Post of the Day - Page 10 - DailyFX Forex Forum

Richard Krivo · #**136** (**permalink**) 02-15-2009, 06:29 PM

Quote:

Originally Posted by javier1965

Excuse if I get in the middle of some fellow trader emotional trade-off. From my experience, if we keep it simple and we have the patient enough to trade on key support/resistance points we will be fine and we will increase our probabilities of success. I did hedge my lossing position a couple times for the same emotional reason NOT TO LOSE. "USDJPY and GBPUSD". I was hammer both ways because I did overtrade and I fail to see the simple facts of technical trading. From my own experience you learn more when you leave your position stop-you-out with a loss, rather than fighting the market and YOURSELF. Again I wish you great and successful trading.

Thanks for your input on this topic...

Richard Krivo · #**137** (**permalink**) 02-15-2009, 06:32 PM

Student’s Question:

Not clear on the benefits of using fast vs slow Stochastics. Can you post a graph showing both and their relative value for predicting trends?

Power Course Instructor’s Response:

I have posted a USDJPY Daily chart below with both a Slow and Fast Stochastic indicator on it.

In principle, the rules are the same...a cross above 80 with a break below indicates that momentum on the pair is bearish...to the downside. Conversely, a cross below 20 with a break above 20 indicates bullish momentum.

We would advocate the use of the Slow Stochastics from the standpoint that it is more "readable" since it does not react as dramatically to each price action movement, be it major or minor, that the pair may have.

Keep in mind that these oscillators will not “predict” trends. Rather they indicate momentum based on price action. A trader will identify the trend on the Daily chart and then use an Oscillator like Stochastics to time their entry in the direction of the trend on the Daily chart when momentum is shown as being in that direction.

So if the bias on a pair is bearish, a trader using Stochastics to enter the trade, would take a short position when Stochastics had been above 80 and then broke below 80.

Richard Krivo · #**138** (**permalink**) 02-16-2009, 08:26 PM

Student’s Question:

I am having a little trouble with this one. Seems like the markets are a little flat today so I had to go to the 15min chart to find an example. Seems like the EUR/CHF is about ready to do something (RSI approachig 30) but I am not sure what or how to place my trade.

Power Course Instructor’s Response:

Good observation on the EURCHF...

See the 4 hour chart below for more details.

If price action closes below the support level identified in red, that would represent a higher probability opportunity to short the pair.

With the RSI, a textbook usage of the tool would have been within the circled area. At that pooint, the pair is in a downtrend so we would be looking for a short position. The RSI was above 70 and broke below 70 providing favorable momentum for a sell with an Evening Star candle pattern on the chart.

Richard Krivo · #**139** (**permalink**) 02-18-2009, 08:34 PM

Student’s Question:

When drawing support and resistance lines should you draw them from wick to wick or body to body?

Power Course Instructor’s Response:

The main rule is that the lines can pass through wicks but not through the bodies.

Take a look at the chart below for some examples...

javier1965 · #**140** (**permalink**) 02-19-2009, 01:26 PM

Dear Mr Krivo:

I have a question about drawing support an resistance line.
I attached to charts.

Can I use current (for example, today's) market price to draw the support and resistance lines or shouls I wait for more price action for the support and resistance line be more reliable.

Thank you

Richard Krivo · #**141** (**permalink**) 02-19-2009, 05:36 PM

Quote:

Originally Posted by javier1965

Dear Mr Krivo:

I have a question about drawing support an resistance line.
I attached to charts.

Can I use current (for example, today's) market price to draw the support and resistance lines or shouls I wait for more price action for the support and resistance line be more reliable.

Thank you

Whichever chart time frame that you are using, as long as you only use "closed candles" (candles whose time frame has been completed) for your analysis, you will able to accurately draw support and resistance lines. Trading decisions and S/R lines cannot be based on open candles since until a candle closes, we do not know what it will be.

Obviously each candle will provide new and more current information but that is a never ending process...at some point we will need to "draw the line", so to speak.

