1. The Secondary level determines the pattern with a possible move to come. At this
level you set your max. stoploss and the profit target with Fib. Extensions 1.61
and 1.20
2. Then move one timeframe up to the Primary level to determine a possible
Projected move also with the Fib 1.61 and 1.20 levels.
3. Then go one timeframe lower then the secondary level to the Tertiary level and
look for a better stoploss level to enhance the risk to reward ratio.
We have studied the MLTS as far as how to enter and determine profit targets etc. but
we have left the overall market condition and rhythm behind. If I should ask you at those
charts we just studied what was the overall state of the EurUsd you wont be able to
answer me as we did not bring that part in with those examples. And that is our next step.
Now that we know how to handle each pattern separately and prepare a specific plan
as to how we are going to trade it according to the MLTS and execute that plan how do
we know if our profit target does not extend to the other side of a MAJOR support and or
resistance level of the EurUsd. That will signify the fact that our profit target might not
be reached. Therefore we have to go to the timeframes higher then the Primary level to
do some analysis to determine if the trade we are about to take is in line with the overall
picture.
I have brought this part in only at this point to show you how easy it is to lose track of
the overall picture while doing analysis in lower timeframes. The correct way is to do
analysis from the monthly down to the daily at least as to trendlines, major possible
turnaround points, major support and or resistance levels etc. If this is marked on the
chart itself in different colors then you can work on a 5min chart knowing that those
important areas are marked and will pop up some time though they might not show on the
screen area that you are working on.
I like to start at the weekly chart marking important points and then on the daily and
then on the 4hour. On the monthly I like to do Fibonacci retracements and extensions.
Look how the monthly chart retraced to exactly the 38% Fib.
Look how it moved up to the 200% Fib extension en then stayed there for 4 months finding resistance.
Look at the weekly chart the price action at the 161% Fib extension level. Some consolidation again before the price gets direction again. After the breakout to the top the next level was the 200% extension creating some nice trade opportunities towards that level. No difficult analysis. Pure simple rhythm.
Look at the daily chart how those areas of floating looks like. Can you see the exact spot
where the breakout occur on both those areas. Don’t that ask for some action. Would you be able
to define the direction with some accuracy. If so then that surely creates huge opportunities to
Monthly chart. Here you could see what the price did on a weekly chart when it reached
the 1.61% Weekly Fib level as well as on the daily chart. Some nice Secondary level
setups occurred. If you had those key levels marked on your chart it surely would have meant a lot. I
am sure you would have planned some trades much better. When the price reached the
Fib extension levels the probability was high that it could float around that level for a
time before getting direction again. In those areas of consolidation a lower timeframe must be used to utilize those conditions and make the most of them. Another part of the market rhythm is the fact that after a breakout the price have the tendency to pull back to the breakout level before continuing its path. That also creates some real nice possibilities for trades. Lets look at those Fib extension levels marked on the daily chart in a 4H chart to see if we can spot some nice possible Secondary pattern moves.
The pink area is the Fib level marked with the top of the area the 161%.
As you can see the opportunities are plenty on the 4Hour timeframe as Secondary
level opportunities. When the 161% extension level was reached the daily and weekly
timeframe will give false signals until there is direction again. But a lot of opportunities
will arise on the lower timeframes.
When going to the lower timeframe we need to have those areas of importance
marked on our chart. That is necessary to be able to know the boundaries we will be
trading in.
Metatrader4 give us the tools to determine on one chart what we would like to be
displayed on each timeframe. That illuminates having lots of open charts of the same
currency on different timeframes. We only have to have one chart and when changing the
timeframe the features that is set for that timeframe will be shown. You can do that with
all indicators, moving averages, trendlines etc. Lets see how that is done.
By selecting the properties of the entity (select it first then right click on it and open
the properties dialog) you will see the property Box open. Then click the Visualization
tab, unclick the “All timeframes” and select on which timeframes you would like to see
this particular feature.
As you can see you can set any feature to be visible in any timeframe you like.
That makes it powerful because you can even set the colors of each feature different in
different timeframes. The Fib retracements on a weekly timeframe can be made up of
different colors then the one used on a 4hour chart. That will help you identify it. On the
common and parameter tab you can even type in the Description of the feature you are
using.
