Monday, June 30, 2014

Concept of Final Auction

Concept of Final Auction

Take a look at the updated chart of gbp/usd

I mention in my Friday posts that strong bias is building up in the cross, and stops are placed at 1.7003 area, price went to test the stops but spike two pips away from the protection area, and finally breaks the equilibrium barrier, and reached 1.7150 in no time.

Here is the updated chart of Sterling

Sterling on new multi-year highs,breaking point of equlibrium, technical update strong bullish momentum

gbp/usd New money flows.

Here We have seen the strong violation of rotation center, where price spend a neutral days and tells us that that breakout from 1.6972 to high of 1.7040 was the activity of strong buyers and give us hint, that they took the stops both way before marking the price up and usually not every level of price is important for market, But the levels which are important for market, they will protect those areas and strong reason to accept when price broke the psychological barrier of 1.7050 with ease.

Now, that price rallied to new multi year high, exposing another opportunity to see if new fund inflows to get it through 1.7200 barrier.

Saturday, June 28, 2014

Value Shifts Immediately higher for Final Auction

Shift In Value, Market Breaks the point of equilibrium Let’s first think about this: every trader has his idea of value, some traders recognize it, some don’t, but we all have idea of value, if we haven’t had it, we would not be able to make a trade. If you go short, you should think that current prices are unfair and market will return to lower prices, if you go long, you also should be aware that value will be built somewhere higher than current price levels. If you sit on your hands, you should think that value is located somewhere near current prices – in other words, opportunity hasn’t appeared yet.

Conventional and straightforward way for capturing value is to build moving average and derivative of moving average – Bollinger-Bands indicator. Moving average is considered to represent value, borders of Bollinger Bands are considered to represent 1 standard deviation from average:

if we take moving average as a substitute for value, we are risking to get many misleading signals.

Why?

It occurs because of what I call «Inequality principle»

It claims: «Different price levels are not equally important for the market».

Do you feel what I’m talking about? Moving average can’t distinguish what price levels are more important for the market – it’s responsibility of a trader. Missing piece is market logic.

But period in the red circle was a final auction, overall trend was rising and market was no longer able to stay inside of a trading range. When market lacks selling liquidity, when nobody is going to sell, it start advertising higher searching for sellers.

We often see that price is leaning to higher extremes and holds on higher prices.

Friday, June 27, 2014

Concepts of Protection Area


Protection area in technical analysis when there is a breakout

I have mentioned the concept of "Protection Area", As there are so many traders wonders that whether a particular breakout will succeed or will faded away, In this extended post I would like to mention the concept of "Imbalance" and "protection area", in one example. Price built up momentum early and when there are market run away from those prices, then market reject the prices from level below and that is why there are strong chances, that those areas are protected by Intra-day traders.

As, In any cases it become difficult to look for entry specially when price went back and forth on a neutral day after breakouts, so I always look for rejection point rather than momentum candles, Because momentum candles do carry wider stops, but rejection candles really don't have to risk too much and reward is always "hotspot area" or upper boundary of price action.

Gbp/usd technical update with low risk reward entry

gbp/usd protection area Intraday update

IN this chart, I have cleared most of the doubts that happens to be in mind of an intra-day trader,with above mentioned example as there price was protecting levels and then we saw strong momentum coming off from that area and we had to use wider stops but then we have rejection candles off that 1.7003 (Low was 1.7005) as the entry came in at 1.7019 and the risk was 16 pips and that risk was covered with the reward at the end of the day which was 19-20 pips.

As a technical trader, we should look to wind up the positions at the weekend and look to enter at the start of the week again if price offers such entry levels again.

Tuesday, June 24, 2014

Elongated Candles Rotations center

I have discussed a lot about "elongated candles" which forms a "rotation center" as and protect any rally against these candles and forms a rotation area, Price squeeze to test the high or low again and sometime go beyond the extremes. I would put more light to that topic soon and cover some trades as there is lot of strong trend which has been pause for quite a while and market preparing for next moves possibly reversals. But it is quite optimistic to predict it too early but recent candles in Pound chart, hinting it could test the strong support.

Will post a chart soon If I found something lethal in the days to come and cover this topic with strong examples.

As Promised, here is gold chart updated with possible outcomes

This chart is a prime example of "Elongated candles often works as vaccum in the market, and As we have seen some good strong bullish candles at support which 61.8% of Fibonacci ratio, which wave traders used for wave ii or wave iv correction, was a clear trap and price fall rapidly.

