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Getting outside of your comfort zone

Discussion in 'Beginners Bootcamp' started by Eric Alyea, Jan 27, 2010.

  1. Eric Alyea

    Eric Alyea Master Sergeant

    Jun 16, 2008
    Likes Received:
    I still consider myself a Newbie here. That either means I'm for s**t or I like the "KISS" method (Keep It Simple Stupid). Learning from the bottom up is a good thing because you have to remember what it was/is like to learn to teach. I found that the best way to learn something is that you know that you have to teach it to others. That way you remember how “YOU” were taught and can improve on the transmittal (how you understood it).

    I was asked to write in the commerce zone and I had never even looked there before. So, for you other Newbies, you never know what you will find outside of your comfort zone.


    Exerts from my post in the above link.
    Pivot Points:
    What I got from them is this:
    We want to understanding price movement on based previous history (technical analysis). Using the time period of our choice e.g. hourly, daily, weekly, monthly etc..
    Let’s use daily as a time period example. Finding the High price of the day (H), the Low price of the day (L), the end of day Closing price "C" we can establish a reference equilibrium or Pivot point (P).
    (H + L + C) / 3 = P
    The sum of the High plus the Low plus the Closing, divided by 3, equals the Pivot Point.
    Next we establish reference zones of movement from the "Pivot Point". "Resistance" being the up movement reference and "Support" being the down reference. An easy way to remember this is gravity resists you when jumping up, the ground supports your feet. Two zones in both directions is common, sometimes three. 1st Resistance and Support zones are calculated like this:
    (P X 2) - L = R1
    Double the Pivot Point (remember it for the next one) minus the Low of the day gives you the 1st Resistance level.
    (P X 2) - H = S1
    Double the Pivot Point minus the High of the day gives you the 1st Support level.
    2nd Resistance and Support zones are calculated like this:
    (R1 - S1) + P = R2
    Take R1 minus S1 (remember it for the next one), add the Pivot Point to get R2
    (R1 - S1) - P = S2
    Take R1 minus S1, minus the Pivot Point to get S2
    Listening to gossip and their gut instincts the "Big Buck" everyday traders use these numbers and play tug of war over the pivot point between the positive 1st Resistance level and the negative 1st Support level. Think of a football at the (pivot point) 1st and 10 (zone), but we aren’t limited to 10 and it goes in both directions. A funny thing happens when one of the zone lines is crossed. Everybody gets excited and jump up and down. Then the people that were afraid to get on the band wagon feel safer about it and start jumping on because they see others doing it .
    An Italian guy named "Fibonacci" figured out the math for the way this commonly happens. The ratio is 1+2=3, 2+3=5, 3+5=8, 5+8=13 and so on. Using this 1,3,5,8,13 jumping on the band wagon effect is predictable and it can go in both directions, i.e. jumping on and starting over with 1 for jumping off.
    Back to what happens when a zone line is crossed. If the R1 Resistance line is crossed it becomes the new Support line and the R2 is the new Resistance line. Just the opposite if the S1 Support line is crossed it becomes the new Resistance and the S2 is the new Support.
    So the Big Buck guys control a lot of the movement back and forth between the zone lines using math, gossip and gut instinct. When one of the zone lines is crossed other traders start jumping on the band wagon and or jumping back off.
    #1 Eric Alyea, Jan 27, 2010
    Last edited: Jan 27, 2010
  2. Forexwatchman

    Forexwatchman Sergeant

    Sep 17, 2009
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    Awsome job Eric. I just want to add a few more rules and perhaps simplify it a bit more. Banks must trade according to strict rules, and part of those strict rules involve the pivot points that we as retail forex traders can also use. This means the "Big Buck Guys" and us see the same lines on our graph and can expect price action to stall or reverse sharply once it reaches one of these lines. These lines should only be used for profit taking targets, and not for entry and exit points. Also, there are daily pivot lines as well as median (middle) lines for the daily ones. The rules according to these lines are a little more complicated where a move that begins at M1 ends at M3, or M2 ends at M4, or S1 ends at R1, and etc. I posted a detailed explaination on my website for more details, but the point is that they work! Such a move began at 7:00 am this morning and ended around 4:00 pm this evening (M3 to M1) on the EUR/USD pair.
    A warning too about Fibonacci, those lines only work for trending markets so don't play around with them. You should study up on them first, or else you are doomed to fail. I will post another lesson regarding these over the weekend if anyone is interested. It will be short and simple, not overly complicated like most traders make using Fibonacci out to be.
  3. Forexwatchman

    Forexwatchman Sergeant

    Sep 17, 2009
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    And boy did they work over the past two weeks, I used them to predict the EUR/USD fall after retracing to the 38.2 line on the 14th, it then continued back down (to the pip) to the 138.2 level today! I posted a pic on my thread under Personal Trade Journals to show anyone who's new to using fib lines.

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