Or they work, or they don't... as simple as that. I cannot stand the fact that sometimes they seemed to work, and when you expect a positive outcome, just don't.
From now on, my indicators will be:
1- Price
2- Support/Resistance horizontal lines
3- Trend Lines
4- Fibs
5- 200sMA 120sMA
I'm studying some Volume approaches now... let's see if it results in something useful.
.
Sunday, October 31, 2010
Thursday, October 28, 2010
usdcad... back to the range
Weekly
I'm going to post two weekly charts. The first one is just to remember the basics of technical analysis and the second one with recent price action.
Why everybody needs to complicate or overcomplicate things? Why would I want that? The truth is people forget pretty soon, almost everything. Think a moment about it and try to remember the news you see on tv or read on a newspaper a few weeks ago; do you remember that? Maybe for a couple of days was relevant, but then, even if is still relevant, no one remembers. I've read about this issue applied to trading and seems to be more important on stocks and commodities, even though the concept prevails.
Back to the basics. How we can define a trend? Higher highs and higher lows would be an uptrend, lower highs and lower lows would be a downtrend. Plain black and white. How to know in advance what's going to happen? NO ONE KNOWS!
Above is the weekly chart for the usdcad but in this one I've included data since 2001. This picture is just to remember what has happened with this instrument and moreover what's happening nowadays. Price has been in a downtrend for around six years, making lower highs and lower lows, but last year's high broke a previous high, making a higher high and then, in april this year, a higher low. If the march09 high is taken out, that would confirm a new uptrend in place, but if price breaks the april low and even the nov07 low, a bigger picture would suggest a continuation of a massive downtrend.
This second chart above is more close to recent price action. I am basically seeing a downtrend followed by a consolidation phase. By now price has bounced back to the range and a better option would be to stay aside from this pair till a confirmation of direction. A triangle formation is in place but a break either way could lead to a clearer picture of future price action.
Daily
Last post we spot a reversal candlestick pattern. Now we can says it was valid due price went straight up, back inside the range. A little bit late, though.
By now this chart looks awful to me. Too congested and volatile to trade. While inside a range, price could do whatever it likes. A test of the upper channel trend line is possible, and a break to the upside would suggest further movement in that direction. Within last two weeks, price has formed a few inside bars with false breakouts and then more inside bars with other false breaks, so my advice would be, stay on the fence.
Price is trading below the 120 and 200sma, but the two are almost flat, although providing resistance. Stochastics has showed a bearish crossover suggesting a possible movement to the downside.
4H
This chart is amusing to analyze. From my last post, I've failed. We had a few confluences suggesting a continuation of the downtrend and a possible retest of the previous low formed recently. I've labeled this with red as FAIL. We made that assumption based in a few confluences around that zone. Price stalled at a fib retracement, near the apex of a previous triangle formation and stochastics showed a bearish crossover.
Next bar of the chart showed a gap up on price with a bullish candle that should sign as a major warning. Price just took off to the upside, breaking previous support/resistance zones, without hesitation. Price didn't show any sign of resistance within the 1.0180/83 zone, but bounced down from the daily chart trend line just to catch some breath and continue higher.
It is curious how the first triangle formation seems to be still valid. Price found resistance in the projection of the lower line of the triangle, and by now has defined a downtrend channel. What I found weird is that this new channel has almost the exact direction of the upper line of the triangle (in blue). Also weird that the direction of the lower line of the triangle has provided some support in the last bar of the chart (in red). That might be just coincidence.
The main knowledge earned here is that higher timeframes are more reliable than shorter ones, and indicators are just worthless.
.
I'm going to post two weekly charts. The first one is just to remember the basics of technical analysis and the second one with recent price action.
Why everybody needs to complicate or overcomplicate things? Why would I want that? The truth is people forget pretty soon, almost everything. Think a moment about it and try to remember the news you see on tv or read on a newspaper a few weeks ago; do you remember that? Maybe for a couple of days was relevant, but then, even if is still relevant, no one remembers. I've read about this issue applied to trading and seems to be more important on stocks and commodities, even though the concept prevails.
Back to the basics. How we can define a trend? Higher highs and higher lows would be an uptrend, lower highs and lower lows would be a downtrend. Plain black and white. How to know in advance what's going to happen? NO ONE KNOWS!
