Trend lines / Resistance help please, pic's added.

[infinitym4ge]

Im trying to understand Trend lines, Resistance and support. i have looked at a few charts and i picked forex USD/JPY.

have i got the trend line and the Resistance correct in this chart? the time line is set to an hour. howmany tops would you need to come accross to find Resistance? where on my chart would i find support? or any more trend lines and Resistance?

if i was to now go short from what i see on this chart where would i set my stop? at about 99.50 im guessing?

A little help on this chart would be much appreciated! i will update this thred further along.

 

[infinitym4ge]

ive had another look at my chart and i think i have the trend line wrong because i started from a red candle. i have now drawn in a new trend line using a blue line.

im sure i have the Resistance correct here because the candles seem to be finding it hard to pass the 99.50 mark.

 

[alan5616]

ive had another look at my chart and i think i have the trend line wrong because i started from a red candle. i have now drawn in a new trend line using a blue line.

im sure i have the Resistance correct here because the candles seem to be finding it hard to pass the 99.50 mark.

The mistake here is where the trendlines are being drawn. In an up trending market, the trendlines are drawn underneath the price and not above it. Vice versa in a downtrending market.

 

[infinitym4ge]

Ahh thank you! right now i have a new line the "cyan" line, i think this is now the trend line. i think i still have Resistance at 99.50 am i right? on the other hand fom my chart would you say the trend would continue further? i personaly would say the trend was going to change.

your help in my understanding of resistance, trend lines and support would be much apprecaited!

thanks
chris.

 

[infinitym4ge]

My thinking of this chart would be, if the value broke above the resistance at 99.50 i would go long because the trend is going to continue, and if the value droped below the "cyan" trend line id go short because the the trend is going to change and my stop would be at the 99.50 mark?

thanks
chris.

 

[infinitym4ge]

Right i have had another look and im sure i have Resistance nailed, have a look at the next chart is the red line resistance? and the red circle where you would have gone long because the resistance has been broken and the trend is going to continue? the stop's still dont stand out to me yet

 

[cr6196]

Ther is no one way to trade a certain setup, the stop depends on the person. The stop should be positioned where your trade is wrong so if you went short around ur yellow line then 99.60 could be your stop, but you often have to watch for false breakout. Some people use Average True Range to work out a stop too.

If you wanted to go long on break of 98.60 then you could just go long immediately after it crosses and stop at the bottom of range maybe 98 but this means you could get caught out by a false breakout, more common in other crosses than yen at the mo. OR you could watch it breakout from 98.6 and then go long on the retest of 98.6 (support becoming resistance), this would allow a tighter stop.

There is no one answer and there are many ways to play every set up. There is no fixed stop either but it should go at the place where u are proved wrong.

I wrote this kind of quickly so mite be mistakes, lol.

 

[alan5616]

My thinking of this chart would be, if the value broke above the resistance at 99.50 i would go long because the trend is going to continue, and if the value droped below the "cyan" trend line id go short because the the trend is going to change and my stop would be at the 99.50 mark?

thanks
chris.

Hi Chris,

On the chart you show, there is resistance @ the 99.50 level. If you look back to the beginning of Feb, the USD has been steadily gaining against the JPY. In my opinion, this is looking to move above 100. I stress this is only an opinion.

Personally, I wouldn't consider a dip below the cyan line a signal for change of trend. If I was trading this pair, I would be looking for a break below 98.15 (the last area of consolidation).

 

[infinitym4ge]

Hello again, im slowly getting the hang of this, im currently paper trading and trying to get use to using these graphs.

cr6196 thanks, i guess what your trying to say is its down to personal preferance your own stratagy so to speak. im going to try and follow this chart over the next couple of days and continue to learn.

alan5616, i did what you said and looked back, something i havent done befor, over the last 4 hours it has diped below the cyan line but as you say nothing looks solid yet. oh and thanks again you have brought up somthing elce which is new to me (the last area of consolidation) ill have to read up about this.

the other question i had was how far would people be going in to trades like this? i mean when you see a clear trend change would you throw alot of money at the deal and watch it over the following month constantly updating your position?

it strikes me that when you watch the hour chart your in for the long run. im guessing that if you went for lets say the 15min chart you have shorter trades?

any ways here is an update on the chart and my trend lines following my "paper trading i have made .200" (i used the pip/ profit calculator on OANDA at 100 units per pip my P/L was +£14) which is quite good for me i guess, i realy need to look in to howmuch my posible loss would have been if it had have gone the wrong way and i was stoped out at 99.50

 

[cr6196]

It all depends, remember there are lots of different players in forex, some people hedging, some people are speculating etc.