But in such case when price end the month on lows and after such behavior If you see any consolidation (As in case of Euro Recently) you should wait for price to rise to sell rallies rather than just selling with the breakouts as such breakouts often offers good low price buying and test of high of consolidation area or high of the swing, so we would wait for any confirmation in such case to sell the rally specially when we see patterns that don't followed by follow throughs to sell the rallies, Will update the blog if found some substantial.

Sunday, June 22, 2014

Australian dollar updates Rally Across the Board


Australian dollar bullish momentum continues

For those , who did not check my earlier chart, Check my previous post here !

As I mentioned in the previous posts, rally of Australian dollar across the board is most expected, and little correction and another shift in momentum is seen, And this time it is with even more force.

If you see the current rally from the lows, then it has bounced from 0.9320 areas which was mentioned as extreme support and now again after ending the week on lows, price accumulates enough, and today there is rotation center violation which is good enough for us to reenter

After price open up with the gap to the downside and then a little upside rally after opening, which was not very strong but you can see "Shift in value" on hourly chart and then spike after the release of Chinese manufacturing PMI which tells us that there was a strong improvement as PMI has crossed the level of 50.0 and above 50 there is strong improvement after months below the 50.0 Mark.

So, there is always a mixture of fundamentals and technicals, which make us flexible trader, because alone technicals are not helpful fundamentals has to be supportive in every course, to support the rallies, and Price if breaks the highs with force, then there is strong test of 0.9510 area could be seen, and after that 0.9570 and 0.9630 aera.

I would always support risky asset class as Crisis situations as war in Iraq is picking up and this force Institutions to buy Gold and Riskier asset class like austrlaian, canadian and newzealand dollar, which always works as safe heaven in risky events

As we have earlier seen, buying of canadian dollar last Friday, So, it could be turn of Austrlaian dollar as well.

Wednesday, June 18, 2014


Upate on Australian Dollar as Rise was on the cards
Australian dollar outlook still bullish

Those who did not check my earlier post check it here

Price did exactly what I had earlier anticipated, and I have covered my position due to close of trading session and daily activity and I would like to see a retest of the zone of entry as I have mentioned on the chart.

We do need strong rallies after test in the pair to reenter. So, Nice daily profits as It was targeted earlier with "reference points" did hint us.

Tuesday, June 17, 2014

Australian dollar Intrady technical levels

In my earlier posts, I always mentioned that we should look to find "Imbalance" to spot the "Institutional activity" in strong trends and shift in value can provide you with another attempts to test the high, specially when trend is strong enough to keep moving back and forth.

As I have mentioned in my previous post that "Australian dollar" is about to break the barrier and it did hold on once again and I was stopped out, and once I was +50(greed to earn more) and I had to cover and stopped out at breakeven and Price has rallied from that area and looking to test the previous zone which could be protected by "Strong holders" which is 0.9210 area.

If it holds and price try to accumulate then there is strong chance of momentum carries the price to test the highs, and In strong trends it is strong possibility that price "Gravitates" towards the previous "reference points".

Price action building strong trade location here

Imbalance still there

There is a strong chance that price will go through the support zone, but we should look out for with the trend possibility and when you are trading with convictions you should look to back your strengths, and My strength is I never look for reversal too early until there is strong liquidation and couple of attempts have failed.

I also look for candlesticks congestion areas or bullish liquidation traps as there was one yesterday, and price reversal today offered an opportunity but I am not too quick to launch on such scenarios.

Intraday trades UPdates

usd/Chf Intraday update

Posting a little update on the usd/chf chart possible congestion candle the last bullish candle and the trade was triggered at 0.8980 and I had to covered the trade around 0.9000 because of slow tempo.

Still there is lot of room but I would like to remain on sidelines ahead of FMOC statement tomorrow and anything can happen but if Fed tap more then we should see rally in usd bulls.

The idea was right look for momentum to carry forward the last day momentum to atleast test the highs and I expected that but due to lack of volitality, the pair seems to pause at the resistance 0.9010

Take a look at the Updated usd/chf chart

I would like to re-enter again if I am given the opportunity to buy low again, but that could seems unlikely because if an area is built then there is unlikely that price visit the previous area.

But to facilitate or through liquidation break it can happen but chances are very rare. Uncertainty drives the market and if price breaks the recent barrier and take out the highs with momentum, then there is strong chance that the trend resume and test multi month high at 0.9110 area and break of 0.9030 will offer good risk to reward.

Monday, June 16, 2014

Extreme support levels In Current Major Currencies

usd/Chf Intraday update

Currently the price action is sideways, may be waiting for Fed to taper more this wednesday, but Our work is not be too much complacent with what would happen will drive the price for surety, as Eur rate cut was welcomed by market and euro found support around 1.3500 area.

