Charting From a Different Perspective

I was reading DailyFX's weekly trading lesson today and doing so pushed me to exploring something entirely off the subject.  But first, let me talk a bit about the lesson content.  The lesson was on head and shoulders chart patterns.  I certainly have read enough about chart patterns, head and shoulders being one of them, but I've actually never traded this chart pattern.  The lesson is short and basic and if you don't know much about the pattern, you can read the lesson at http://www.dailyfx.com/story/strategy_pieces/weekly_trading_lesson/Weekly_Trading_Lesson__Head___1173715146697.html.

The example the author gave pertained to the EUR/USD on a 1-hour chart.  The head and shoulders pattern is actually still in play as I write this.  In looking at the picture of his chart, I could clearly see the two shoulders and head.  I then went to my Metatrader charts and opened the 1-hour EUR/USD but I could not see the pattern.  Here's what I saw when I opened my charts:

 

 

 

 

 

 

 

 

I don't see the head and shoulders, do you?  Call me stupid but I never thought about getting a different perspective by changing the zoom level on my charts.  I usually only zoom out at the most one level on my Metatrader charts.  But yet again, I never really thought about zooming out further.  Yes, I feel like quite the amateur but here is what the same chart looks like zoomed out two more levels:

 

 

 

 

 

 

Do you see it now? It isn't perfect but it's pretty evident.  

Popularity: 2%

Ichimoku Charts Book

Harriman House, publishers of finance, business, economic, and political books were nice enought to send me a free copy of "Ichimoku Charts: An Introduction to Ichimoku Kinko Clouds" which I received last week.  The author is Nicole Elliott, a trader for Mizuho Corporate Bank.  I had seen Nicole's name before when I regularly visited the Mizuho bank technical analysis research website.  You can find the links for this and other recommended sites at http://list.forexproject.com.  I found this site very unique in that it was the only technical analysis site where I've seen the exclusive use of ichimoku.  So I started reading the book last week and my first impressions are that it's refreshingly unique material, challenging, yet rough around the edges.  The author is a trader and not unlike me, probably not a trained writer.  In addition, I think she may be European so I cannot relate to some of the non-trading terms she utilizes.   Like I said before, a lot of the information contained in the book is totally new to me so I have yet to grasp a lot of it.  Overall, I'm intrigued and looking forward to reading it further.  When I have time to allow the information to marinate in my head, I'll be sure to pass it along.  Let me leave you with the main elements explained within the book:

1. candlesticks
2. 9 and 26 day moving averages
3. the Cloud and its size
4. Chikou Span
5. long term wave count
6. short term wave count
7. the Wave principle
8. price targets
9. time principle 

I can't fully review the book until I'm finished so I'm hesitant to recommend it but if you are really interested in learning more about the elements above now, you can always buy the book at  http://www.harriman-house.com/pages/book.htm?BookCode=22962

Popularity: 3%

Ichimoku Cloud Filters

I have had interest at times in the Ichimoku indicator mostly for longer term trades.  The information on the internet or in books related to this indicator such as how to interpret or trade using it are very thin at best.  So when I find new articles related to the Ichimoku, I think they are worth posting.  There is a new article titled, "Ichimoku Cloud Filters Information Storm" on Investopedia that gives a good overview of how to interpret the components of the indicator and also an example of how to trade using it.  The author, Richard Lee compares the use of the Ichimoku to the use of your run-of-the-mill support and resistance lines.  

http://investopedia.com/articles/forex/06/ichimoku.asp  

Mizuho Corporate Bank provides daily technical analysis for most currency pairs for free and their analysts use the ichimoku in most of their charts.  This may be a good place to see how they use the ichimoku each day if you want to learn.  http://www.mizuho-cb.co.uk/TresInternet/TECHNICALS/Index.htm  

Popularity: 4%

I’m Not A Swing Trader

Even though most of my trades are supposedly swing trades, I don't think I know the first thing about swing trading.  In fact, I don't know the first thing about price action.  Well, I know a little but certainly not enough to be successful.  I was reading through the forums last night and came across a webinar by Linda Raschke on price action and swing trading.  Reading articles and forums are great but watching videos can teach you so much more.

