First, I would like to say this site is great for someone like me who is a complete newbie!
I have done the school of pipsology and found it really useful.
I have a preference to day trade and I am using parabolic SAR with a MACD to see the trend and I am using a day view then straight to a hour view to place a trade.
I don’t really focus on support and resistance (with fibs)- is this a bad thing?
Finally, could someone also be kind enough to help me with stops? If I am buying then why can’t I set my stop where I bought so that I break even? and if I am selling why do I need a stop?
I won’t claim to be giving you chapter and verse - you’ve covered a lot of ground there! - and hopefully others will chime in and you can average us all out. But I’ll give you a few thoughts on that.
But to start with your closing point: you don’t sound ‘thick’ (lol). You just sound like a beginner, rather than an expert. I know nothing about sailing - if I ask an experienced sailor about why s/he does some of the things that they do, I hope that I would not sound thick. I’d just be seeking knowledge. So never worry about asking questions on here, it’s a site that generally welcomes them. We’ve all of us known nothing about something at some point, after all!
You say that you don’t really use Support & Resistance, then add (with fibs) in brackets. Fibonacci really just amounts to one form of S&R - it just boils down to levels where some traders expect that Price has a decent chance of reacting. Which is all that an S&R level is. No level is ever going to cause a reaction 100% of the time, however strong it appears to be. And then when there is a reaction, that reaction is never going to be 100% predictable. Trading encompasses a number of different styles and approaches, so there is not absolute correct answer to the question of whether you ‘should’ use S&R, or whether you ‘should’ use Fibonacci. Personally, I am a largely technical trader, and S&R is probably the key thing that I look for in a chart. For me, it would be the starting point when learning to trade, and it the single thing that I would not want to do without. So for me, you are making am mistake in neglecting it. However, I am sure that there are other traders who would disagree with that - one of the problems is that there are few absolutes in trading. As regards Fib, personally I would not start out with Fib, I’d get a handle on basic S&R levels, then once you have those down then yes, I would add Fib to my arsenal. Whether or not Fib works because of mystical significance, or simply because a number of traders believe that it works (so it becomes a self-fulfilling prophecy) my own view is that Fib levels work and can help with placement of SL and TP (and, to a lesser extent, Entry).
Even if you are plotting a trend and you feel able to see that clearly, an area where that trendline coincides with a clear S&R level is going to give you a higher probability setup, imho.
I think that you are doing the right thing, looking at a higher TF first, then drilling down to a lower TF for your Entry. You might like to look at the 240 to give you an interim level of detail, but many would not bother. It can suddenly show up other reasons for or against a trade.
In terms of Stops, no you can’t simply set it to BE from the off. Firstly, Price rarely moves in a straight line, virtually never, it oscillates back and forth a little, even if you are right about the overall direction. There are a number of reasons for this, but it does mean that if you enter a trade with an SL too close to your Entry then it will likely be taken out before the decisive move in your favour, even if you are conceptually right about your trade.
But before you even get that far, you have to take into account the spread on your platform: If you have a 2 pip spread on EUR/USD, that is what your broker gets up front. So if you enter at £1 a pip, then the broker enters you into your trade two pips off your optimal Entry price, so the trade has to move two pips in your direction to get to BE. So if you entered your trade with your SL at BE, it would actually be set to a two pip loss. That SL would almost always be taken out through natural oscillations in the market. So you would lose two pips per trade, and your account would bleed out.
But tied into that is the fact that many (all? I don’t know) broker platforms won’t allow an Entry too close to current market Price, and then won’t allow the SL value to be too close to the Entry (on mine I think the minimum SL size on EUR/USD is five pips, but that’s from memory), so it is a choice between a Stop of a few pips or more, or no SL at all.
And you need a Stop when selling just as you do when buying because you are not actually buying or selling anything, there is no physical transaction taking place. To exit a trade, you effectively enter an opposite trade. The market can make or lose you money going up or down - effectively you are (whisper it) betting on the value of one currency going up or down in relation to another currency. So if you are wrong and the market moves against you, you are committed to being on the wrong side of that transaction until your SL is triggered or your account is wiped out - if you went short EUR/USD, but your trade moved against you, effectively you would be the guy buying the falling currency from all the people making money from their correct, opposite trade. Except that you would run out of funds in any sort of decent move against you. So my own view is that trading without a Stop - in either direction - is lunacy. Although we have the odd guru on here advocating trading without an SL. Maybe they are right and I am wrong, but I certainly disagree with them.
Anyway, that was a pretty hefty ramble, I hope that I have not simply confused you - I confused myself a little, in the middle, tbh! And to be really honest, that was a quick scoot through the various issues you raised as I see them while feeding my three year-old a strawberry yogurt, so it really is a bullet-point summary. You will likely get a raft of more detailed responses on the various individual issues you raised.
The fact that you are asking - and asking here on BP - bodes well for your trading in itself. You most certainly did not sound thick!!
Thank you so much, the confidence boost is really helpful.
I agree with all that was said, I think whilst the MACD and SAR will help me show the trend, I need to work out where the support and resistance is. I am going to look for an indicator that will potentially show S and R areas.
I haven’t been looking at trading in pips but in actual currency because I was going to for tighter spreads and commission as I am more suited to scalping/day trading.
I wouldnt even bother looking for indicators to show support and resistence. You have to put the time in yourself watching charts and seeing how price reacts at s/r. Every new trader makes the same mistake of looking at lots of indicators. I wish i found this site earlier and someone told me not to bother with all the indicators because it would of saved me months of work!
Don’t fall into this classic newbie trap. stacking on indi after indi to try to find the ultimate combination. Learn classical technical analysis and price action. Draw the S/Rs yourself, also with the indi’s you already have, understand everything about them. How they are calculated, what purpose were they created for, and use them for what they were meant for. Remember pick the right tool for the job.
Am I right in saying MACD and Parabolic SARs identify uptrends and downtrends- so when MACD crossover this is a new trend and parabolic dots also identify the trends?
I am struggling with idenifying S and Rs- could you help me with this at all please? I can’t do the swing highs and lows.
and as for price action- i have interpreted this as technical analysis plus fundamental analysis?
I have also worked out that that i have to be wary of the entry point AND the entry area so ideally if going long then figure out support and go in at that point and sell at resistance.
I do really appreciate everyone’s support (no pun intended).