TECHNICAL ANALYSIS


FX


from 108.81 breached the prior swing to warn of a change in trend. Yet we


also


note the Figure 3


bullish momentum of this phase was far more impressive than the bearishness of the preceding move to 108.81. In simple terms, the bulls have achieved more in 19 bars (+310 pips) than the bears managed over the preceding 19 bars (-205 pips). Whilst we still do not know if this marks a major swing low, we can see that sentiment has changed which undermines the bears.


If we are to now see relatively shallow retracements (above 38%) then our confidence of a turning point also increases.


Figure 4 early


signs of a reversal . If Using time and price


we are to identify several LH and LL, whose phase-2 waves account for 80-90% of phase one, chances are this is more corrective. If we were to ignore this relationship and simply focus on higher highs / lows then we run the risk of trading weaker trends or moves which turn into reversals.


To take this a step further we can also measure time and distance to


assess underlying


strength of a phase. In doing so, we can monitor for earlier clues for a change in trend of a higher timeframe


On Chart 1, the move higher


By referring to a higher timeframe (see Chart 2), we also note the bearish decline from 118.60 high has produced a messy trend’ of LH and LL, with large overlaps. The fact this was preceded by a remarkably bullish phase with minimal pullbacks has us strongly on the lookout for a return to a strong, bullish trend.


Combining techniques Moving averages:


Using multiple moving averages effectively


provides a multi- FX TRADER MAGAZINE July - September 2017 39


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