But for me I never try to predict what is going to happen or not. I always look around for the pairs which are trending and the reason they go sideways or trend is paused needs confirmation or even if fundamentals does opposite, they do tend to find support to really again .

And that is why I have put a lot of thoughts in to usd/chf chart which has told me that recent rally from the lows could be a hint of big buyers and support zone is strong around 0.8956 and 0.8910 area but I would expect later to protect any strong downside rally, But we need to trade momentum from the located areas on the chart and I would looking to add more to my recent longs around that area again

Take a look at the usdchf update chart . Are we looking at culmination ?

In this chart there is stair stepping trend, which is followed by moving market accumulation and then pair has found support on similar levels it did before, And pending rally still looking for momentum and this could be a start of culmination which means there could be a start of strong trend and we need to keep look to buy on dips, if and When we are offered any such opportunity.

Saturday, June 14, 2014

Price action basic recent update when there was no supply

Minor development areas base after breakout know as protection areas

I have covered most part of these blog with "simple price action when there breakouts followed by neutral day minor developments and has no supply to hold the price to that level", which means that if we see some area is protected by the market strong holders then any spike and downside rally is always strongly protected by those areas.

In the following chart I have covered a scenario (the most recent one), where you could tell yourself who is moving the market or who has the control on the price action next move

If you dig deeper than simply following price action, you will understand that supply and demand will drive the market. But supply can be short-term, then transform into demand and vice-e-versa.

So, you have to rely on professional supply and professional demand and be able to distinguish it between other fluctuations.

Recent price action makes it clear where is ongoing demand

Price action basics,No supply area and minor development areas with protection, rotation areas,Ongoing demand of currency

Check this post how reference points works to find good trade locations

Charts often tells you what to do and to trade what you see, but when we relying on other things like candlesticks patterns or any other trading techniques we relying on them rather than we really on what chart trying to tell us and that is what basics of price action pure basics are.

When market breakout from a level (Strong accumulation breakouts or range breakouts) and maintain a level above and we strong neutral day and minor development area and then market end the days on lows, then we have to see if there minor protection and development area and look to see the market reaction when price touch that development area again.

In the above chart of nzd/jpy strong trade location were there as there was minor consolidation areas were at the top and market really had no supply below to hold the prices there and the result was followed by strong demand.

Candlesticks patterns are reliable and work most of them as congestion

Candlesticks patterns in overall price action patterns

I see that many traders create complicated approaches to trading, so I've decided to share with you some simple candlestick patterns that you can use in your trading. But I must warn you that patterns itself are not enough to generate consistent profit.

You will easily find conflicting patterns on the same price chart – one signal to the «long» side, one signal to the «short» side. You have to choose between those signals – which would you accept?

So, patterns are not enough. You should sort of «big picture view». You should have idea of where the market is traded right now. I say – «idea», it’s not really «knowledge».

Every view we have is considered to be an idea that we have to test – sometimes our ideas are good, sometimes not, but if we build our ideas basing on something that works, we increase our odds of success.

Also, it’s more effective to use those patterns on time-frames starting from H4 and more. The lower your time-frame, the more noise you will have and the less importance candlestick formations have.

By «candlestick formations» I mean something not too complicated. All those «Morning stars», «3 white soldiers» and other conventional candlestick formations create more complexity and push us to predict price action rather than to trade upon what we see.

Congestion area often give traps or continuation hints

1. Congestion. Most of the time market holds in congestion. It is a price formation, that is built like shown below. We have measuring bar (candlestick), usually it’s a candlestick with elongated body. High and low of measuring bar become local support and resistance level.

Also we have at least 4 candlesticks that don’t violate or at least touch high and low of a measuring bar. Duration of average congestion – about 10 bars/candlesticks.

If we register that market is traded within congestion, all trading signals will be of low importance. Price movements within trading ranges can be a result of random move. Nobody really knows what do they indicate.

Also, price will tend to find local reversal points within borders of congestion.

2. Simple continuation pattern. If you see that price action emerges from congestion or some trading range (and you back up this pattern by understanding that main trend is headed in the same direction), you can use as simple pattern as shown below.

First you identify directional bar/candlestick that is considered to have small or no tail at the upper side (for bullish pattern) or at the lower side (for bearish pattern).

Then you simple can divide this candlestick on 4 parts and place your buy limit order at the upper quarter (for bullish pattern) or at the lower quarter (for bearish pattern). Your stop-loss should be set with respect to volatility (say, ATR indicator) Let me know if this topic is interesting – should we continue talking about that?

