FX TRADING SYSTEMS


2016, showed how price reacts to ‘market maker’ levels above the previous daily highs and lows. If these levels are within the golden zone, and you blend other resilience factors into these levels – previous daily volume highs


and lows, previously transacted higher timeframe volume and liquidity – there is compound probability of price reaction. Extensions levels – specifically the Golden Zone – provide a final trading context.


Example – Trading Divergence in Context


Impatient traders can be dazzled by market


volatility and price


inefficiency, with an inability to stay out of the market. If you are an impatient trader, and like Wilde can resist everything except temptation, then you need context. But how can we use this extension data, convincing though it is? Where does information get added to data, and value added to information?


Figure 5 - EUR/USD - Follow Trough if 162 Extension is Broken


Figure 7 - Example Price Behaviours in Context shows the extension levels plotted out for each day on the EURUSD 1-hour chart. The chart also shows momentum divergence


as revealed by the


310-Oscillator (Linda Raschke’s modified MACD).


A number of separate ideas blend to form the expectation of a manageable trade setup:


Figure 6 - Patterns of Behaviour for 2016 Across Several Pairs


A move lower, below a recent swing low, or a break of the most recent trend line, could be something to watch for


44 FX TRADER MAGAZINE January - March 2018


1. Bearish momentum divergence is shown with the extension zone at 127E adding to the probability of resistance. Note the ‘market maker’ level at 1.0825 bounded by the 127 extension, with an expectancy modelled independently in the first article in the series (Q3/Q4 2016).


2. Bullish divergence is shown within the ‘golden zone’, with 162E adding to resistance. Again, note


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