Understanding Price Action ~ forex trading important news
I have always emphasised, most especially to new traders, that price movement is never random. It is an organised chaos designed by the big players to confuse the novice. However, the daily chart will exposes the intention of the big boys.
As you can see from the daily chart below from its height of 1.62795 the daily candle touched 1.59593 and is now pulling back as at the time of writing. Where will it close? Please note that until a candle closes it is still a moving target. Concidentally, the last time the daily candle fell from 1.62795 it touched t.59593 (indicated by the red box in the chart) and pulled back to 1.61750 area. On the first occassion, the daily RSI kissed 50 point mark and turned back. Will it behave the same way this time around? Coincidentally these key areas are respected on the weekly chart.
What is the meaning of the above observation? Whenever price gets to 50 point mark on the daily RSI price could go either way, it could either reverse or continue the journey. The key to success in this business is TIMING (TIME TO SELL, BUY, WAIT OR TAKE PROFIT). If you are trading using the daily chart as a guide 50 point mark is neither the time to buy or sell but to take profit and wait for other opportunities.
How do you trade this? As long RSI is still above the 50 point mark, the ultimate direction is down (30 point mark) before any major reversal. If this is a pull back, watch out for opportunity to sell between 1.61750 and 1.63000 when daily RSI would be around 70 point mark. In simple term, you can either wait for daily RSI to get back 70 point mark to sell or 30 point mark to buy.
See the daily and weekly charts below and the key areas to watch out for. It is always helpfull to plan ahead.
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