Thursday, June 12, 2014

Strong signs of Paradigm Shifts

Intraday forex trading opportunities

As, I mentioned in the last part of my trade updates about Australian dollar can continue the rally, and It give me confidence after decline in unemployment in OZ area still giving boost to Australian dollar and Longs were triggered around.

Australian dollar can break through any time

The best part of this activity is that liquidation break has been faded out and price has taken the highs out and Now just consolidation and holding higher prices, which is also a good clue if it is followed by a test of trade location during the release yesterday.

If you want to get good price and capture a reversal of correctional trend(as you can see price spike off minor development area from the lows which is mentioned in blue rectangle), you should seen signs of real support. Real support creates conditions for a reversal if market goes against big buyer, as I mentioned when big buyers are holding the prices at highs and create trade locations and then we see strong selling as market goes against them in this case. (remember –to reverse the market, there should be supply/demand imbalance).

Reversal occurs after paradigm shift, when it becomes clear for most short sellers that they were biased and go in the wrong direction.

In such case, we most often see imbalance in price action, when market has already create a development area and end the day on lows, then next day or two we saw strong accumulation and rejection from the prior day low, the suddenly paradigm shift and strong continuation of the trend is seen.

Tuesday, June 10, 2014

Reference points involvement in predicting next possible move

I have covered "reference points" in my previous post in which I mentioned how we can "pick reference point in predicting the next possible move", as there is always a chance of neutral activities after breakouts, which prevent the strong rallies to the downside.

I posted a chart of usd/chf chart on Friday for possible continuation to test the highs after we have some good trade location taking out the "highs".

The chart below is a true indication of institutional activity and when we have some good reference points after breakouts, then strong downside rallies are often "reversed" as In this case.

Recent price action update of usd/chf chart !

Although it is not necessary that we should look for this kind of price action in every strong breakouts because it tends to gravitate to the upside after the end of correction, But the chart which I mentioned above accumulate after that downside rally and strong breakout test was there and that rally pause to take the stops of buyers.

But the important thing is next rally was powerfully to give you second entry and trade location was exactly the low of correction that start from low of bottom.

I have seen some strong buyer is Australian dollar as well will post the chart soon If I got something substantial

Monday, June 09, 2014

Basic convictions of technical analysis

Convictions of Technical analyzing in depth «Price reflects all, trends will likely continue and history repeats itself.»

I would say, it’s true in the first part – price reflects it all, what about 2 other? Will trends continue and will history repeat itself? It’s a big question because nobody knows what «trend» is for example.

Some people draw «trend lines», but more often than not they provide information that is already useless. Trend line shows trend when it is already confirmed, therefore it has lower odds for continuation.

Traders also use support and resistance, but it works only when strong demand or supply drives the market. Those technical methods will not help you identify strong supply and demand – the fact that price has touched some level twice is not the indication of strong demand.

But what is that?

Einstein once said that you can’t solve the problem using mindset that created this problem. To combine information that price gives us, we should apply one more parameter, and this parameter is time.

Of course you are using it in some ways, but traders often don’t use in consciously.

What time gives us?

Time is one of components of value. The more time we have, the more value we can create. Simple example is interest rate. If you put some money in the bank, interest rate multiplied by time will increase your capital.

The same is in trading. The more time market spends near some given level, the more this level is validated.

There are some clues when you employ parameter of time compared to parameter of price.

Corrections are not deep enough.

On screenshot below you see no spikes on the way down:

Trend is likely strong if:

Usually they don’t exceed 25% of previous move up.

It means that strong buyers are probably dominating. To make things clear – by strong buyers I mean «buyers with distant stops», not «buyers with unlimited pockets». But more often than not those who can move the market and yet have distant stops are huge enough, be sure about that.

Why does it work that way? If you see weak buyers involved, they would liquidate quickly and market will go after their stops – you will see rapid «spikes» on the way down.

I will cover more on this topic in the days to come ! Keep Checking for Updates

Thursday, June 05, 2014

Types of Swing trading.

Swing trading and its types update

What is swing trading? How "swing trading" differs from «momentum trading»? Actually, there are many approaches to swing trading, but I will express my point of view on the subject.

Swing trading is trading on intervals more than 1-3 days, some traders may call it «long term» or «medium term», but in fact, good swing trade can last no more than 4-5 days. Swing trades are usually level-based trades.

For example, if you trade momentum, you can capture short-term overbought or oversold condition of the market (imbalance) and trade-off scenario of inventory correction.

Swing trading basic based on rejections and hotspots areas

I basically trade 2 types of swing trades – «rejection trades» and «hot spot trades»

How do they look like?

In this post I will talk about "rejection trades".

