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Chapter 19, Part I. Harmonic Approach to Recognizing a Trend Day Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Chart #2 | 5-min EUR/USD down trend has started from gap on Monday
    2. Acceleration to new low after the day’s open. Well, on chart #2 this is not seem perfect. Still we can see that market shows nice long bars to the new low (second LL) of the day while holding the gap unfilled. Here is one important rule:

    “If the market shows a nice long thrust bar down to new lows and then shows a strong reverse move up and fills the gap – then a trending day probably will not happen.”

    The same is true in up trends. So, the appearance of a gap, holding it unfilled and acceleration to new lows are our early signs of a down trending session. The appearance of a gap, holding it unfilled and acceleration to new highs are our early signs of an up trending session.

    3. Appearing of inside trading sessions - narrowing trading range of previous periods of larger time frames (perfect if it will be about 5 periods – whole week). Here we have to take a look at higher time frame. If you trade intraday – then you will have to look at daily time frame, trade daily – on weekly and so on. Let’s specify what is meant by “inside day”. This is the situation, when the current trading session range (from high to low) totally stands inside of the previous trading session. Other word, the high of the previous session is higher than the current one and the low of the previous session is lower. But this should not be just single inside day – it should be some confluence of those days, not necessary that all of them should be inside to each other. Just use common sense here – you have to see contraction of trading range during some period of time – about 3-5 days in a row. Look on chart #3:

    Chart #3 | Daily EUR/USD - inside days and range reducing before strong trend days

    We see that ID (Inside Days) is not 5 in a row – but market drastically reduces range during the week. In the second example, right on top is even clearer situation – a lot of Doji and High waves just confirm that the market is in indecision. Both of these examples show that in such kind of environment, the market is building energy and determine the way. We do not know where the market will go – up or down, but we do know that this move should be strong. For direction estimating, we have two previous points.
    Pipruit: Sir, this is very interesting. If I’ve understand all things correctly – first, we look at a higher time frame, say, daily if we trade intraday. If we see strong range contraction and some inside days then we should be ready for some trend day in either direction. Then we start to keep an eye on the beginning of trading sessions. If we see unfilled gaps, acceleration to new extremes after it, especially in the beginning of the
    week, then it tells us that probably a trending day is starting. The gap should hold unfilled and some strong long bars should follow in 15-30 min after the market’s open to new extremes for high or low of the day.

    Commander in Pips: Yes, that’s absolutely correct. Also it’s important to not get a reverse fast move from new high/lows and gap filling. This probably tells that a trend day will not happen.
    Pipruit: Right.

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