WHY I AM LOOKING AT EUR/CAD FOR BUY I see the forex market from both microscopic (fundamental) and microscopic (technical) perspective. When a patient consult a doctor, he examines the whole body to have an idea about the illness, but for him to arrive at a diagnosis the doctors must perform specific test. When the results corresponds with his general examination, he treats the patient based on the diagnosis. However, sometimes even when the general examination and the tests points “perfectly” to a particular disease the patient does not respond to treatment, but for a good and highly doctor this happens on rare occasions. So in forex a trader examines the market generally, looking at the fundamental, which comprises- News, Government intervention, Political state, Employment state, GDP, Trade balance, PMI, PPI etc. If his fundamental analysis does not reflect his “tests” (technical analysis) then it is dangerous to execute that particular trade. So the fundamental is as important as the technical. However, there are times where everything fall in place; you are so sure but the trade moves against you; resulting in a loss. As a good trader this should be limited to at most twenty percent of his trades. This is where money management plays an important role which effectively protects a good trader. MY TECHNICAL ANALYSIS OF EUR/CAD FOR BUY........ {I have attached a picture of a chart, so download it and use it as reference} This week after my fundamental buy analysis, i decided to look at EUR/CAD. How does this reflect in my chart using my code: DR PRAS D= Divergence R=Resistance P=Peaks and Bottom A=Averages (moving averages) S=Stochastic. RESISTANCE From the picture of the chart above, let me consider the Resistance, using bottoms of price movements, stochastic and RSI from the chart, I have points A and B. At a point A1 and B1 the market formed “bottoms” at the same resistant line or level which was reflected by the stochastic at point A2 and B2 respectively, and RSI by point A3 and B3 respectively. What i meant was simply that the price reached the bottom A1 bounced off to point O and moved down to point B1, so A1 and B1 formed a resistance line which the price could not break through line connecting A1 and B1 which is the resistance. DIVERGENCE There are two types; (a) Classical ( which i used in my analysis)- when the price makes lower low and the indicator(STOCHASTIC) makes a higher low . for example- as the price drops from point P1 to point B1, stochastic moves from point P2 to B2. This is an example of classical divergence. (b) Hidden Divergence ( not applicable here) - when the price makes a higher low or lower high the indicators makes lower low or higher high. The example will not be covered here. Therefore, using resistance and divergence from my chart, this was buttressed by a green trend line which retested point B1. This formed my technical on high time frame (daily chart) for buying EUR/CAD. Also double bottom was formed between A1 and B1. Summary Forex my technical bias for buying EUR/CAD (1) Resistance line at points A and B of price and RSI (2) Divergence of stochastic (3) Technical line ; price retests trend line at B1 (4) Double bottom between point A1 and B1 EXECUTION OF THE TRADE? How do I now place a trade? What do I want for before i enter a trade? What would be my stop loss, my take profit? Now it is time to turn to four lower chart which is my trigger time frame- the four hour chart which if use{ this I can’t cover here for now}. For those looking to understand technical analysis, i suggest you see the divergence and resistance as shown in picture above and at least digest it. A journey of a thousand miles begins from a step. For more information inbox me please. NOTE: Am here to exchange ideas, positive criticisms are welcome, as i am also learning. Happy trading week ahead.
Posted on: Sun, 11 Jan 2015 08:44:53 +0000
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