Above is the weekly chart for the usdcad but in this one I've included data since 2001. This picture is just to remember what has happened with this instrument and moreover what's happening nowadays. Price has been in a downtrend for around six years, making lower highs and lower lows, but last year's high broke a previous high, making a higher high and then, in april this year, a higher low. If the march09 high is taken out, that would confirm a new uptrend in place, but if price breaks the april low and even the nov07 low, a bigger picture would suggest a continuation of a massive downtrend.
This second chart above is more close to recent price action. I am basically seeing a downtrend followed by a consolidation phase. By now price has bounced back to the range and a better option would be to stay aside from this pair till a confirmation of direction. A triangle formation is in place but a break either way could lead to a clearer picture of future price action.
Daily
Last post we spot a reversal candlestick pattern. Now we can says it was valid due price went straight up, back inside the range. A little bit late, though.
By now this chart looks awful to me. Too congested and volatile to trade. While inside a range, price could do whatever it likes. A test of the upper channel trend line is possible, and a break to the upside would suggest further movement in that direction. Within last two weeks, price has formed a few inside bars with false breakouts and then more inside bars with other false breaks, so my advice would be, stay on the fence.
Price is trading below the 120 and 200sma, but the two are almost flat, although providing resistance. Stochastics has showed a bearish crossover suggesting a possible movement to the downside.
4H
This chart is amusing to analyze. From my last post, I've failed. We had a few confluences suggesting a continuation of the downtrend and a possible retest of the previous low formed recently. I've labeled this with red as FAIL. We made that assumption based in a few confluences around that zone. Price stalled at a fib retracement, near the apex of a previous triangle formation and stochastics showed a bearish crossover.
Next bar of the chart showed a gap up on price with a bullish candle that should sign as a major warning. Price just took off to the upside, breaking previous support/resistance zones, without hesitation. Price didn't show any sign of resistance within the 1.0180/83 zone, but bounced down from the daily chart trend line just to catch some breath and continue higher.
It is curious how the first triangle formation seems to be still valid. Price found resistance in the projection of the lower line of the triangle, and by now has defined a downtrend channel. What I found weird is that this new channel has almost the exact direction of the upper line of the triangle (in blue). Also weird that the direction of the lower line of the triangle has provided some support in the last bar of the chart (in red). That might be just coincidence.
The main knowledge earned here is that higher timeframes are more reliable than shorter ones, and indicators are just worthless.
.
eurgbp
Weekly
In last week's bar, price reached the 0.89s with a bull candle and has made a new high at 0.8941 within the current week's bar before reversing. At the time of writing, price has taken out previous bar low, turning itself in an outside bar. Macd and Stoch are suggesting a possible move downwards. A breakout of the high or the low of the current bar would lead to a more clear scenario. If next week's bar breaks to the downside, more than likely price will continue to the downside to test previous support zones (0.86s then 0.85s). If next week's bar breaks to the upside, might suggest a possible bullish sentiment that could lead to test previous highs (0.9150/53 then 0.94s)
Daily
In the chart below we can see how price has climbed to the 0.89s with a high of 0.8941 on monday's candle. As an observation, note how price climbed even though from last post the indicators were suggesting an immediate change of direction (are you confident with indicators still?). On monday's close, with still divergence on macd and stoch in overbought zone, price just dropped. I've drawn a regression channel to analyze, which has been broken suggesting further decline in price, but price might be just in a taking-profit phase from the current uptrend thus a climb beyond the 0.89s is possible. Let price to tell the story.
4H
I've attached the 240 chart where we can see the narrow cluster that suggested a possible reversal between 0.8893/0.8923. Also can be seen an upward trend channel in blue with a false breakout with continuation in direction of the trend, and then the real breakout. Right now price is testing a support area consisting in previous lows. A break to the downside would suggest a possible movement further to the downside to support areas at 0.86s and then 0.85s. We might have a bounce up and develop a right shoulder for a complex head and shoulders pattern. Stochastics has had a bullish crossover and is pointing up.
Final words... The higher timeframes are better guides than shorter ones. Are indicators reliable? Price is the best indicator.
.
What am I thinking?
Hard to explain... is it possible to do this? Am I able to do this?
What's the most important thing in trading the markets? Strategy? As I've read that should be just a little aspect of a whole. Trade management is important but more important is managing risk. Mathematically it is possible to demonstrate that if you have a 40% chance over a hundred trades of winning, you still will make money in the market, only when risk is properly set to a risk/reward of 1:3.
With a 50% winning system, and a risk/reward of 1:2 also would be possible to be in positive. So... when is the turning point? with 50% chance of win or lose, and a 1:1 we might be just at breakeven point but more than likely would result in negative.
The main question here is: Do you have a system?
