Fractal Wave For Forex Trading (and Stock Market Trading) - page 2
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Here is the summary of the techncial analysis in the table format assuming the peak trough analysis is applied to your chart. The points means either peak or trough here. For example, "Connect more than two or three points in a straight line" means to connect more than two or three peaks in a straight line (=Resistance) or to connect more than two or three troughs in a straight line (=Support).
Some technical analysis do not require ratio check and some require the ratio check.
Ratio check simply means to divide the price change of the right swing by the price change of the left swing in the fractal triangle (see the screenshot below).
Ratio = Y0/Y1.
That is it. To understand the technical anlaysis, you do not need to understand some rocket science but just understanding simple ratio like this is more than sufficient.
Hence, anyone can attempt to learn and to practically use them for their trading.
I wrote this information in a hope that you can find some consistency across all the techncal analysis. This will help you to understand any techncial analysis with confidence in the future.
When I first tried to learn any of these techniques many years ago, no one provided some clear explanation on how each techniques are related together.
Hence, at that time, I had to spend a lot of time to learn each technique seperately. Sometimes, this could be the bottle neck of your Forex education.
But as you can see, all these techniques are just different language to describe (hence, to predict) the fractal wave present in the forex and stock market.
If you try to understand fractal geometry of forex market first, then the learing time for all these technical analysis can be shorten dramatically.
You can also set much clearer objective for your techncial analysis too.
I did not know I can not edit the post after somtime.
So I correct some wordings in this line.
Since more than two does not include two, above line should be written like this
This line can be found from Post #9
Here is one educational article in pdf file. This article contains more detailed explanation to understand the forex and stock market.
In the pdf file, you will find the two experiments. I named the experiments as the Magnet and Stock Market Experiment.
First one is the magent experiement. Second one is the Dow Jones Industrial Avearge Index experiment (using stock market chart).
By comparing these two experiments, you will learn the great deal about how the market behaves.
Since we know how market behaves, we can also predict the market better although it is in the probablistic sense.
Since, this article will guide you to predict the market better as well as improving your trading operation , we recommend reading the pdf file.
Kind regards.
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Instruction on file
Forum does not have an option to upload pdf file, so I had to zip it.
If you unzip the file, then you will get the pdf article. The pdf file is 11 pages long.
Here is another good educational article freely shared for Forex trading.
The title is "How to Identify the Best Buy and Sell Timing"
This PDF article summarize what I have explained in post 8 and post 9 of this thread.
Fine the attached PDF file.
Kind regards.
===================================================
Instruction on file
Forum does not have an option to upload pdf file, so I had to zip it.
If you unzip the file, then you will get the pdf article. The pdf file is 11 pages long.
you have no said what to do after the triangles are built. I guess the mathematical part is done, but you still have a procdedure to determine
-if a trade must be placed or not
-if a trade must indeed be placed, then is it buying or selling
you have no said what to do after the triangles are built. I guess the mathematical part is done, but you still have a procdedure to determine
-if a trade must be placed or not
-if a trade must indeed be placed, then is it buying or selling
That was a good question.
The thing is that you will be able to get the peak trough analysis tool or indicator from somewhere on the internet for free.
Even there will be some free indicator for Peak Trough Analysis in provided from MetaTrader platform of yours.
Then, the automatic algorithm of peak trough analysis will help you to do following technical anaysis much easier and faster. (I summarized the technical analyisis in the screenshot below for you. It is the updated screenshot from last one in fact.)
Basically, I was trying to explain the shortcut or quickest method to learn all these important methods for our trading.
Without understanding that peak trough analysis visualizes the fractal wave in the price series, it can take too long to learn all these methods. In addition, people can learn inaccurately too.
For example, the easiest techncial analysis you can perform with the peak trough analysis or the peak trough indicator is to draw the support and resistance.
You can draw the support or resistance by connecting more than two points as outlined in the previous post (the points means peak or trough here).
This is the most introductory technical analysis. However, it is recommended to understand this simple method if you are trading in forex and stock market as this method will provide the basis for more advanced technical analysis later.
When the support resistance is used alone, it is the market volatility predictor.
This method is suitable for people who prefer to react to the market instead of predicting the market.
Although there could be several different ways to trade using the support and resistance lines, one way to trade is to follow the direction in which the price is pushed by the crowd. Hence, you do not predict the direction but just follow the price.
When you trade the support resistance this way, this strategy helps you to react to the market. This react to market strategy is the main tool used by the day trader, who do not like the prediction based trading strategy or who do not believe that market is predictable.
I personally respect both react to market strategy and the prediction based trading strategy. However, depending on the trader, there are clear preferences in choice between react to market strategy and the prediction based trading strategy.
Understanding the difference between these two strategies are clearly the important starting point to learn trading.
However, when you use the support and resistance, you need to watch out the false breakout or false reversal signals. This is one of the main reasons for losing trades.
One way to deal with this sort of false breakout or false revesal signal is to set the trigger price around the support and resistance. The concept of the triger price for buy and sell looks like this. It is important to define at least one significant fractal triangle around the support or resistance to set the trigger price. You can have a look at the screenshot below.
Risk Management is important even if you are trading with support or resistance. Up until you get to this point of risk mangement with support and resistance, no methodology will help you to make money.
However, most of time you will get into unsatisfactory explantion with risk management with support and resistance on else where on the internet.
The reason is simple as they do not get into fractal wave or fractal triangle (=the core theory of technical analysis).
Even if you draw line for support or resistance, you need to get aware of at least one significant or important fractal triangle.
Since we have covered how fractal wave extended into technical anlaysis, for us, who reading this post, it is dead easy to understand the risk management around support and resistance.
As described in the Book: Scientific Guide to Price Action and Pattern Trading, you can extend the trigger level idea into the risk managmenet too.
First one is the Symmetrical Trigger Level using the propotion rule and second one is Symmetrical Fibonacci Retracement using the Fibonacci analysis.
Let us have a look at the Symmetrical Trigger Level first.
Below the screenshot shows the Symmetrical Trigger level applied to the resistance.
Buy entry and sell entry price are set using the height of the Fractal Triangle. In this example, entry price was set to 20% height of the Fractal Triangle. Assuming that price approached near the resistance, you will enter the buy position if the price moves over the buy entry price. Likewise, you will enter the sell position if the price moves below the sell entry price. In addition, the entry price is adjustable to 15% or 25% and so on.
According the the market memory, the known peak or trough can be revisited. Hence the first sensible profit target is to use the trough of the Fractal triangle. In another words, profit target is set to 100% of the Fractal Triangle. However, if the surrounding market condition highly favours our trading direction, then you can increase the profit target to 120% or 200%. If the surrounding market condition is less favours our trading direction, then you can reduct the profit target to 70% or 80% and so on.