Hello traders! This week’s newsletter comes to you from stormy Dallas, Texas. If you ever want to visit, make sure it’s not during springtime! Strong storms with tornadoes and hail are pretty frequent and make outdoor activities hazardous to say the least. The actual topic of this week’s newsletter is that every trading style looks for the same thing, just on different charts.
As you may have heard by now, different traders will look at different time frames depending on how long they want to hold on to their trades; this is their trading style. A day trader may want to be in a trade for a few minutes to a few hours, a swing trader may want to be in for a few days, and a long term trader may want to be in a trade for a few weeks. The interesting thing is that they will often look for the same patterns, just on different time frame charts.
In this weekly chart of the USDJPY, we have a classic rally (uptrend) a base (sideways trend) and a drop (downtrend.) I’ve marked in just a couple of potential entry points this long term trader could have taken. Each of these trades may have lasted a couple of weeks to a couple of months, if the trader was patient enough to hold that long.
In this ten minute chart of the USDJPY a nearly identical pattern to the weekly chart emerged. A similar rally-base-drop is obvious, and again I’ve marked out a couple of potential trades. Each of these trades would have lasted just a couple of hours. Notice the similarities in what each trader would look for?
Here are a couple of examples of sideways trading in the AUDUSD. The chart on the left is a daily with a few long and short trades indicated in demand and supply. The chart on the right shows a very similar pattern, just on a one hour chart. Again, notice the similarities? So, the real question is, how can we use this information to make money trading? I’m glad you asked.
Imagine you are looking at a chart of a certain currency pair and aren’t sure how to trade it. Perhaps you are looking at a four hour chart. As this chart develops, I guarantee you that the same (similar) pattern will have already happened at some time in the past, perhaps on a different timeframe.
Here’s an idea: look back in time and see if you can recognize the same pattern and see what happens next. Then you can trade the current live chart accordingly. Of course I want you to sell in a quality supply zone and buy in a quality demand zone, which goes along with Online Trading Academy’s core strategy. But when you know that the past charts can show you what your current charts will probably do, don’t you think trading will be easier?
As I’ve stated in numerous previous newsletters, trading is a lot like driving. Every day your drive to your favorite store is a little bit different, but the basics are the same. Same turns, same roads, just the traffic is a bit different. The same applies to charts and patterns; every chart will be just a bit different but the main patterns constantly repeat over time.
This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.
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