What are the types of analysis need to do in Forex Trading?

[Fugazsy]

hi Fugazsy

A flag in the traditional sense has a sharp move followed by consolidation to form a wedge or a pennant. I don't see a flag formation here but rather a steady downtrend followed by 4 months of consolidation with lower highs within. In fact, if i were to reference this to traditional patterns, it more closely resembles a descending triangle which is a bearish pattern but really only offers 50% chance of playing out.

you also mentioned double and triple bottoms in your diagram. In TA these do indeed represent trading opportunities, however, in relation to the downtrend they are in a technical sense (against the trend). In the years i practiced TA, I invested a lot of time looking at this and found that it was more or less a coin flip success rate. For this reason, a trader will need to assume more risk and wait for confirmation (breakout or trend formation)

I tried both approaches with moderate success. The problem i found was that however i tried, only a few trades nailed a trend and when you account for the ones that didn't then you end up with far less profit through losses and trading costs. So while i do agree it works technically, you need to have those home runs to pay off costs and losses. Fundamentally i am able to filter out those losing trades and run trends far more efficiently that i ever could technically. When i establish a fundamental shift is taking place i will take profit and get in at better prices multiple times knowing the trend is there without guesswork. I can get in with higher confidence before double bottoms form or other traditional patterns and start slicing profit on multiple trades. I couldn't dream of doing this following a technical approach and believe me i gave it a decade of trying. The problem wasn't failure but rather the ability to stick with the ones that allowed the absorption of losses and costs.

I know everyone is different in how they do this but in my experience i have little doubt that my account is growing significantly more than it did using TA as primary analysis. I should also point out that individual data points released do not give the trader enough information to establish if a trend is forming. Anyways, i respect you way of doing it, this is merely my standpoint on the matter.

laters

Forker

Thank you for your post.

I agree with you on your perception.

Regarding the right terminology of a pattern or of any TA I do not consider myself a filing clerk (close is close enough. there are not perfection in art form), to me a flag is a pause (horizontal or vertical) of the prevailing trend as clearly shown with the weekly chart, in this case also a bear channel, bear channel are normally bull flags, they will end to continue in the main direction (not always), traders will look at the main trend and enter at any signals from 1/3 to 2/3 (value) of the retracement, here prices stalled at 50% with a small convergence turning the channel in a wedge.
Here there were clear evidence (TA, double bottom and so on) of buying pressure in terms of entering the new direction or covering the old one.

It is not important to define TA in a visual matter, more important is to define the motivations of the participants trough TA, viewed in this optical may be a bit more difficult (understanding the mass psychology of the participants) but when done in this manner can be quite fascinating in term of gratification and in terms of financial remuneration.

Said that again I am not implying it is the right tool for everyone, it is an art form where we need to bring our self forward to be able to melt with its fluidity,it will help if our personality relates to it.

TA can be also very subjective: print a chart, close your eyes a spit on it, you will notice market had turned (major reversal), continued (break out), or paused (fading minor reversal) at your impact.

In forex I am aware of FA but the chart is enough for me to tell me who is in charge, often I use news to fade the move: in a bear a positive news is great possibility to fade the move and so on. I also keep away (but not always ) in trading around major news.

 

[Fugazsy]

"I began to realize that the big money must necessarily be in the big swing. Whatever might seem to give a big swing its initial impulse, the fact is that its continuance is not the result of manipulations by pools or artifice by financiers, but depends upon basic conditions. And not matter who opposes it, the swing must inevitably run as far and as fast and as long as the impelling forces determine".

"Obviously the thing to do was to be bullish in a bull market and bearish in a bear market. Sound silly, doesn't it?... It took me a long time to grasp that general principle firmly before I saw that to put it into practice really meant to anticipate probabilities."

Lefevre

 

[forker]

I know where you are coming from as I was in that mindset and didn't think news would make a difference. I was unhappy with my growing account because it wasn't growing fast enough. No matter what I did I couldn't decrease the size of my losses and my account was growing at approximately 20 percent a year on average with some years being less as I tried to tweak it. Only when I mixed the 2 did I start to see a pickup and when I tried avoiding TA altogether, that's when I noticed a significant reduction in losses. I also believe I am having longer trend trades and trade news which I never did before and it's paying off. This is my best year to date. Gloating over, seriously, give it a whirl sometime, it's not as much work as you think.

 

[Fugazsy]

I know where you are coming from as I was in that mindset and didn't think news would make a difference. I was unhappy with my growing account because it wasn't growing fast enough. No matter what I did I couldn't decrease the size of my losses and my account was growing at approximately 20 percent a year on average with some years being less as I tried to tweak it. Only when I mixed the 2 did I start to see a pickup and when I tried avoiding TA altogether, that's when I noticed a significant reduction in losses. I also believe I am having longer trend trades and trade news which I never did before and it's paying off. This is my best year to date. Gloating over, seriously, give it a whirl sometime, it's not as much work as you think.

I am glad for you finding your own way.

 

[Fugazsy]

TA has many facets which can be overwhelming and confusing but a street smart trader makes chooses by being selective to reinforce his edge, he cares not to be right but to make money, he also knows his psychological make up will constantly try to derail him, but to be aware is a step forward for expansion which is the opposite of contraction.

When he looks at any instruments PA is always shifting between a few phases: trend (spike), channel and range. Channels are hybrid between trend and range, they can be narrow or large, fast or slow, when large they are traded like range, when narrow they are traded like trend with limit orders (not enough space to swing a mouse).

So, prices move fast (trend), then a few minor TL's get broken and prices set in channels in his various aspects, then prices normally shift into range before they break out in either direction and so on and on again and again.

A street smart trader will specialize (in a sea of uncertainty) in all the above phases or in one only, with time and experience he will gain confidence and know more than most (giving him a stronger edge), here he will start to become a professional in his own game and gave him the gratification in knowing he can compete with anyone else in his own field.

He know by only following PA does not need to follow anything else but he is also aware of anything else.