Richard Krivo · #**142** (**permalink**) 02-19-2009, 07:28 PM

Student’s Question:

A. In determining the resistance and support, what interval chart should be used or does it matter?

B. At what point should you begin to chart new resistance and support lines?

Power Course Instructor’s Response:

S/R levels can be determined on any charting time frame.

First we would want to check the Daily chart on a currency to note the trend and any significant levels of Support and Resistance.

Then we would consult a 4 hour and/or a 1 hour chart to determine if an entry is possible in the direction of the trend on the Daily chart. Also, if levels of support and resistance that were noted on the Daily chart also appear on the lower time frame charts, they would be very significant levels to monitor for breaks above or below.

New S/R levels would be charted as the former ones no longer apply…they have been broken through and compromised. As you might guess, this will occur more often on the lower time frame charts than on the longer time frame charts.

Richard Krivo · #**143** (**permalink**) 02-22-2009, 08:04 PM

Student's Question:

What type of trade is good for new trader who start with small fund?

Power Course Instructor's Response:

A Swing type of strategy, as noted below, might the most favorable.

Also, trading less volatile pairs such as the AUDNZD, EURGBP and the CHFJPY would be the best as opposed to more volatile pairs such as the GBPJPY or the GBPAUD. From the Money Management side, and this would be true no matter what the account size, never risk more than 5% of your account at any one time and have a 1:2 Risk Reward Ratio in place on each trade.

Entering off of a smaller time frame chart, say a 1 hour, would be preferable to taking trades off of the Daily or the 4 hour charts as they would require deeper stops than a smaller account might allow.

You may find the information below to be helpful as well...

Richard Krivo · #**144** (**permalink**) 02-23-2009, 07:56 PM

Student’s Question:

Instructor, if you go back further in a chart you may notice a different support and resistance. Should you try to draw support and resistance lines after the most recent breakout? What is going to give you the most accurate reading?

Power Course Instructor’s Response:

Good question...

Looking at a Daily chart first and then determining the S/R levels on that chart is the way to go. Then looking at successively smaller time frames, 4 hour and a 1 hour and see how the S/R levels on the various charts compare will provide a good overall feel for the pair. S/R levels appearing on successive charts will represent the most strength.

Look at the most recent part of the chart first and see what starts to present itself to your eye and makes sense as a Support and Resistance level. As you determine recent levels, one can look back in the chart and see if those levels appear at other points on the chart.

After a while, this will become second nature.

Take a look at the GBPJPY chart below...

Very soon this pair will either close above resistance or below support as represented on the chart.

If a candle closes below support, a short position can be taken as that is the direction of the trend on the chart.

If a candle closes above resistance, the pair is continuing to build higher highs and higher lows which is a bullish sign. Personally, before I take a long position on this pair, I would want to see additional levels of resistance taken out to confirm the bullish pattern.

Richard Krivo · #**145** (**permalink**) 02-24-2009, 05:50 PM

Student’s Question:

Please tell me if this is a correct support and resistance line.

Tks

Power Course Instructor’s Response:

You definitely have the right idea here.

Keep in mind, however, that when drawing support and resistance lines (channel lines in this instance), the lines can go through candle wicks but not the bodies of the candles themselves. Once a line is comprised by a candle closing above or below it, the line is no longer valid.

See the chart below for a visual…

The red lines would be that ones we would observe for trading purposes.

When we discuss support and resistance, think of a room with a floor and a ceiling.

The FLOOR is SUPPORT and the CEILING is RESISTANCE. A large ball bouncing between the FLOOR and the CEILING represents PRICE.

When PRICE (BALL) hits the FLOOR (SUPPORT) it bounces UP. When PRICE (BALL) hit the CEILING (RESISTANCE) it bounces DOWN.

When the PRICE (BALL) breaks through the CEILING(RESISTANCE); the old CEILING (RESISTANCE) becomes the new FLOOR.

