart I’m going to keep the order around for one or a few days more.
On Currensee I’m currently in just one trade. It’s not exactly the best trade and it’s kind of interesting to see that Mr Kruger of DailyFX can get it wrong as well. I took the trade from an idea from there. I never do that on my real account but i thought it would be interesting to see what the results might be from following their recommendations.
So far that trade is my only (potential) loser… That’s a lesson isn’t it - rely on no one but yourself. Still it’s a experiment I’m going to continue for a while. I guess I’ll just have to compensate for any losses with my own supreme trading
I’ve wanted a live “lab” account for testing and playing around a bit so I decided to allow myself to do that with the IBFX account. I can see the risk being that people will think that’s how I trade. Well, it’s not.
Here’s my weekly chart showing the lines I have on GBPUSD.
Some lines are stronger than others, one worth noting is the 1.70 which is one of those lines that I view as a PPZ. Check out how price has reacted to it.
Remember that I’m not exactly a pro at this either. Another more experienced trader than me might put his/her lines elsewhere.
Yes, you are. For instance you’ve caught the 1.70 line. Why does your chart say 16. instead of 1.6?
Normally I try to have some space between my lines but I can see that my own chart wasn’t the best example of that.
In the beginning I drew two lines to mark out the borders of a zone but then I decided it was just easier to draw one “best fit” line and then always know mentally that it’s not a line but a zone.
I’ve seen in Phil’s e-book that he draws two lines, so obviously many things are a matter of taste when it comes to drawing lines on a chart.
Best advice I can give you is practice over and over again. Do throw up more charts if you want feedback.
I’ve tested my little project again tonight with some success. That’s taken the better part of the evening so I’m not up to any serious chart studies tonight.
I did however notice a couple of things:
AUDJPY is again bouncing of the 80.00 level.
AUDNZD may be forming a nice pin bar bouncing off of the 1.21 level
AUDUSD is again stalling just above 0.87
EURCHF inside day forming after yesterdays pin-like bar
EURGBP rally might be over with a bearish day today and a reasonably long upper wick
GBPCHF worth watching for candle formations to go long around the 1.67 level
NZDJPY might be doing the same as AUDJPY
I’m not going to trade any of these, if I wasn’t longing for the Sandman I might.
Today I’ve learned two things.
I have to put more money in my IBFX account to avoid playing with it. I’m trading my real account as I should but the IBFX account hasn’t been treated well at all, in fact you might say I’ve been bad. :D:o
DailyFX (and all other so called experts) are worth just about zilch. I’ve been wondering what Joel Kruger has been doing lately as he’s been trying to pick tops and bottoms using reasoning like: a healthy correction is overdue. I thought that was the first lesson in trading: don’t try to pick tops and bottoms.
Not to mention that he’s been trying to sell EURUSD since it was at something like 1.35 - I rest my case. The nice part is that sooner or later he’s gonna get it right, if we can just wait long enough :rolleyes:
Feels good to know I can hold my own in trading and my little experiment with DailyFX is therefor over.
Now I’m going to transfer more funds to IBFX and play it serious from then on.
