Fractal Wave For Forex Trading (and Stock Market Trading) - page 3

Young Ho Seo

Knowledge is the money in Forex Trading. I hope you have followed well up to the previous post.

In the previous post, we have covered the risk management for the support and resistance. 

In fact, what we have covered is for the horizontal support and resistance. 

There are other kind of support and resistance, for example, like the diagonal support and resistance.

The great thing is that we can extend the risk management for diagonal support and resistance without adding any complexity. 

For your information, the diagonal support and resistance are also those lines that are making up the Triangle Pattern, Rising Wedge Pattern, Falling Wedge Pattern and Channel. 

Let us have a look at the simple diagonal support and resistance example.

If you apply the buy and sell trigger level, the it will look like something like this. As before, as long as you can identify one significant fractal triangle, you can well define your entry, profit target and stop loss.

However, here are few points I want the newbies to understand. Diagonal support and resistance can be affected by your chart scale. 

Depending on your chart scale, the angle of the diagonal support can change. 

Hence, I will consider the diagonal support and resistance is slightly harder to trade.  

If you are starters, I will recommend mastering the horizontal support and resistance first. After that, go for the diagonal support and resistance or price patterns like  Triangle Pattern, Rising Wedge Pattern, Falling Wedge Pattern and Channel.

Of course, do not forget before using the support and resistance, you need to understand the peak trough analysis. 

Young Ho Seo

So far, we made some posts on the market timing and risk management using support and resistance. 

The essense is that do not sepearte market timing and the risk managmenet. But do both together in the price chart directly using the support and resistance as well as peak trough analysis. 

Read the previous posts.

We tried to make as clear as possible not leaving any gray area when you use the support and resistance for your trading.

Now, one interesting point we can take here is that we can extend what we have learnt for the support and resistance to the supply demand zone trading. 

People who just started to use or get used to use the support and resistance may think it is complicated to use the supply and demand zone. 

In fact, it is not. We will explain why it is not too complicated. 

To start with the check the screenshot. This screenshot will provide the intuitive explantion in the first place.

We have drawn the supply and demand zone in the left and the support and resistance in the right side.

When we compare the supply and demand zone to the support and resistance, we are talking about the trading zone against the price level. 

In this end, the Supply demand zone can be considered as the support and resistance with the trading zone (=2 dimention = area). 

Hence, what we have taught about the market timing for the support and resistance can be used for the supply and demand zone too.

Stephanus Ivan Yulianto

Whatever the indicator is, at first we all have to know that the indicator is formed because of the price, not the other way...

Fractals, Zigzag, even rsi, stochastic or any else, are lagging to the price, YES it can be a good signal or reversal of the price, but you will find many many times in the market that those indicators make a correction to themselves as the price refuse to reverse or continue the movement..


Young Ho Seo

Likewise, consider the harmonic pattern.

In the Harmonic Pattern, the pattern completion interval provides the trading zone like the supply and demand analysis. 

Check the screenshot below.

Left and right chart are the same chart.

We have drawn the harmonic pattern in the left chart. We have drawn the support and resistance in the right chart. 

In this screenshot, you can feel the trading zone vs price level again for the case of harmonic pattern.

This is an important distinction, between 1 dimension data and 2 dimension data, you can make before you are moving on to the advanced techncial analysis practice.

Young Ho Seo

Many people think the technical anlaysis is complicated.

In fact, no. It is because they have skipped some basics before they go on the the techncial analysis practice they like to use.

As we have shown in this post, one technical anlaysis will provide the basis for the another techncial analysis.

Hence, it is always best to get some organized trading education.

Start from peak through analysis + support and resistance.

Then move onto the more advanced techniques as I have shown in this post.

Opportunity in Forex market is always open as it is a diverse and volatile market

Young Ho Seo

In last post, we covered how trading zone is extended from the line as in support and resistance.

So we will show how the trading zone is used to control your trading risk in place of symmetrical trigger level and symmetrical fibonacci retracment of the support and resistance.

For example, with Pattern Completion Zone (= Pattern Completion Interval), you can set your stop loss and take profit in terms of the height of the Pattern Completion Zone.

In the screenshot below, stop loss is 1 x Pattern Completion Zone and take profit is 3 x Pattern Completion Zone.

In practice, the stop loss can be set little bit wider than 1 x Pattern Completion Zone to avoid any stop hunting. 

So you can consider 1 x Pattern Completion Zone as the minimum stop loss size. 

Risk management is simple and practical when the Pattern Completion Zone is defined accuartely (Reference: Guide to Precision Harmonic Pattern Trading).

In this post, we tried to demonstrate the idea behind the trading zone. In this case, the trading zone is the pattern completion zone in Harmonic Pattern.