STRATEGY TRADING FOREX

Currency Trading Strategy Number Fourteen :

And now for the tough part. I know my documentation says that the
forecast low and high for the next trading session can be M1/M3 or
M2/M4. However, trading is shades of gray. It is not a black and
white business. If it were, the world would be paved in gold, and
everybody would be rich. Now, we wouldn’t want that would we? The
forex would be nothing more than a Church at the end of a road
connected to a river bank at the other end with nothing in between.
The point I am trying to make is that the “actual” low and high for
the next session could very well be any combination of M1, M2, M3,
and M4. It could be M1/M4, M2/M3, or combinations of the other five
pivot points.

The M1/M3 and M2/M4 calculations are just guideposts,
but are not poured in concrete. Price is the number one indicator. It
will determine what the low and high are going to be. And one other
thing, you should use these forecasts in conjunction with the other
three “tools” in your forex trading toolkit – “reading bars,” MACD
divergence, and trendline analysis. In other words, if price has been
trending down from the past session into the current one, price is
trading at, say, M3, and price is still going down, then M3 may very
well be the high for the new session, regardless of the fact that my
system may have called for M4 to be the high. So, use the pivot
points in conjunction with other three possible signals – “reading
bars,” MACD divergence, and trendline analysis. I have seen it
happen, as in the example just given, where price was trending down
from one session to the next right through M3 at the open of the
next session – simultaneous with the formation of a “double top” bar
pattern. Well, there you have three indications that price was headed
south for sure. And, I believe MACD was also trending down in that
particular case. So, that was another clue that the high for the
session had probably already been put in.

Currency Trading Strategy Number Thirteen

Only use “reading bars,” MACD divergence, pivot points, and
trendline analysis in your forex trading toolkit. That’s all you need for
this market. Be a technical bigot. Focus on pure technical analysis,
and avoid funnymentals. Even news is factored into price action, so
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you don’t need to be up on it each and every nanosecond.

If you
don't have my .pdf file on reading bars, please send me an e-mail,
and I'll forward it to you: prbain@tradingsmarts.com As was pointed
out to me by a client, "reading bars" includes spotting double, or
even triple, tops and bottoms.

Currency Trading Strategy Number Eleven

That all said and done, if you entered a trade close to a pivot point,
or a particular significant bar pattern (like a double top, for instance,
or a trendline breakout), place your stop on the other side (but not
too close to) the event that caused you to take action. This is
because price has a tendency to snap back to that situation that
caused it to bolt away from it in the first place. If you follow the 20-
30 pip stop rule, but a 33 pip stop on the other side of that event
would safeguard you against such a reaction, then so much the
better. So, yes the stop rule is 20-30 pips, but within reason of
course.


Currency Trading Strategy Number Twelve

Stops (read “stop-loss”) are for insurance purposes only – not
necessarily for taking profits. However, you can most certainly
employ “trailing stops,” whereby you keep moving your stop up (or
down, whichever the case may be) to protect your profits, as price
advances, or declines.