Originally Posted by sirfx

Newtrader,

Something I began to see was that the structure of charts and the reason trendlines work has to do with the relationships between time, price, and position of the market. Many traders will use several methods to determine 1 or 2 of the above. When you use all three, the success of your trading will be significantly impacted. I, for one, after YEARS of noticing these relationships failed to grasp all the tools necessary. It wasn't until after I read Robert Miner's "Dynamic Trading," that I got the exact details of how this dynamic market really works. As Kiwi was saying, there are no absolutes, but you sure can narrow down the window of opportunities to what each time frame is telling you.

I for one try to determine the position of the market first, via the EW method, keeping my eyes peeled for the "mistakes" of mass trading psychology. Which EW reveals quite nicely. Combined with technicals that I understand, I place trades for short and medium term opportunities. Here are some of my current assessments of market positioning.


High to Low- 140.74-132.24 = 850 pips A retrace of the following off the 132.24 low is likely resistance for an initial A wave

78.6% RT = 138.92
61.8% RT = 137.49
50% RT = 136.49 (target reached)

Since 50% percent has been hit, we need to start preparing for a B wave to retest the low, assuming it is a solid low we can at least expect a retrace of the same amounts. IT IS IMPERITAVE TO UNDERSTAND THIS PSYCHOLOGY. Every high, low, gap, etc. will be tested at every time frame. You could trade a 5 min or 2 hr chart this way.

EW trades in an A-B-C wave format, sometimes A-B-C-D-E in a complex correction and each wave can be identified as impulsive(trend) or corrective(range) It is these sweeping waves of psychology where the answer lies.

Since this psycholgy is so predictable we can continue to look for repeating patterns. One rule I like to focus on is how a C wave usually breaks some technical barrier before resumption of trend or ranging continues. This is why we could therotically pick tops and bottoms of corrections for exploiting trading opportunities. I might expand later on the principals here but you may want to get a copy of the book.

For example, the market has already set the low at 132.24, which is a new low. We now must retest that. But the market has also told us that it is correcting off the lows. This means we should see and A-B-C minimum correction. Lets assume we are using a 4hr chart. Each A wave will have a substructure of waves that could be broken down and identified on smaller time frames. The current bounce off the low is an A wave on the 4 hr chart and has reached 50% RT of the high to low. This is why your line is acting as resistance, even on the hour time frame. IF we are CORRECTING off a low and not trending, we will trade down at least 61.8%-78.6% of the move from 132.24-to 136.58(assuming this is the highest point of A wave).

Total range of A= 444pips (132.24-136.58)
61.8%= 274 pips or 133.84

We should expect major support at this level. There are ways to confirm this by means of time and position as well, but I will leave that to those who want to research this topic further.

The A wave will not be the ultimate high though. After a correction to 133.84, we start to prepare for whether or not a C wave to the upside will form and ultimately hit 61.8% of the 850 point move from 140.74-132.24 at 137.49. It is my belief that we will continue to form triangles as buyers and sellers react to support resistance levels in this pshychological format before a breakout. Which I believe will be to the upside and could happen as the C wave on the 4hr chart begins. The point of all this is, that it cannot happen until we retest 133.84! So I am planning to short at some level of current prices between 136.50 and 137.50 to head down to that level, unless I see signs of support at 50% and confirmation that it is indeed support, I expect 133.84 to be hit and to be a great place to TP. More on all this later! Hopefully you found this information useful. Happy trading!




SIRFX

Originally Posted by sirfx

Confirmation of short on GBPJPY at 137.29, wait for .618 RT at 136.95!!!!!!!!!!!!!!!!

Originally Posted by Mike in Japan

Nothing quite logical here - the Nikkei currently up 5.15% yet the Tankan figures were much worse than anticipated.. I cannot see it moving above the 137.00 level during Asia trade.. Europe can be full of surprises on opening..UK govt spending billions of GBP on bank help, so could we see a slight strengthening of the pound?.. We should, but as we all know, these are not normal times..Interesting evening ahead - Still keeping my short in place..!

Originally Posted by Mike in Japan

Hi Sirfx,

Extremely interesting are your charts and thoughts.. Would you say that 136.90 is holding as a support level, and that a short here would be viable? Thanks for all your info..