When you point your mouse on it, it will display what feature it is.
Now this really gives us some power as to have a whole market analysis from a
monthly to a 1min timeframe right in front of us all on one chart without clocking the
chart with lines and features all over the place because we choose what we want to see
and on what timeframe. That is powerful.
Below are a sample table as to what is displayed where. This is not a full table but
only to give you an idea. You start with the Feature column going down to lets say the
Fib levels on the M(monthly timeframe) and on what timeframes do you want to see that
feature you go to the right side and see that you want it to be displayed on all timeframes.
The Fib weekly levels you don’t want to see on the monthly TF(timeframe) but on all
lower TF. And so on. I always want to see the M,W,D features on all timeframes down.
That will give me the opportunity to spot a weekly Fib retracement level , trendline etc
while busy preparing for a MLTS trade on the 5min chart. That is powerful. But I don’t
want to see 1hour Fib levels when I go to the weekly chart as it has no value there. The
same with a 5min trendline when going to the 4H. So I set the Visibility off when going
to timeframes where I don’t want to see that feature.
By now you should have a good idea as to trade with an overall map of the
currency pair you are trading right in front of you.
Now we come to the news aspect as that will also influence our trading. I am not
regarding all news as dangerous if a setup occur during the morning when there is news
to come out the afternoon. What I have found is that price normally have the news
already built into it when the news comes out. The mafia knows the news as they are
walking in those big circles. But when it comes to Non Farm Payrolls and Interest related
news I stay away till after the announcement only because of the severity and speed the
price moves on those announcements. You could be caught in a trade and can not close it
because of the speed of the move.
There are other news that also might have an effect on the markets. That is why I
recommend that you go to www.forexfactory.com and do some backtesting on certain
news and see what the result on the price was. The price normally reacts heavy when the
news is either better or worse then what was forecast.
Don’t ignore setups that occur just because there is some news coming out.
Especially if you are trading on higher timeframes. As I have said price most of the time
have already have the news in it when the announcement is made. When doing your
backtesting on the calendar just see for yourself how many setups occur before the news
that actually supported the news when it was announced. But always have a cautionary
approach. Ready to take action when necessary.
You can preset the news that is still to come with vertical lines and on the
property box you set the Description and on the Parameter tab you set the date and time
of the news that is still to come. After you have set all and close the dialog box the
vertical line will not be on the screen anymore as it is set for a future date and time. The
only problem is that it is still selected and if you press delete it will be deleted. To solve
this press Ctrl B that will take you to the Object menu and unselect it. Then it will stay
there until that date and time is reached. When you see the line appear just point your
mouse on it and the Description that you have added will show what it represents.
It is currently 1st Jan 2010 and I have just mad my trade analysis for the coming
week 4-8 Jan2010. See image below.
The chart on the left are a daily chart showing the Monthly, weekly and daily
Fibonacci levels. Those levels are necessary for possible support and or resistance levels
for the week to come. The chart on the right is a 1hour chart showing the price in a
channel. I have given the amount of pips between all the levels as well. That will help
with the decision making when there is a Secondary setup to see if the risk:reward ratio to
the marked level will be OK to trade.
The channel width is 200 pips and will make some nice ground for lower
timeframe trades. I will watch the 5min and 15min closely within the channel for some
setups. The bottom of the channel might be tested. We might find some support at that
trendline. Should the price break below the bottom trendline we have 70 pips to the daily
Fib which represents the nearby low. Then we have another 100pips to the Weekly 38%
retracement. That will be some strong support. If that is broken we have another +100
pips to our Projected Price Move. If the price should break to the upside during the week
we have 65 pips to the daily 38% retracement level, then 110 pips to the 50% retracement
and then another 110 pips to the 61% retracement all of which might be some resistance
levels. They also make very good target level if you are in an open position.
As you must have spotted our Projected Price Move is between the 38% and just
above the 50% retracement levels. When the price breaks the channel to the upside just
have that in mind.
Lets mark the important news for the week with vertical lines.
There you can see the news I have marked for the coming week. The thick red
line is FOMC interest rate and the purple line the Non Farm Payrolls. Those are the main
ones I will be out of all trades before the announcements come. I have their visualization
set to be seen from the Daily down to the 1min. I don’t have to see them on the weekly
and monthly as they will be clocked together.
