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optionsagent

Technical Analysis in Forex Market

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Very beneficial. Here is something called the "Fractal Guru" strategy that I want to share with you. It is a strategy that is very effective for high probability trades. A currency analyst named Navin Prithyani introduced this strategy that is all about riding the trend by correctly identifying it.

Open up the Meta Trader 4 platform which has both Fractals and Average Directional Index (ADX) indicators built in. To display the Fractals, go to Insert – Indicators – Bill Williams – Fractals. Then for the ADX indicator, go to Insert – Indicators – Trend – Average Directional Movement Index.

 

Bullish and Bearish Fractals

 

Bearish%20Fractal.jpg

 

The chart above is of a bearish Fractal which is basically the middle candle having the highest high and then two higher highs on either side. The bearish Fractal is when the middle candle has the lowest low and is surrounded by two candles with lower lows on each side.

 

How to use the Fractal Guru Strategy?

 

fractal_guru_strategy.png

 

Actions steps for a call entry:

The chart above shows the ADX blue line rising steadily in the ADX chart at the bottom of the above chart. In the instance of a call entry, the green dotted line has to be above the red one. In the chart above, it never does but there will be instances in reality when it will. When this occurs, a bullish Fractal (the ones in the chart with the Fractal arrow pointing down) should be already locked in. Keep in mind that a long wick must be in the Fractal arrow direction and a short one on the other side.

 

Likewise for a put entry:

The first step again is to ensure that the ADX is rising steadily. As can be seen from this particular stock chart, the green dotted line is below the red one. Traders should then ascertain that the bearish Fractal has been established. The candlestick has to be examined to see if the bearish Fractal has a long wick pointing in the direction of the Fractal arrow and a short one down below.

 

Conclusion

It is a nice strategy especially for expert Forex traders out there who don't have trouble identifying the ADX indicators. Some of the instructions that Prithyani gives regarding what traders should watch for in the ADX to make money with this strategy are rather vague. The other thing is that most traders agree that the ADX is not the best indicator of a trend that is so crucial in making this "Fractal Guru" strategy. One thing is for sure: expert traders have made lots of money with this tool.

 

P.S. - The fractals used here and in trading generally differ from the fractals you might have heard about in mathematics.

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i just go simple with my technical analysis in forex. i use S/R levels combined with the 50 and 200 DMA and thats it, nothing more. I swing the trades and check out if there are any big news events coming for my traded instrument in the next 2-4 days (my normal holding time)..

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http://www.traderslaboratory.com/forums/attachment.php?attachmentid=34420&stc=1&d=1359910100

 

Just an example with USDCHF D1: Chinkou Span (white line) crossed the price 1 day ago on close bar for bearish as a primary trend, but price did not cross 0.9075 resistance on close bar. So, it may be bear market rally on Monday. After that - the price may be continuing downtrend for example.

usdchf_d1.jpg.d683503fa85e6d7054a6372346fbc025.jpg

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I have used technical analysis in equity stock market. but how is it beneficial to use in forex market ?

 

There is no one way of doing analysis especially technical analysis. To relate technical analysis which u were using in equity stock market with forex market, it is important to tell us the type of technical analysis u have used there.

 

Technical analysis is useful for any trading derivative as long as u understand the logic behind that analysis.

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Support – Resistance Custom Indicator

 

 

Here is a nice illustration of what the S/R indicator can do for you. The next time when your looking to do some technical analysis on forex or even for a stock/indices it will be very useful.

 

Support-Resistance-Tool1.png

 

You guys probably already know this, but let me include it here anyway for the newbie traders out there. After all, this strategy is mostly for newbie traders. The more experienced ones would do be better without it as they will be faster. It can be still useful for its confirmation value when implementing a strategy.

 

The Support level will put declining prices back into higher territory. The more times we see the price go back and forth to the support level, the stronger the support becomes.

 

The Resistance is a level that rejects rising prices into lower territory. Just like Support, Resistance becomes stronger if it rejected price many times in the past.

 

The problem sometimes is that support and resistance can be at the same level. Just take a look at the picture below:

 

Support-Resistance-Tool2.png

 

So use common sense when identifying S/R. :cool:

 

The main drawback with the indicator is that it is not good at identifying S/R zones and rather draws several lines that can make it hard to do technical analysis.

 

Support-Resistance-Tool3.png

 

Download the Support Resistance Indicator from the attachments section here. You'll have to extract it using Winzip/Winrar. Then go to your Meta Trader 4 platform and click on Insert – Indicators – Custom – Support-Resistance and then click OK on the little box that comes up.

Support-Resistance.rar

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