I found this video to be very helpful and I'll post the notes I took while I watched it:

• Trends
  have greater odds of continuation than reversals
• a trend
  seldom reverses without warning

trend
behavior

• once a
  trend is established, it takes considerable power and time to turn it
• a major
  trend seldom reverses without warning
• the
  absence of any pattern or swing in the price implies a continuation of trend
• trends
  tend to begin out of a low volatility environment

Very important

• momentum
  precedes price
• if
  momentum makes a new high or low, the odds are that the price high or low is
  still to come
• a
  trader should look to establish a position on the first reaction following a
  momentum high/low
• there
  are usually at least 3 impulse moves in the direction of a trend

How to
see if momentum decreasing or increasing?

• by eye,
  when downswing is greater than previous upswing, market is telling you that
  supply demand imbalance to downside
• when last
  downswing greater than previous downside, momentum is increasing
• when last
  downswing is less than previous downswing, lessening momentum
• lessening
  momentum doesn't imply reversal, just that you may see some consolidation
• need lower
  lows in indicator (momentum) and lower lows in price
• the
  longer the sideways line, the greater the potential move

Technicians
job

• what
  is the trend on the current time frame?
• what
  is the trend on higher time frame?
• what
  are support and resistance levels?
• is
  the market in a trading range or trending following a breakout from a range? 
• is
  the market in a range, is it moving from the high of the range to the low or
  low to high?
• if
  the market is trending, is there an increase in momentum or a decrease in
  momentum

1. what is the main play - based on existing
   structure; looking for small or bigger play
2. risk
   defined by swing lows or swing highs

• higher
  high and higher low after downtrend indicates a possible reversal.  Warning!!!!  At the point that the higher high is taken out, we have a reversal

• flag
  formation occur in trending market
• trading
  with the trend

simple
bull and bear flags

• 
  do
  not look for flag formations in a trading range environment
• do
  not look for flag formations after a buy/sell climax

• work the
  market from 1 side

I would recommend you check out the webinar yourself: 

http://www.cciclub.com/marketvu/linda-raschke-swing-trading.html

Popularity: 4%

The Best Traders on Oanda Forums

I know it isn't easy to define who are the best forex traders because really, you only know how good you are.  Knowing this, I posted to the Oanda forum asking the more informed and experienced users who the most "successful" or experienced traders were.  

www2.oanda.com/cgi-bin/msgboard/ultimatebb.cgi

I received a response with traders whose member names were
~chaffcombe , blueingreen, oldhand, craigatk, altman, Airoekhion, and danielgsx.  I wanted this information because I really want to concentrate on reading posts by them with the hope of learning more.

The post that caught my eye asked the question, "Right tools for trends and ranges?"  The post is located here: http://www2.oanda.com/cgi-bin/msgboard/ultimatebb.cgi?ubb=get_topic;f=15;t=004808;p=1

There are a lot of recommendations but I was watching what oldhand had to say:

While I agree with the "eyeball" indicator, I'd have to disagree about
the value of "indicators" taken by many. For example, s/r lines,
whether horizontal or angled are probably used by all traders to
greater or lesser degree and they are just as much "indicators" as
MACD/RSI/CCI etc. Trend lines and channels in my experience being the
strongest of all devices to suggest high probability directional clues.
What about moving averages? The 100/200 SMAs in virtually all time
frames are a must for any trader to track. The 200 SMA especially on
weeklies and dailies is a must and to ignore such an indicator or be
oblivious to it is guaranteed to lead to mis-steps on trades. Not
knowing Fib levels for your price analysis is likewise operating with
one eye closed.

Whether
"indicators" inform about some objective underlying reality about price
patterns or simply are self-fullfilling reations of various trading
segments is a question that can never be answered one way or another.
But, the fact that the majority of traders rely upon the variety of
indicators to make decisions is not in doubt. Your best trades are
always going to be when a variety of indicators, whether moving
averages, Fib levels, trend lines etc all line up at certain points and
within different time frames. For example, if you see price touch a
channel line on the daily and let's say the 3 hour, and RSI is in over
sold/bought territory, and a Fib level is at the same point, and MACD
or Momemtum paint a divergence, price is going to react in a major way
and predictably. Why? Simple really. The different trader segments,
some weekly or daily players relying lets say on channel lines, and
another segment relying on Fib levels, and another on RSI levels and so
on, are going to all react at that point causing a counter price
movement. How far price will move is very difficult to predict but
direction is not.

So, I'd say a study and attention to indicators is a must for any trader and well worth the effort.

Popularity: 33%