FOREX TECHNICAL ANALYSIS: Questions and Answers for beginners
Hi, I would like to ask about trend lines. I read that if you draw a trend line you can then draw another line in the same angle creating a sort of channel. So if it is an uptrend line then you draw another line on the top of the graph and the other way around if it is a downtrend line. What I would like to know is how do you pick the spot to start the second line when creating the "channel" because you can get the same angle and all but how do you pick the point so that the signal is not a false one? Thank you
Your new duplicated trend line doesn't require a precise point at which to start. You can draw it approximately from the same point, where you started the original trend line and then extend the channel in time.
Creating a channel out of trend lines is done the way you've described and simply by duplicating(copying) the original trend line with the technical means of a trading platform and placing it on the opposite side of the price action. The only requirement is that both trend lines should be strictly parallel for the best accuracy of a trading price channel.
As a newbie to Forex I read a great deal about how you should go with the Trend or the Tide and not with the ripple or wave. However I don't follow this logic. Isn't the Tide made up of ripples and waves and therefore should we not be paying attention to the changes during the smaller time frames?
Good point. What seems like a smooth move on a higher time frame, say, weekly, is a set of small up and down moves/waves on a smaller time frame, like daily; it gets even more wavy as we descend to hourly charts and lower.
Therefore, you have to be friendly with a trend on your main time frame, but not forget to check the 1 frame higher for a major trend direction and few frames lower for an accurate signal to enter a trade.
More on choosing time frames here: http://forexbeginners.net/what-time-frame-to-trade
How do you establish the upper and lower trend lines?
This website will walk you through drawing trend lines.
What are Harmonic and Vibratory numbers?
I trade from London open till close. Is there a way to determine in advance if the market will be trending the next day?
There is no formula to tell whether tomorrow there will be a trend or not. But, there is few things Forex traders may check in order to anticipate certain market behavior next day.
First of all, news. Check with Forex Economic calendar if there are any important news to be released tomorrow for the currencies you'll be trading. If so, you can expect decrease in Forex market activity right before the news, or even starting from the early morning hours (if everyone leaves in expectations about impact of upcoming events);
and high increase of activity after the news hours as a result of market being shaken out, a new/old trend being identified/confirmed/changed, and as a result, every Forex trader would be looking to join in.
Folow th elink below to learn: What are the highest impact news in Forex?
Another factor that could help to judge about the market trending conditions tomorrow is price approaching/sitting on/trading near major support/resistance level, often weekly or monthly, daily at times.
When this happen, price tend to consolidate, test and try before either turning back or breaking out. During such periods traders find frequent sharp price turns, whipsaws and increased volatility, but without price progressing much in either direction, e.g. there is no trend.
Another simple factor could be the angle of the Moving average, for example, take 50SMA or 100SMA on either 1 hour or daily or whatever chart you prefer to trade with. If the Moving average is flat, e.g. flows horizontally without significant incline to either up or downside, you can pretty much conclude that the market is flat. On this assumption it would be logical to identify price channeling boundaries and avoid trading with trend following strategies until price breaks out of the channel.