European Forex Professional Weekly 2009-12-03

[tadinda]

Fibs taken out by Price

Gentlemen (Sive or SEntinel,

YOu lost me in the explanation of how and when Fibs are takenout by price.

Can either of you two nice gentleman explain it once again possibly in simpler words for us to understand better.

I do understand focus and reaction points.

Regards
ERnest

 

[tadinda]

Fibs taken out by Price

Sive and Sentinel,

Have posted a question for you in the Trade Desciption Part. Please excuse me.

The question regarded Fibs taken out by Price. While I do understand Reaction POints and Focus I have not managed to understand the explanatgion of how Fibs are taken out by Price.

Maybe Sive or SEntinel can provide a more detailed explanation please.

Ernest

 

[Sentinel]

Confluence

Ok, I got it... So we now have three confluence areas since we have a new focus at 1.5143, 25.11.2009 high? (Highest one of them seems to be taken out by price at the time been)

Sentinel

Yes, looks like you're right. At the second Confluence there is an agreement also.
I've checked other pairs such as AUD, JPY and NZD. And picture looks bearish.
I think that there can be some retracement higher from 1.4745 but then we can get another downmove.

Besides, look at DOSC at Confluence support... It look's like we get Stretch pattern...

Thanks, I was unaware of the agreement and the Stretch level.. Even though there are three confluence levels in a row to play, it looks too risky to go long as you say the picture looks bearish.

Sentinel

 

[Sive Morten]

Gentlemen (Sive or SEntinel,

YOu lost me in the explanation of how and when Fibs are takenout by price.

Can either of you two nice gentleman explain it once again possibly in simpler words for us to understand better.

I do understand focus and reaction points.

Regards
ERnest

Hi Ernest,
look at the attachement:
What do we have here... Fisrt - see, DOSC at extreme OS level and at the same time price is near strong Confluence support and Agreement. This is a directional Stretch pattern.
Second - the most high 0.382 support level was canceled by the price - market has broke through in and closed below. this level not in game anymore.

Sive

 

[tadinda]

Fibs taken out by Price

THanks Sive for teh explanation.
What was confusing me was the bit "before focus" and "after focus".

So what we are saying is this, if I understood correctly.

If Fibs are taken out by price. Thta is they are crossed and we have a close below the fib, the fib is taken out of the game.
However, as soon as a New Focus is formed, all fib lines, cancelled beofre by Price, have to be redrawn.

Would appreciate your confirmation of this explanation, in my own simple words.

Thanks your patience.

Ernest

 

[Sive Morten]

THanks Sive for teh explanation.
What was confusing me was the bit "before focus" and "after focus".

So what we are saying is this, if I understood correctly.

If Fibs are taken out by price. Thta is they are crossed and we have a close below the fib, the fib is taken out of the game.
However, as soon as a New Focus is formed, all fib lines, cancelled beofre by Price, have to be redrawn.

Would appreciate your confirmation of this explanation, in my own simple words.

Thanks your patience.
Ernest

Ernest, do not concentrate on "before Focus and after Focus". First, I advise to you reread the part III of Di Napoli levels - there are many explanations of canceled levels. You should to understand what is a Swing - it's a range between First (major) reaction point and Focus. Then you can build a DiNapoli levels from different reactions for CURRENT FOCUS. But, these levels will change if Focus will change.

Do not complicate it. In general, if market has broke through Fib support and close below it. This Fib support is canceled. It's like the wall in the castle. Fib levels - are walls. IF enemy has broke one of them - this wall is not a barrier anymore. And forget about "before Focus and after Focus". The testing of Fib levels will begin, when market will start reverse move.
Look at my previous explanation - do you see anywhere "the previous focus" on the chart? No. Because there is no such thing as "previous focus". There can be only current and single focus and absolutely precise Fib levels that is linked with this focus. But if market will go higher that previous high, then, you can receive another focus and another Fib levels.
Sive.

