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Technical analysis by Pipsopolis

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  • Technical analysis by Pipsopolis

    In this thread I am going to review basics of technical analysis (TA). New topics are generally be given weekly and for the rest of the week, we try to Q&A the theme of the week. I appreciate your participation.

  • #2
    1- Cycles

    We all have the experience that when prices going up or down do not move in one direction only. They move in cycles. Surprisingly most of “traders” do not know how to count cycles. If you cannot see prices moving in cycles, you cannot succeed in this business. Figure 1-1 shows cycles in a chart.
    1-1.jpg
    There is always an ABCD pattern. This pattern is always valid and applicable to all timeframes and charts. In figure 1-2, although you can see a tiny cycle but because there is not enough consistency between this specific cycle and the movement, you should either pass it on or go to a smaller timeframe to catch it correctly (figure 1-3).
    1-2.jpg
    1-3.jpg
    In the next session, we will talk about trends and how to define them.

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    • #3
      Thanks Pipsopolis, however I was wondering if you could explain how you use these cycles to make a trading decision?

      Do you draw in ABC then expect a move to D?

      I've drawn a couple of extra points on the chart that look like they could be parts of the cycle, why don't you use these?

      Pipso.jpg
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      • #4
        Originally posted by Nick View Post
        Thanks Pipsopolis, however I was wondering if you could explain how you use these cycles to make a trading decision?

        Do you draw in ABC then expect a move to D?

        I've drawn a couple of extra points on the chart that look like they could be parts of the cycle, why don't you use these?

        [ATTACH=CONFIG]6[/ATTACH]
        Also how would you know that the area high after A was not B without hindsight? Are you waiting for a break of the flag either way that formed? Or are you only trading once you find a C?

        Comment


        • #5
          Originally posted by Nick View Post
          Thanks Pipsopolis, however I was wondering if you could explain how you use these cycles to make a trading decision?

          Do you draw in ABC then expect a move to D?

          I've drawn a couple of extra points on the chart that look like they could be parts of the cycle, why don't you use these?

          [ATTACH=CONFIG]6[/ATTACH]
          Nick,
          This is kind if the introduction to the discussion. Still needs more topics before going to trading these patterns.
          As for the arrows, as we would discuss later, A is lower than C and B is lower than D. So the arrow to the left cannot be A ( as it is higher than A mentioned) and the other arrow can be C to some extends but after a the price fails to form a D (higher than B) and forms a lower point down the so called C then we have a new C in effect. There is another reason for it not to be C which will be discussed later.

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          • #6
            Originally posted by BoozyBum View Post
            Also how would you know that the area high after A was not B without hindsight? Are you waiting for a break of the flag either way that formed? Or are you only trading once you find a C?
            As I told Nick let's wait for trading signals later and focus on cycles here. It is basics after all.

            Comment


            • #7
              2- Trend

              All of us have heard that “Trend is your friend…”. But how can we define a trend?
              There are three ways to define a trend, two of which are not common and the common one is not correct! And the three ways are:
              • Ask a 4 year old if the prices are going up or down (this really works, I asked my 3 year old and he replied: it is an upstairs and the trend was bullish)
              • If prices making higher highs and higher lows, we have an uptrend. We are in a downtrend if the prices make lower high and lower lows.
              • Draw a trendline. Unfortunately this common method is not an accurate way to define a trend. If you tend to find a trend using a trendline, go back to the previous discussion and try to learn cycles.
              Figure 2-1 shows an uptrend. As you can see the price forms higher highs and higher lows (or C’s are higher than A’s and D’s are higher than B’s).
              2-1.jpg
              Figure 2-2 shows a down trend and figure 2-3 shows a range market (in which neither the 4 year-old nor cycles does not show you up or down).
              2-2.jpg
              2-3.jpg
              In the next session we try to answer this question: If we have to trade in the direction of the trend, why do we tend to fade the trend?

              Comment


              • #8
                There's a guy on FPA name Sive that talks and shows video about ABCD patterns, I don't understand your explanations or his, Now I understand It's not you or him it's me. I just never will understand why it's ABCD or the reason for it being ABCD.

                But it looks good keep it up, someday I might get it.
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                • #9
                  Originally posted by EricB View Post
                  There's a guy on FPA name Sive that talks and shows video about ABCD patterns, I don't understand your explanations or his, Now I understand It's not you or him it's me. I just never will understand why it's ABCD or the reason for it being ABCD.

                  But it looks good keep it up, someday I might get it.
                  Sure Eric, I'll try to explain in the simplest way possible. Cheers

                  Comment


                  • #10
                    Some incidents in the recent months show that you cannot lever your account too much and survive in the long run. This game is not a sprint but a marathon.

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