Briefly, rejection is a reversal. It’s that simple. But there’s one small nuance. Rejection level is not a «support» or «resistance» level. Actually, there are no support and resistance levels – there are only areas of support and resistance. And they are usually located where majority of traders don’t seek them.

Important principle:

Before ever considering fading correctional move, you should see signs of support/resistance before. Sun Tzu had said: «Every battle is won before it’s ever fought»

The same is in trading. Every reversal is made before it’s occurred. Weird, huh?

Reversal is just a paradigm shift in heads of market participants. Before reversal, market must have strong imbalance between demand and supply, otherwise no power can drive the market against existing trend (even correctional)

So, to decide whether to join a trend or not, you should see signs of big money buyer (seller). As you know, institutional buyer will tend to accumulate, to slowly build his position. More often than not those guys are not speculators in conventional way – they accumulate position by given price, then use purchased asset in business outside the market.

So, if you see that market tends to show you very well traded levels in the center of the day and poorly traded levels on the extremes of the day, it can be a sign of accumulation if this process goes long enough.

Look at the chart of usd/chf – you have seen signs of big buyer accumulating long here – look how price is leaning to the area 0.8970. How do you think – why market shows strange consensus around this level?

Also, you expect to see «neutral» or «normal» days as the process of accumulation goes on. Neutral day is day with very low tempo and aggressiveness – it closes near its open. Normal day is more aggressive day, yet it also closes near its open. These days also help you find accumulation areas on the chart

Usd/chf update

Here is the update

New Usd/chf chart update

As I mention earlier in my post, sometimes it is easy to find reference points rather than mere support and resistance and current rally is a example of that and Price was willing to rally after strong consolidation for days and that is where we should stay alert.

Are we seeing another attempt before ECB decision

usd/chf Intraday update

USD/CHF Intra-day Technical update . Are we seeing another rally

There are some things that mostly day-traders do and rarely (if not never) other time-frame traders do. As an example - reaction on short-term reference points.

Price action indicates - what market does right now, but we need to know not only that, but - what to expect from the market? What can we anticipate?


While we analyze any chart, we first rely on the recent price action and rely on reference points, which are short term location where price lean after break out, Candlesticks chart or support and resistance traps are quite often ( I don't think that there are any such strong and resistance area as there are extremes and rejection areas and it is important for us to know how market react after breakouts)

With candlesticks, I don't trust any patterns as there are often strong breakouts are followed by reversals,Big buyers used Candlesticks against the strong trend to reverse the price for liquidation purpose and to trap the traders who don't know what is "Context" and what market tells you to do after such a candle appears and price did not follow through or pause for few sessions.

Monday, June 02, 2014

usd/jpy strong accumulation period after breakout


usd/jpy Intraday update

usd/jpy Intraday update . Are we looking at culmination ?

The reason I was concerned with this trade, because there are not too many times price has lean near those high prices and downside price action was rejecting from low prices.

To spot «weak holders» activity, let’s think – what levels will be not interesting for big money buyers/sellers?

They are – sessional highs/lows, previous days highs/lows.

We see some participation from level above and price freezes near level below. If it reverses from this point, probably it will be a sign of day-traders purchasing there.

Big money players are not interested in that levels – they don’t attract enough volume for them(Like the one I mentioned where are set my stops), Big money buyer will rather act inside of consolidation, because he needs volume to execute his position. (They rarely react at daily price extremes) Now if you have two attempts from day-traders to play long and to play short, you may want to see – what group is going to earn money.

If sellers will have good prices to exit (prices will breakout to the downside quickly), then probably market is driven more by strong (professional) supply there, if day-trading buyers will win, then some strong (professional) demand is there and helps them.

Usd/chf real time update.


usd franc real time update based on Intraday chart !

As I mentioned in my previous posts that trading is advertising mechanism and we have seen this in the pair when Institutional money is continously buying at low levels, For those who did not follow my previous post check it here !

Price action does give us hints of buying

In this chart we have seen some strong trend breakouts and recent breakout we have two scenarios, One price after second breakout was holding higher prices and when we have few neutral activity days and if that strong holders, which it was, will test the low and shift in value and then they start buying again with even more force.

If Our assumption is correct price will break the barrier and will make a new high and that should not enough as we would start covering our position if we see any such activity.

Demand and supply are very crucial aspect of trading and when price is in strong swing it gives us an entry to renter at pullback but we must consider a thought that why such entry is offered, and any logic behind offering such entry.

When we have good solid background which tell us that buying activity was there even while correction and any such area which has hold before could be a good clue of price will advertise higher again and even with strong force that it was done earlier,

Popular Posts