Fundamental and technical analysis

Welcome all!

This page is a work in progress and will always be under construction. I will always add pertinent information in regards to my trading strategy to this page and upload the latest versions of the indicators, templates, set files etc. that I use to trade this strategy.

You must have at least one year trading experience to trade this system as it does require you to have a mature trading psychology as well as a good knowledge of the MT4 trading platform. I WILL NOT ANSWER ANY BASIC MT4 QUESTIONS!
You must follow proper money management principles and it is your own responsibility to ensure that your account is protected against draw down. I will not answer any MM questions nor am I taking any responsibility for your losses. You must understand that there are inherent risks associated with Forex trading and your account could be wiped out in a matter of minutes if you do not follow prudent principles of money management.

The purpose of this tread is to help traders understand the fundamental aspects of trading and the importance thereof. It is the fundamentals that move the market.
Fundamentals alone does not necessarily give you a winning edge and that is why I believe that combining fundamental analysis with technical analysis can give us a real winning edge in the market.

What is a strategy if it cannot be altered, adapted or tweaked as time goes by to increase it’s effectiveness?
This is what I have done recently. The fundamental outlook and market sentiment is the cornerstone of my trading strategy. I also use the principles of Fibonacci Pivots (information of this strategy can be found on the thread of Davit - https://www.forexfactory.com/showthread.php?t=588764).
My strategy combines these principles with fundamental analysis and price action basics (candlestick patterns) to qualify entries.
So, I do not make use of technical indicators like RSI, MACD, Stochastics etc, etc, etc. but I trade on a naked chart with just the Fibonacci pivots indicating higher probability areas for buy or sell, together with my own developed candlestick pattern indicators.
I basically try to identify strong and weak currency pairs based on fundamentals and sentiment and trade those (i.e. if USD is strong and the EUR is weak for example I will enter a short trade on EURUSD when price action confirms an entry which could be at or close to Fibonacci pivot levels).
I trade on three time frames – H1 as the main TF, M30 and H4, and I do not trade CHF or exotic pairs at all (this is personal preference).

Any currency pair can be in one of three states (depending on time frame):

1. Trending. Higher highs and higher lows or lower lows and lower highs can be easily identified
2. Reversal state. New higher highs and higher lows, switching from down- to up-trend and visa-versa for up- to down-trends
3. Ranging state. A mixture of highs and lows, or similar highs and lows than previous can be seen with no clear market direction.

I use the H1 time frame to help me identify the state of a currency pair and if the state is not clear on H1 I use H4 time frame. I focus on pairs where the time frame agrees with the fundamental outlook for the pair. If there is currently no clear bias for the pair I steer clear and wait for a bias to develop.
Once I have a tending pair where the bias agrees with the fundamental outlook, I use candlestick patterns to identify opportunities to enter a trade.

I use four indicators for my technical analysis:

1. a version of Nostromo's pivot indicator that I modified to be able to select which pivot levels I want to use
2. PA indicator and
3. Candle reversal indicator
4. A commercial indicator that I cannot share. This indicator also identifies candles of high probability price movement, based on price action. My system can be traded without this indicator – I only use it for additional confirmation.

The PA indicator: has three candle bar patterns: bullish/bearish engulfing, bullish/bearish reversal pattern and Dojis. I ONLY use the bullish/bearish reversal pattern and switch off the engulfing and Dojis as the Candle reversal indicator has optimized engulfing & Doji patterns (I lost the machine on which I developed the PA indicator with no backups and had to re-code from memory but is now better!!).
· Keybar signal indicated by a green star (for long and short trades)
· Strong Keybar signal indicated by a red star (for long and short trades)
· Bullish/bearish reversal signal (thin blue or red arrow)

The Candle reversal indicator: has five candle bar patterns:
· Reversal (weak, moderate and strong – indicated by n)
· Two strong candles (indicated by a ³)
· Three strong candles (indicated by u)
· Confirmed bullish/bearish engulfing (indicated by é and ê)
· Valid Doji signal (indicated by ª).

The PA and Candle reversal indicators should be used in conjunction with the WP Nostromo indicator to identify areas of support/resistance and reversal. Areas of reversal are above R61 level for short entries and below the S61 level for long entries.
If the PA indicator shows an arrow and/or star it is an indication that a certain chart pattern has developed. These are classified as follows:

How to use the indicators:
I wait for two candlestick indicators to indicate a buy (for an uptrend) or sell (for a downtrend), mostly on the H1 time frame. Then, there has to be confluence on either M30 or H4 if I trade from H1 or confluence on H1 if I trade from M30 time frame. I normally do not trade from H4 but rather use it for confirmation. If there is confluence on all three time frames, I know the trade is a high conviction trade and I might add positions to the original trade.
To identify a trend reversal (point 2 above) I need four candlestick indicators on mainly the H1 time frame and I use the same principle of confluence. When price is above, below or inside the buy and sell zones as indicated by the WP_Nostro_mod_me indicator the probability of reversal is higher than outside these areas but is not always the case (as we know the Forex market!!), so there could be trend continuations in these zones as well.

The Strong Keybar signal is a very good indicator that a price reversal is about to occur especially above the R61 or below the S61 pivot level. The green Keybar signal on H1 time frame is normally a good indication the the prevailing trend will continue.
The fib pivot levels are normally fairly accurate areas of support and resistance and price action quite regularly bounces off them, reversing direction.

