Combining Fundamentals with Technicals to Trade the Crosses
Some additional common trading errors or pitfalls that can arise from failing to follow a trading system are discussed further in the sections below.
However, it’s important to realize that it’s a normal part of trading the Forex market and it’s best to be viewed as part of the learning process. By understanding these situations, we can better protect ourselves from losses and make profits as well.
Concepts like the 5-wave impulsive structure and the 3-wave, overlapping - corrective structure, are as clear as day to Elliott Wave traders when they spot them on their charts.
On the contrary, an ordinary trader, unaware of the Elliott Waves may often get trapped in overlapping price action believing that it’s the main trend when in fact the price doesn’t go anywhere and will only reverse in the end.
Its core states that market trends develop, last and end in a very orderly and predictable manner, rather than being chaotic and random as it was believed by many at the time and is still believed by some today.
The Master Candle trading strategy is famous for the fact that it provides clear patterns and also helps in the identification of breakout points, making it especially useful for traders in the long run.
Likewise, the Bat and the Crab are also constructed of 4 legs, starting with the XA leg followed by an ABCD pattern. While the Gartley and the Butterfly patterns have been around for quite some time, the Bat and the Crab were discovered at the beginning of the previous decade by harmonic trader Scott M. Carney.
Trading the Butterfly and Gartley patterns is very similar to trading the ABCD pattern, hence it’s strongly recommended to read that article first. All the trading rules and tactics like the entry, Stop-Loss and Take-Profit rules are the same for the Gartley and the Butterfly as for the ABCD. Therefore there is no need to repeat them here and we will just describe how to identify the patterns on the chart.
The golden Fibonacci ratio as the elemental constituent and the other accompanying Fibonacci ratios are the cornerstones of the harmonic trading method and the harmonic chart patterns.
The sudden change in volatility and volume between the quiet Asian session and the busy – volatile London session makes the occurrence of a breakout highly probable and hence the high probability of success with the London session breakout strategy.
Traders who are aware of this can trade accordingly and reap significant gains.
Rounding Tops and Bottoms:
More precisely, classical reversal patterns will tend to appear inside of the rounding formation as part of the overall turn in the market sentiment.
When this occurs it’s a stronger signal that the reversal will be genuine as multiple price levels and tools can now be used to confirm the validity of the reversal.
Head & Shoulders Pattern
For trading the pattern in the Forex market the implications, rules, and strategies work exactly the same for both the bullish and the bearish versions of the pattern, so everything can be used interchangeably only, of course in the opposite direction.
We will treat the symmetrical triangle as a slightly different kind, while the ascending and descending triangles are the exact same thing only in the reversed direction.
The pullback may be downward or upward depending on the direction of the breakout and the general trend. If the general trend is downward, the pullback will be upward and vice versa. A pullback may also be referred to as a retracement. Traders who understand how pullbacks work can trade them profitably and avoid making unnecessary losses.
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