 

[tadinda]

Drawing Fibs

Sive,

I am attaching two imagies of NZD USD.
One shows the many reaction POints I ahve chosen to draw fibs from. There may be others but I triesd to leave it simple.
The second, is a larger image of teh same pair but showing the most recent bars.

I number my lines as follows:

D = representing the TF
S = Support
1,2,3,4,5 etc = The reaction POints with 1 being the oldest and 5 being the lastest.

Then 3 = 382 Fib Level and 6 = 618 Level.

I hope I am drawing these correctly.

Now back to what will be taken out by Price.

Clearly DS5 3 @ 0.72696 has been taken out by Price.
The confluence between DS4 3 and DS5 6 has not been taken out as the close is above it.

Now my earlier question of before or after.

If a new focus is formed later on above the existing high of 0.76325 do I have to redraw DS5 3 as since it will move upwards it may be be taken out by any price action?.

After I solve this I will ask how to draw the Profit Levels and how to move them or develop them with price.

Regards
Ernest

 

[Sive Morten]

Sive,

I hope I am drawing these correctly.

Yes, looks like they are correct

Clearly DS5 3 @ 0.72696 has been taken out by Price.

That's correct

The confluence between DS4 3 and DS5 6 has not been taken out as the close is above it.

Absolutely

Now my earlier question of before or after.

If a new focus is formed later on above the existing high of 0.76325 do I have to redraw DS5 3 as since it will move upwards it may be be taken out by any price action?.

Yes, you will have to do it. And, as you have said it right, this DS5 3 (in your classification) will move higher and will not be @ 0.72696 already.

And current down move (partculary the minimum) will made another, new reaction point or points (if market will go higher and give us a new Focus).

And remember the reaction point is always an extreme - maximum or minimum of the bar - not close price.

Hope it helps,
Sive.

 

[tadinda]

Profit OBjectives

Phewwwww. THanks Sive, that has certainly put my mind at rest. THanks a million.

Now, if I may take some more of your time. My next concern is the profit objectives. I know that one needs an ABC structure to draw the fib expansion etc. My concerns are the following:

1. When is the Extension adjusted. In the sense, should it be adjusted after achievement of a COP, OP or an XOP or the formation of a fresh ABC structure, irrespective of profit achievements.
2. How is the Expansion adjusted. Should it just be made bigger or move on to the next ABC structure.
3. When drawing the Expansion is there some rule as to the position of the C Point with regard to the A POint. EXample we are in a dwontrend, does the C Point always as a rule have to be below the A POint. Or are expansions allowed when the retracement from the B Point is Higher then the A POint.

Thanks Sive. Am learning a lot and yesterday I had my first winning trade on the EUR JPY using the method.

Ernest

 

[Sive Morten]

Phewwwww. THanks Sive, that has certainly put my mind at rest. THanks a million.

Now, if I may take some more of your time. My next concern is the profit objectives. I know that one needs an ABC structure to draw the fib expansion etc. My concerns are the following:

1. When is the Extension adjusted. In the sense, should it be adjusted after achievement of a COP, OP or an XOP or the formation of a fresh ABC structure, irrespective of profit achievements.
2. How is the Expansion adjusted. Should it just be made bigger or move on to the next ABC structure.
3. When drawing the Expansion is there some rule as to the position of the C Point with regard to the A POint. EXample we are in a dwontrend, does the C Point always as a rule have to be below the A POint. Or are expansions allowed when the retracement from the B Point is Higher then the A POint.

Thanks Sive. Am learning a lot and yesterday I had my first winning trade on the EUR JPY using the method.

Ernest

Well, not all so simple with expansions. In general, the point C should be between A and B. If it not - it should not be too far from A. As usual, A is a start of a move and B is a current ending. So, A and B points should be from the one side of 3x3 and C point - from the other, even it can be a 0.382 or 0.618 retracement from A-B move.
This is not typical for LPO's calculation when ABC in a M or W market pattern (like in a DRPO case). But all the others moment - it's only experience can help - learn the Book, look at expamples, do your own analysis...

Sive.