Richard Krivo · #**146** (**permalink**) 02-25-2009, 06:06 PM

Student’s Question:

What happens when price break through the Fibonacci levels, ranging for months without forming new highs & lows (even if it did not break through the Fib levels). In other words, the ranging highs & lows are still within that of the Fibonacci trend line high & low. Is it reliable to trade with this Fibonacci irrespective of how long the market ranges ahead? If not, how long can one rely on Fibonacci retracement line before resorting to a, probably, another Fib levels drawn with smaller trend line for new trades?

Power Course Instructor’s Response:

The chart you posted indicates a nice understanding of the Fibonacci Retracement tool. While the Fib line that you drew was accurate, it encompasses almost a full year of price activity...back to March of '08. Given the extent of that time frame, the retracements will be very extended in both time and pips.

Each of the Fib lines in yellow on the chart below are valid as well. However, since they represent shorter time frames, the retracements and new opportunities for trades will occur at more frequent intervals. As each new move to the upside creates a new Swing High and Swing Low, a new, current Fib line can be drawn.

Given the length of your original Fib line, I added two more (less often used) Fib levels at 23.6% and 76.4%.

Keep in mind that a trader can also drill down to a shorter time frame, a 1 hour or a 4 hour chart, and put Fib lines on those charts. The key, no matter what time frame of the chart, is to identify a new entry in the direction of the trend on the Daily chart.

Richard Krivo · #**147** (**permalink**) 03-02-2009, 08:51 PM

Student’s Question:

Daily chart shows broad downtrend since mid-July, but a very wide channel. Is that how an instructor would see it?

Power Course Instructor’s Response:

You have the right idea here...the pair is definitely in a downtrend.

When drawing support and resistance or channel lines, however, we would want them to come into contact with the candles at least three times for them to be considered valid.

Note the Daily chart on the NZDUSD pair below with trendline resistance in place.

Richard Krivo · #**148** (**permalink**) 03-03-2009, 07:47 PM

Student’s Question:

I think a crossover that occurs within the 80-20 channel can be used to enter trade provided we have other evidence like candlesticks supporting such move. A crossover above 80 confirms a overbought situation and below 20 confirms a oversold situation a trade entry in these levels gives a good probability of success.

Power Course Instructor’s Response:

I would agree, but let’s take it one step further…

Keep in mind that after the cross above 80 or below 20 occurs, we would want to see Stochastics break above 20 or below 80 before actually taking a position. Just by virtue of the crossover occurring does not mean a position should be opened. The indicator can stay above 80 or below 20 for quite some time under the right market conditions and continue to become even more overbought or oversold. If a trader takes a short position while Stochastics is still above 80 or a long position when the indicator is still below 20, they are setting themselves up for a potential loss.

Take a look at the chart below for a visual…

Midnite Rider · #**149** (**permalink**) 03-04-2009, 12:22 AM

I have taken the powercourse and have a practice account and a real micro account.There is a discrepancy between the practice account charts vs the real account charts.The same time frame charts,i.e. 1h on the practice account is different than the 1h on the real account.They are both Marketscope2.0 platform but the candles are different.Why should that be?Is it because they are each using different feeds?Since they are the same platform one would think that the charts would be duplicates of one another.

Thomas Long · #**150** (**permalink**) 03-04-2009, 08:12 AM

Quote:

Originally Posted by Midnite Rider

I have taken the powercourse and have a practice account and a real micro account.There is a discrepancy between the practice account charts vs the real account charts.The same time frame charts,i.e. 1h on the practice account is different than the 1h on the real account.They are both Marketscope2.0 platform but the candles are different.Why should that be?Is it because they are each using different feeds?Since they are the same platform one would think that the charts would be duplicates of one another.

While your live account charts reflect the data associated with the micro prices, the demo account reflects the data associated with the standard account prices. The spreads may be different at times which will show up on the charts. So while they are using the same platform software, the prices reflect the actual prices that you use to trade depending on the account you have open.