Trouble understanding sentiment?

Beginner Questions
1

I’m currently still learning to trade and have not started trading live yet. At the moment, all my analysis is technical and as such, I don’t even take into account which currencies I’m looking at - I just look for certain signals and indicators and make my trades based on this alone. I assume this is a bad way to do things?

So, when I’m reading something, like this: Daily Chart Art - November 18, 2013, where it says “[I]You could go long at one of the retests if you think that the pound is headed higher against the Aussie, but you could also wait for the support to break if you’re one of them Aussie bulls.[/I]”, I have a little trouble understanding. If not because of a signal, trend, pattern or other technical indicator, why might you feel bullish or bearish about a currency? Is it vitally important that I keep up to date with economic news in order to for such an opinion? Or is it okay to just trade based off technicals?

Thanks

2

Yes I understand the confusion & when you see some of the answers which are coming
your way from, PA, Fundies etc. you may feel even more confused.

It is also great that you are getting your “feet wet” with some reading of other
analysis.

However here is my 2 penneth. At the moment in your learning process if you are
winning using your method then there is no reason to change. You may as time
passes start to understand more about fundamental analysis & decide to sit on your
hands during large statements ie NFP, Rate statements etc.

What the article is saying about the GBP/AUD is, as it is in an uptrend on the 1H,
using the 100 SMA as a support line, then when price comes near to it (100SMA) find an entry
signal to get in long. This is called buying on dips.

However if it breaks the 100 SMA look for a re-trace to bounce off, what is now
a resistance line & go short. (With this scenario always remember the underlying trend.)

Also there is an AUD rate statement later today, or early tomorrow which ever time frame you
are in.

3

At some point you will want to have an under standing of both tech and fundi analysis. You will want to consider any relevant information that will help put the balance of probabilities on your side with the currency pair you are considering trading. But in the beginning it’s easier if you start with 1 currency pair. Use one you’re familiar with. Example I’m from Canada so when I was looking for 1 pair to start with I chose US/Can currency pair. So pick a pair you’re familiar with to start. For me it was easier to master tech analysis before fundamentals, but that doesn’t mean anything, for you or someone else it could be the other way around. Pick one and practice. practice and practice. It’s much easier to expand your learning when you build a solid foundation in the begining.
Good Luck
Gp

4

Thank you very much, I appreciate the time you’ve taken to respond to my question. Why do you say that it is easier to begin with a single currency pair? Do different pairs tend to be easier or harder to trade on certain time frames (at the moment, I hold most of my positions for 4-12 hours)? Do different pairs tend to react differently to certain indicators? Is it likely that a system that worked with one currency pair would not work with other pairs?

Thanks again

5

I thought you wanted to know if you need to have an understanding of fundamentals as well as technical s. I suggested at some point you will want to and in the beginning choose 1 pair that you’re familiar with cause it should be easier to understand the fundamentals for that pair. As far as , “is it likely that a system that worked with one currency pair would not work with other pairs” the answer is yes and no depending on the tools and rules your system is based on.

For example I only trade in the direction of the trend for the time period I’m trading on, when momentum is on my side, at the beginning of a long or short cycle and the trade is verified by support and resistance. Along with that I have some other rules that I follow. This is for short term trading, so I avoid trading pairs that have major economical events on the day I’m trading.

6

Sorry, I understand that I did not make this particularly clear. To begin with, I’d decided to develop a strategy based entirely off technicals and was wandering whether this was a terrible mistake to make.

Are there any currency pairs that you’d recommend using when attempting to develop your first strategy? More specifically, a day trading strategy based off technical indicators and price action analysis? I can’t remember exactly what pair it was (other than that it was a JPY cross), but I read somewhere that this particular pair was a good one to start on because the signals it gave were more reliable.

When you say “at the beginning of a long or short cycle”, what exactly do you mean? Is this to do with Elliott Wave Theory?

Thanks again, you’ve been a real help!

7

This is one I used with no fundamentals. Entry/Exit is what I mean by short term cycle

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8

I think personnaly I should get to fundamentals. I have been trading technically and recently found the drawdown of my system can be larger than what I was expecting from preceding backtests for some periods. No matter how good the technical system is, you will eventually get bad luck and run into a series of bad entries.

I am now hoping I will be able to add a layer of fundamentals to my technical system, to reduce drawdown by filtering technical entries to avoid to be on the wrong side at the wrong moment. I am also thinking of reading COT reports for sentiment analysis but the weekly timeframe of these reports will probably be a problem.

Concerning Fundamentals, I am a bit clueless of where to start. It is a lot less documented than technicals. They are a lot of different kinds of fundamentals, it seems like a jungle. Many fundamentals are totally vague. The fundamentals with figures like economic reports are good for news trading but that is not what I want to do. Are there any fundamental systems examples in the holy grail section? what fundamental sources would you recommend to get a bias on the strength of a currency for the following days?

9

Surprised, Kinda, its a newbie Forum, But Listen to these key words,

HEAT MAP

You HAVE to trade with confluence…

Like today for instance, If your not jumping in on JPY tanking, your not in the game…

I knew this by looking at a heat map…

Buys on Support,

When you look at the bigger picture, because Currency flows around the world, they run with eachother, and most days, a single currency will just have a bad day, and you need to be able to see this developing before trading…

Confluence is most important, then anything else in Forex, well, I think so anyways…

I used to say, " I just trade EU", but I also never looked at the bigger picture, so I was just throwing darts, by entering on candle development…

Now, I have a good sense of whats going on, with a WORLD view…

I can trade every single pair now, if I wanted too…

Find value before entering the market…

Find a heat Map, get a good DeMark trendline indicator, and get to work,

I believe these are the 2 best indicators every trader should use…

Best of luck,