On the whole, it is thought that IBs tend to look at 1H and 4H...this doesnt have any real relevance tho to how long you will hold the trade for.

Watching price action is the best way to understand when people are getting in and when they are getting out, like actually watching every tick, you can see where people get in, where they get out, when stop gets hit. As soon as i started doing this, it all became easier, you understand support and resistance far better.

i hope that helps

 

[cr6196]

this thread might help:

http://www.trade2win.com/boards/price-volume/37898-markets-those-involved.html

 

[infinitym4ge]

thanks for the quick response cr6196! i have tryed watching every tick and to behonest at this stage it was moving to quick for me i had to move up to 1H because i found it easier to follow. thanks for the link to that thread im going to save it and read it tomorow im finding now that im starting to understand support and resistance the graphs are starting to make sence. from what you have read sofar am i going along the right track?

thanks again
chris.

 

[cr6196]

yeah, the most important thing is to remember what support and resistance is telling you, price action! it tells you that at 99.50 or whatever it was that a lot of sellers entered there and pushed price down...as obvious as that sounds i found it took a while to click. Keep persisting though with watching it tick by tick on a 15 min or something, eventually you see the selling pressure, the buying pressure, you see when limit orders or stops have been hit.

 

[alan5616]

thanks for the quick response cr6196! i have tryed watching every tick and to behonest at this stage it was moving to quick for me i had to move up to 1H because i found it easier to follow. thanks for the link to that thread im going to save it and read it tomorow im finding now that im starting to understand support and resistance the graphs are starting to make sence. from what you have read sofar am i going along the right track?

thanks again
chris.

Hi Chris,

This may be worth getting a copy of to help develop your chart reading skills

It's an excellent paper-back that costs less than £10.
How Charts Can Help You in the Stock Market (Fraser Contrary Opinion Library Book): William L. Jiler: Amazon.co.uk: Books

A more expensive, and advanced, book is
Technical Analysis and Stock Market Profits: A Course in Forecasting (Traders Masterclass): Richard. Schabacker, Donald.(Ed Mack: Amazon.co.uk: Books

The latter book was first published in 1932 but, the examples and illustrations contained in this book are as valid today as they were 77 years ago!! If you get to grips with the knowledge which the author conveys, you will need little else to help you become successful. If there is such a thing a trading bible, then this is it (imho).

It doesn't matter whether you are trading commodities, indices or forex, the chart patterns contained in these two books are relevant. You will see them occur time and time again.

Over the years, people have tried using the very latest, technical indicator only to find that it "doesn't do what it says on the tin". Understanding price action and chart patterns are the real ingredients to becoming a successful trader.

 

[infinitym4ge]

Hi alan5616, i have a couple books at the moment and one of them is just an introduction in to charts by michael kahn. it is verry tempting to go in to live trading based on a few wins but im going to remain solid. i told my wife lastnight "when ican look at a chart and it begins to speak to me, then i might use real money". she thinks its a waste of time but i know there is something here which takes time to learn.

to be honest the best ebook i have come across has been T2W, the amount of info on this website is amazing.

P.s good call on the USD/JPY, broke the 99.50mark leaving some very nice support behind it.

 

[alan5616]

Hi alan5616, i have a couple books at the moment and one of them is just an introduction in to charts by michael kahn. it is verry tempting to go in to live trading based on a few wins but im going to remain solid. i told my wife lastnight "when ican look at a chart and it begins to speak to me, then i might use real money". she thinks its a waste of time but i know there is something here which takes time to learn.

to be honest the best ebook i have come across has been T2W, the amount of info on this website is amazing.