Calendar/news feed:
You can used any Forex calendar and/or news feed of your own choice - I use the calendar here at ForexFactory and I use the free financialjuice.com newsfeed.

Here are the MT4 indicators and template that I use for my technical analysis (the template has all the correct settings, no need to change anything):

I fully agree with you

fundamentally very needed by everyone as the basis of knowledge.

How many newcomers traders who have successfully?

Technical analysis good for swing. Fundamental analysis good for scalping. Combining both; you know the trend and your entry/exit in that pair which is key to your success.

Forex Trading is 5-8 trillion daily trading market. 95% loser and 5% are winner including banks.

To become a successful Doctor/engineer/computer programmer you study and abreast in knowledge. So why not in Forex? To become successful Forex trader, understand Fundamental / Technical analysis and study all trading methods including grid/martingale/price action/pivot, practice them in DEMO.

i'v been in forex sector sice 2004 and i figure out that technical analysis show the scenarios first and fundemental analysis follows.

This statement isn't entirely correct. Fundamentals drives the market and is in fact how most professional traders analyse the market. Mixing fundamentals and technical is a toxic soup because technicals offers the trader any narrative they can imagine while fundamentals paints the picture for what it is.

I wrote about this yesterday so don't want to repeat myself again so have a read.

https://www.forexfactory.com/showthr...5#post12087115

sorry but you are just wrong with this statement.

a few examples of patterns in data that traders use all the time in trading - i could find many more but haven't any the time at the moment

humidity


murders


natural disasters


random walk data


subway


transport use


scientific whaling

"Fundamentals don’t matter
It may come as a surprise but markets are not driven by fundamentals. They are driven by psychology.
One of the biggest mistakes I see new traders make is paying too much attention to news.
In order to profitably trade news events you must predict 2 things correctly.
a. The news event itself
b. How the market will react to that news.
Take non-farm payrolls. To profit from this news event you must accurately predict both the NUMBER and the REACTION from the traders in that market.
These are two things that you cannot possibly know prior to the news event and there is simply no way you can consistently predict the outcome of two things you cannot possibly know.
Instead, base your decisions on how the market reacts to the news. You will fare far better."

- Jason Stapleton

Technical analysis is far more superior to fundamental /news trading.........

You will be much more successful trading what you see on your charts than trying to interpret fundamentals.

Upps TooSlow these guy has left trading has filed... Jason Staplton,

And that's why over 90 percent of traders who use it fail, because it's superior. The professionals must be morons for all following fundamentals then, after all they are the ones that move markets.

Your entire understanding of it is flawed. You don't need to know or predict the number to be successful trading it. How the market will react is a function of the analysis and the difference between expectations and reality. Psychology has nothing to do with it.

Could you please elaborate what you are trying to show with your pictures? That technical analysis is nonsense?

Really it's very simple:

FA tells us if we should BUY or SELL,
TA tells us WHEN to send the orders.

Everything else is just patience........

I wouldn't say nonsense but rather smoke and mirrors. You can apply any narrative to charts. Those images show the same structure that is sold as having a purpose in markets.

When a trade is triggered can also be done though FA, no TA required.

Those are some awesome examples for a very relevant point. We are born hard wired to find patterns, even if the data is completely random. Therefore one can see regular patterns in every price chart, what they mean for future price movements is usually completely unclear.
There are some things that work thou, and they work better with more experience. While i am far from being an expert i feel that there is relevance to volume data, level 2 data and Bonds. I realize that volume and level 2 is usually not available or at a bad quality. Therefore i think that certain price formations indicate certain patterns in the (unavailable) level 2 data. For example the popular head and shoulders pattern seems to correspond to a temporal pattern in level 2, which makes it so popular because it works from time to time.
So my point is that there are some patterns which actually work for certain instruments. However one has to be extremely careful not to see a lot of nonsense.

To be honest, I was very close to not responding because your expectations shows that you are so unfamiliar with fundamentals that you have really just made a bit of a fool of yourself. To be fair it's probably due to the sheer volume of bullshit peddled in the retail trading space, so not really a fault of your own. That being said a bit of research to rule out whats bullshit and what isn't is highly recommended going forward.

Nobody on this planet can predict the outcome of the news and even if the news has a similar outcome, relative to historical prints, it doesn't guarantee the outcome will be the same again. This is probably why so many retail traders have tried and subsequently have been slaughtered, followed by the birth of a belief that its all just bullshit.

Take today as an example, US retail sales beat expectations but the USD sold off against the Euro regardless. To the retail trader this is proof that its all crap. To the educated trader, and i mean no disrespect, the trade wasn't a buy in the first place. You see this morning an ECB executive board member, Coeure, said the market read it wrong and last weeks announcement does not imply a change in policy geared towards a recession. This is why the Euro was bid this morning leading into the US data event. I dont care to explain too much in details but just understand that this gave the euro a bullish sentiment.

On the other side of the pond, the US released dismal job numbers last week, and even though todays numbers were a beat, the revisions on last months data, which was the worst in years, was revised further south painting an even bleaker picture, and clouding any dollar bulls. So the uneducated trader would have been slaughtered today while the educated trader made profit because they bought euros which was essentially just a continuation of the mornings sentiment.

Now getting back to your misinformed request, you need to realise that professional traders are not in the business of fortune telling. They dont need to know what the result will be, they only need to know how to react to the release if the data swings one way or the other. So theres a little lesson for you to replace the tripe you have been told.