And the following questions derived from the first one: Do you know the winning percentage of that system? How much is your risk/reward ratio for your trades? Is the same for everyone or differs from one to another?
And as a final question: Are you waiting for the best "low risk - high probability" setups to occur or just jumping in and out of the market based of emotions?
Tough questions... tough answers required. You are the responsible for your future.
I haven't entered any trade, but I've been burning up a demo account. From my observations to the market and my own response to the market, shorter timeframes are just to volatile and with price action flashing so fast, the brain is tricked by the eyes. With higher timeframes all the setups have enough time to be placed and executed.
It's a little bit contradictory but technical analysis should work in any market and any timeframe. Technical analysis might work but emotions won't.
Plan your trade and trade your plan.
PD. Flipping a coin doesn't count as a system!
.
What's the most important thing in trading the markets? Strategy? As I've read that should be just a little aspect of a whole. Trade management is important but more important is managing risk. Mathematically it is possible to demonstrate that if you have a 40% chance over a hundred trades of winning, you still will make money in the market, only when risk is properly set to a risk/reward of 1:3.
With a 50% winning system, and a risk/reward of 1:2 also would be possible to be in positive. So... when is the turning point? with 50% chance of win or lose, and a 1:1 we might be just at breakeven point but more than likely would result in negative.
The main question here is: Do you have a system?
And the following questions derived from the first one: Do you know the winning percentage of that system? How much is your risk/reward ratio for your trades? Is the same for everyone or differs from one to another?
And as a final question: Are you waiting for the best "low risk - high probability" setups to occur or just jumping in and out of the market based of emotions?
Tough questions... tough answers required. You are the responsible for your future.
I haven't entered any trade, but I've been burning up a demo account. From my observations to the market and my own response to the market, shorter timeframes are just to volatile and with price action flashing so fast, the brain is tricked by the eyes. With higher timeframes all the setups have enough time to be placed and executed.
It's a little bit contradictory but technical analysis should work in any market and any timeframe. Technical analysis might work but emotions won't.
Plan your trade and trade your plan.
PD. Flipping a coin doesn't count as a system!
.
Sunday, October 24, 2010
Aussie update
Weekly
I have relabeled the elliot count to something more pleasant to see. Is it reliable? No, it is not.
Watching merely price action, last bar change bias in the audusd, making a lower high and a lower low so further decline could happen next. Stoch has made a bearish crossover but is still in overbought zone. Even though the doji has established a 1.0002 high, further advance can happen as discussed in previous posts. We have to consider though last bar is still bullish in nature so a break of its range would give a better understanding of future price action.
Daily
As said before in the last post, really interesting week to see the market. Critical times to learn. I'm almost sure that not just one got chopped out and eaten up by the market last week. In this chart we can see that the break of the regression channel to the down side did occur, forming a wide bearish candle, and then is when became interesting. Price bounced back defining a new support zone and consolidate for the following days. This consolidation, formed by long bars almost shaping a symmetrical triangle, is called Shark32. This is not a perfect Shark32 but close. Next week we will see which direction the market choose but with the prevalent uptrend, more than likely, a continuation would follow. The interesting thing here is that price has formed a wide range with a couple of inside bars so the best plan to follow would be wait till price gives us more clues. Price might trade inside the range for a while or break in either direction. False break outs are always a possibility. Next week also is worth to watch.
.
I have relabeled the elliot count to something more pleasant to see. Is it reliable? No, it is not.
Watching merely price action, last bar change bias in the audusd, making a lower high and a lower low so further decline could happen next. Stoch has made a bearish crossover but is still in overbought zone. Even though the doji has established a 1.0002 high, further advance can happen as discussed in previous posts. We have to consider though last bar is still bullish in nature so a break of its range would give a better understanding of future price action.
Daily
As said before in the last post, really interesting week to see the market. Critical times to learn. I'm almost sure that not just one got chopped out and eaten up by the market last week. In this chart we can see that the break of the regression channel to the down side did occur, forming a wide bearish candle, and then is when became interesting. Price bounced back defining a new support zone and consolidate for the following days. This consolidation, formed by long bars almost shaping a symmetrical triangle, is called Shark32. This is not a perfect Shark32 but close. Next week we will see which direction the market choose but with the prevalent uptrend, more than likely, a continuation would follow. The interesting thing here is that price has formed a wide range with a couple of inside bars so the best plan to follow would be wait till price gives us more clues. Price might trade inside the range for a while or break in either direction. False break outs are always a possibility. Next week also is worth to watch.
.
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