Now it is time to wait and see how we will trade all this market analysis.
Here is another example traded on the 13Jan2010. Possible move as determined on the
Secondary level with the triangle pattern. Determine the profit target here.
READ MORE - Trading About Trend System Trade System
level you set your max. stoploss and the profit target with Fib. Extensions 1.61
and 1.20
2. Then move one timeframe up to the Primary level to determine a possible
Projected move also with the Fib 1.61 and 1.20 levels.
3. Then go one timeframe lower then the secondary level to the Tertiary level and
look for a better stoploss level to enhance the risk to reward ratio.
We have studied the MLTS as far as how to enter and determine profit targets etc. but
we have left the overall market condition and rhythm behind. If I should ask you at those
charts we just studied what was the overall state of the EurUsd you wont be able to
answer me as we did not bring that part in with those examples. And that is our next step.
Now that we know how to handle each pattern separately and prepare a specific plan
as to how we are going to trade it according to the MLTS and execute that plan how do
we know if our profit target does not extend to the other side of a MAJOR support and or
resistance level of the EurUsd. That will signify the fact that our profit target might not
be reached. Therefore we have to go to the timeframes higher then the Primary level to
do some analysis to determine if the trade we are about to take is in line with the overall
picture.
I have brought this part in only at this point to show you how easy it is to lose track of
the overall picture while doing analysis in lower timeframes. The correct way is to do
analysis from the monthly down to the daily at least as to trendlines, major possible
turnaround points, major support and or resistance levels etc. If this is marked on the
chart itself in different colors then you can work on a 5min chart knowing that those
important areas are marked and will pop up some time though they might not show on the
screen area that you are working on.
I like to start at the weekly chart marking important points and then on the daily and
then on the 4hour. On the monthly I like to do Fibonacci retracements and extensions.
where the breakout occur on both those areas. Don’t that ask for some action. Would you be able
to define the direction with some accuracy. If so then that surely creates huge opportunities to
trade All the timeframes shown above was from the same Fib levels as drawn from the
Monthly chart. Here you could see what the price did on a weekly chart when it reached
the 1.61% Weekly Fib level as well as on the daily chart. Some nice Secondary level
setups occurred. If you had those key levels marked on your chart it surely would have meant a lot. I
am sure you would have planned some trades much better. When the price reached the
Fib extension levels the probability was high that it could float around that level for a
time before getting direction again. In those areas of consolidation a lower timeframe must be used to utilize those conditions and make the most of them. Another part of the market rhythm is the fact that after a breakout the price have the tendency to pull back to the breakout level before continuing its path. That also creates some real nice possibilities for trades. Lets look at those Fib extension levels marked on the daily chart in a 4H chart to see if we can spot some nice possible Secondary pattern moves.
The pink area is the Fib level marked with the top of the area the 161%.
As you can see the opportunities are plenty on the 4Hour timeframe as Secondary
level opportunities. When the 161% extension level was reached the daily and weekly
timeframe will give false signals until there is direction again. But a lot of opportunities
will arise on the lower timeframes.
When going to the lower timeframe we need to have those areas of importance
marked on our chart. That is necessary to be able to know the boundaries we will be
trading in.
Metatrader4 give us the tools to determine on one chart what we would like to be
displayed on each timeframe. That illuminates having lots of open charts of the same
currency on different timeframes. We only have to have one chart and when changing the
timeframe the features that is set for that timeframe will be shown. You can do that with
all indicators, moving averages, trendlines etc. Lets see how that is done.
By selecting the properties of the entity (select it first then right click on it and open
the properties dialog) you will see the property Box open. Then click the Visualization
tab, unclick the “All timeframes” and select on which timeframes you would like to see
this particular feature.
That makes it powerful because you can even set the colors of each feature different in
different timeframes. The Fib retracements on a weekly timeframe can be made up of
different colors then the one used on a 4hour chart. That will help you identify it. On the
common and parameter tab you can even type in the Description of the feature you are
using.
monthly to a 1min timeframe right in front of us all on one chart without clocking the
chart with lines and features all over the place because we choose what we want to see
and on what timeframe. That is powerful.