P.s good call on the USD/JPY, broke the 99.50mark leaving some very nice support behind it.

Hi Chris,

Assure your wife that it's not a waste of time. Buy her some nice flowers and persuade her round to your way of thinking.

There is a lot of good info on T2W. In many ways, there is too much. This could lead you to jump around from one strategy to another and delay your learning curve. I would suggest that you trade the demo account just on chart patterns and see how this works out. Leave all the technical indicators in the box! Mark your chart with S & R, pivot swing levels and draw trendlines.

If I am making this sound very easy; it isn't. The markets are very news sensitive, at present and volatile because of it.

 

[infinitym4ge]

Thank's alan, im sticking to trend lines and S/R's for the mo. im learning slowly and my understanding of the USD/JPY right now is its going sideways, i would aslso say there is alot of support at the 89.90 mark.

im going to take a punt at this, im off to work now for 8 hours and on my paper trading im going to place a stop at 89.90 and im going to jump in now at 99.300

what im finding had to understand with oanda is this, what do units mean? can you show me what my posible loss would be if i was stopped at 89.90 based on the units? this part realy confuses me. (hope you can understand that)

anyways here is my chat at the moment..

thanks chris.

 

[richen]

support and resistance traders have many different ways to interpret support or resistance.
listen support or resistance can only be determined by the eye of the beholder. why you may ask.
level's of s/r are constantly broken with fakes, giving slightly different levels but close in proximity.
find the medium between the fakes and draw a buffer zone top and bottom. that's the only correct way. the buffer zone is drawn the extreme highs and lows on ether side of the medium level that sits
in between.



trend line are also made to be broken, only to rejoin the trend. trend lines are not used for trends!!!!
got it !!! get it !!!! so to properly draw a trend line, you first must know that this line dose, as is other

lines like support or resistance, moving averages,etc. are primarily designed to be broken so traders
can suck you into the wrong direction. fib lines the same way.
but not always!!! they have to hold up some times, or price can not change direction or continue
in a direction. most of the time trend lines are designed to fake out traders. so knowing how
to draw them is ok, but knowing how to use them that's another story.
if you look close to your own example above if you were drawing trend lines all along that bull move
you could find several trend lines broken, and as soon as they are the trade re-joins the trend.
and novice traders are now spending their time re- adjusting a new trend line. lol how many trend
line breaks can you get out of this one screen shot. and each time rejoining the trend. a count three
good trades with the trend after the trend line break.

further more you can not draw trend lines on noise like the 5 minute, lol you guys kill me. the only reason
the 5 minute exists is to pin point entries. by seeing a quick higher high and higher low. for example.
there is no trend here. Think of it this way. first any one want to stand up and get killed here. if any one wants
to challenge me on this i will make you look real bad. any one?

Bull move example ; ok think of price that fluctuates with in an hour. price almost always goes except news
trades and a rare occasionally strong candle. price moves up in this case higher highs and lower highs
this goes on two three four times, then bang !!! price turns around taking out 50% to 70% of the total
move. Think about that for second ........ now it only takes out 50% of the one hour move. that means
some were on an upper time frame with out noise we are still looking at a higher low. then all of the sudden
the candle moves in to higher highs and higher lows again.fallowing price and trend lines down here is
a recipe for disaster. price moves to quick and to choppy to try an anticipate any kind of direction. or trend.

 

[alan5616]

Thank's alan, im sticking to trend lines and S/R's for the mo. im learning slowly and my understanding of the USD/JPY right now is its going sideways, i would aslso say there is alot of support at the 89.90 mark.

im going to take a punt at this, im off to work now for 8 hours and on my paper trading im going to place a stop at 89.90 and im going to jump in now at 99.300

what im finding had to understand with oanda is this, what do units mean? can you show me what my posible loss would be if i was stopped at 89.90 based on the units? this part realy confuses me. (hope you can understand that)

Sorry chris,

I can't help you on this. I prefer to spread bet and, at present, the SB co., which I trade with, give me a 6 pt. spread (GBP/JPY) which is as good or better than many DMA brokers.