FX TECHNICAL ANALYSIS
The changes And so how is this done and what changes need to be made to achieve the returns private traders look for when venturing into trading? The answer is by moving away from trading on the lower time frames and stepping back and
finding
that all-important edge on the larger time not
instant gratification and
quick results
but by playing the long
game. And
by focusing not on many small winners on a daily basis but on a few large winners over weeks and months.
If you are new to
trading, I
r e c o m me nd adopting trading on the larger time frames and developing that all important edge from the very start as it is very easy to fall into a routine that leads to undesired results.
The criteria
As a long-term trend trader, I use the monthly, weekly and daily time frame to find my edge. Each time frame has its own purpose but I use them in unison to establish optimal entry points into what could potentially be an environment for a long-term tend to establish itself.
68 FX TRADER MAGAZINE April - June 2016
• Major pivots (defined by a particular logic - red and green lines on the chart). • Round numbers (every 1000 pips - also circled on the daily chart). • Annual levels - the high, low and close of the previous calendar year (represented by the pink lines).
I want to pay particular attention to these annual levels as they represent more than just support and resistance. I also use them to give me a bias to current price action. If price is trading above the highest price of last year, price has a bullish bias and I look for long
frames. By looking for
The monthly time frame
Tis is where I draw my major levels of support and resistance. I look at:
opportunities. If price is trading below the lowest price of last year, price has a bearish bias and I look for shorting opportunities. If price is trading between the high and the low, then it is generally considered a consolidation and this is when I stand aside. By waiting for price to trade above the high or low of the previous year, we are now starting to establish that all important edge.
Moving away from the lower time frames can help you achieve better results in the long term
Note: Trading is an art not a science. Te high and the low can sometimes be a fair distance apart, which suggests a trending market the previous year, in which an entry point into a current trend may present itself. It would not be a wrong move to test the waters
by entering a trade but I reduce my risk accordingly. A full allocation of risk for me is 2% but entering a trade between the annual levels would mean reducing my risk to 1% or less.
The weekly time frame
The weekly chart is where I look for trend direction. This is simply done by using the 200sma to give the overall bias of the market and then the 50sma as support or resistance. The logic of the 200sma comes from before the creation of the internet when traders used
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