Newbie here

Philippe90

Newbie
2 0
Hi everyone,

Looks like an all right forum.

A little bit about me. In the past couple of months I've been doing some rather general reading about 'trading' (not necessarily just forex related), with the view to eventually have an income stream in addition to my day job. Perhaps a rather ambitious goal, granted; but one which I will attempt to plan well, just as one would presumably plan well for any business venture. One thing that attracts me to forex is its extensive trading hours compared to other markets.

I'm very much still learning at this stage, about how to approach the whole thing logically - that is, to make trades with a positive expected return, all things considered. It's not possible to monitor all variables - but important ones I plan to, on the technical side that is.

When different variables align that signal a certain likely direction a pair is to take, that's when I would trade.

I'm currently experimenting with analysing certain
1) price action based analyses: candlestick formations, key support/resistance areas (whole numbers, previous rebound/bounce points) and
2) commonly used technical indicators (bb bands, moving averages, rsi etc), insofar as many traders will be on the look out for these and basing their trading decisions on them

Putting it all together, my approach would be when different factors co-allign, it makes a trade more likely to succeed. .e.g.: rejection candlestick formation in a double top area [ii], in which a moving average line is also intersecting [iii].

If anyone would like to chime in with some thoughts, that would be appreciated.

Have a good day!
 

timsk

Legendary member
7,135 1,909
I'm currently experimenting with analysing certain
1) price action based analyses: candlestick formations, key support/resistance areas (whole numbers, previous rebound/bounce points) and
2) commonly used technical indicators (bb bands, moving averages, rsi etc), insofar as many traders will be on the look out for these and basing their trading decisions on them
Hi Philippe90,
Welcome to T2W.

Experimenting is a natural and fun thing to do when one starts out (well, at any time to be fair), but it's focused study that will really serve you well. Specifically, that means developing a thoroughly researched and tested trading plan. Whatever the market throws at you, you must know how you will respond in any given situation. Check out the third link in my signature if you want an idea of how to develop a trading plan.

Regarding technical indicators, I think you're barking up the wrong tree here. If you think that a market as large as forex is going to reverse down because RSI is overbought or because price has hit an upper Bollinger Band - then you need to think again. There might, possibly, be some merit in this idea if everyone - especially the major institutional players who affect the big moves in the market - are all looking at exactly the same indicators, on the same settings and on the same time frames. And this assumes they're only looking at a single forex pair in isolation. Trust me when I tell you they are not! The nearest you can get to this is to have a 50 and 200 moving average on a daily chart, as those averages are often used as bell weathers for the market - but that's about it.

Having said the above, if you find an indicator that you like, that indicates something of value over and above what you can glean from price alone, and is incorporated as part of your trading plan - then that's fine. But tread carefully, as indicators can create more problems than they solve and, certainly, they are not the magic panacea that unlocks the market's riches that many newbies imagine them to be.

Good luck with your journey!
Tim.
 
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Philippe90

Newbie
2 0
Timsk, thanks for your input. ,

Yes, ultimately it's the "big players", not retail traders, who impact the market. So your suggestion, by implication, is that one ought to look out for what the "big players" look out for?

In terms of the use of technical analysis, if indicators are largely unhelpful (e.g.: in the sense, if indicator x and y and z does 'a', then I must do 'b'), then it's best to analyse in terms of price action (key support/resistance levels, trend lines, candlestick formations etc)?

Thanks for the links.
 

timsk

Legendary member
7,135 1,909
Hi Philippe90,
Yes, ultimately it's the "big players", not retail traders, who impact the market. So your suggestion, by implication, is that one ought to look out for what the "big players" look out for?
In a word: correct! The impact that retail traders have on most markets is at best small. In the case of forex, it's inconsequential. As a general rule of thumb, if you can work out the flow of 'smart money' and and then tuck yourself comfortably in its slipstream - you will fair well. Easier said than done of course! Probably the most popular way of achieving this objective is to define the trend in a higher time frame than the one you're trading - and then only take trades in that direction.

In terms of the use of technical analysis, if indicators are largely unhelpful (e.g.: in the sense, if indicator x and y and z does 'a', then I must do 'b'), then it's best to analyse in terms of price action (key support/resistance levels, trend lines, candlestick formations etc)?
Taking action based on the confluence of three indicators (or just two - or twenty) isn't necessarily the 'wrong' thing to do and, indeed, it may be a perfectly valid course of action if it's a tried and tested part of your trading plan. However, if you're just experimenting with a clutch of indicators in the hope that you'll magically stumble across the right ones, on the right settings and on the right time frames - then I suspect you'll be looking for a very long time.

My suggestion - and it is only a suggestion - is to start by looking at price and only introduce indicators if price alone doesn't tell you something you want to know. For example, if you're looking at a bunch of different charts and there isn't enough screen real estate to show a lot of price history so you can't easily determine whether price is trending and how strongly - then introducing a moving average may solve that problem. If you deploy a mean reversion strategy, then Bollinger Bands or Keltner Channels may help determine the extent to which price has deviated from the mean. If you want to trade only when volatility is above or below a certain level - the Average True Range may be helpful to you etc., etc. The key IMO, is to work out what it is that you want to know and, having decided on that, to then look for an indicator that might address the problem. If you can manage without them, so much the better, because that's one less thing to worry about and, potentially, one less thing to mislead you. And believe me, there are plenty of things that will mislead you in this game, the biggest of them being the little voice inside your head!

Hope all that makes some sort of sense!
Tim.
 

NVP

Legendary member
37,081 1,916
Most traders use confluence to signal trades.....find the ones that make most sense to you and don't have to many.....people focus far to much on signals instead of also focussing on achieving perfect execution of entries and exits....that's where the money is also made or lost......you have to be the perfect all rounder to make consistent money

My systems are using relative strengths of currencies......I focus on the main movers and pair them up when I see momentum......most of my trades are trend based continuations.....and I add a few other rules to assist me......but as a scalper I have to be very disciplined with my entry and exit routines.....if I get sloppy then I will lose pips needlessly ......and that all adds up

N
 
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