Below are a sample table as to what is displayed where. This is not a full table but
only to give you an idea. You start with the Feature column going down to lets say the
Fib levels on the M(monthly timeframe) and on what timeframes do you want to see that
feature you go to the right side and see that you want it to be displayed on all timeframes.
The Fib weekly levels you don’t want to see on the monthly TF(timeframe) but on all
lower TF. And so on. I always want to see the M,W,D features on all timeframes down.
That will give me the opportunity to spot a weekly Fib retracement level , trendline etc
while busy preparing for a MLTS trade on the 5min chart. That is powerful. But I don’t
want to see 1hour Fib levels when I go to the weekly chart as it has no value there. The
same with a 5min trendline when going to the 4H. So I set the Visibility off when going
to timeframes where I don’t want to see that feature.
currency pair you are trading right in front of you.
Now we come to the news aspect as that will also influence our trading. I am not
regarding all news as dangerous if a setup occur during the morning when there is news
to come out the afternoon. What I have found is that price normally have the news
already built into it when the news comes out. The mafia knows the news as they are
walking in those big circles. But when it comes to Non Farm Payrolls and Interest related
news I stay away till after the announcement only because of the severity and speed the
price moves on those announcements. You could be caught in a trade and can not close it
because of the speed of the move.
There are other news that also might have an effect on the markets. That is why I
recommend that you go to www.forexfactory.com and do some backtesting on certain
news and see what the result on the price was. The price normally reacts heavy when the
news is either better or worse then what was forecast.
Don’t ignore setups that occur just because there is some news coming out.
Especially if you are trading on higher timeframes. As I have said price most of the time
have already have the news in it when the announcement is made. When doing your
backtesting on the calendar just see for yourself how many setups occur before the news
that actually supported the news when it was announced. But always have a cautionary
approach. Ready to take action when necessary.
You can preset the news that is still to come with vertical lines and on the
property box you set the Description and on the Parameter tab you set the date and time
of the news that is still to come. After you have set all and close the dialog box the
vertical line will not be on the screen anymore as it is set for a future date and time. The
only problem is that it is still selected and if you press delete it will be deleted. To solve
this press Ctrl B that will take you to the Object menu and unselect it. Then it will stay
there until that date and time is reached. When you see the line appear just point your
mouse on it and the Description that you have added will show what it represents.
It is currently 1st Jan 2010 and I have just mad my trade analysis for the coming
week 4-8 Jan2010. See image below.
Fibonacci levels. Those levels are necessary for possible support and or resistance levels
for the week to come. The chart on the right is a 1hour chart showing the price in a
channel. I have given the amount of pips between all the levels as well. That will help
with the decision making when there is a Secondary setup to see if the risk:reward ratio to
the marked level will be OK to trade.
The channel width is 200 pips and will make some nice ground for lower
timeframe trades. I will watch the 5min and 15min closely within the channel for some
setups. The bottom of the channel might be tested. We might find some support at that
trendline. Should the price break below the bottom trendline we have 70 pips to the daily
Fib which represents the nearby low. Then we have another 100pips to the Weekly 38%
retracement. That will be some strong support. If that is broken we have another +100
pips to our Projected Price Move. If the price should break to the upside during the week
we have 65 pips to the daily 38% retracement level, then 110 pips to the 50% retracement
and then another 110 pips to the 61% retracement all of which might be some resistance
levels. They also make very good target level if you are in an open position.
As you must have spotted our Projected Price Move is between the 38% and just
above the 50% retracement levels. When the price breaks the channel to the upside just
have that in mind.
Lets mark the important news for the week with vertical lines.
line is FOMC interest rate and the purple line the Non Farm Payrolls. Those are the main
ones I will be out of all trades before the announcements come. I have their visualization
set to be seen from the Daily down to the 1min. I don’t have to see them on the weekly
and monthly as they will be clocked together.
Now it is time to wait and see how we will trade all this market analysis.
Here is another example traded on the 13Jan2010. Possible move as determined on the
Secondary level with the triangle pattern. Determine the profit target here.
Projected move as determined one levl higher on the Primary level. A better stoploss was obtained from the
Tertiary level making the risk:reward ratio much batter. +70pips for the day.
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