Strat's Long Term Stress Free Trading
Thanks to those who advised me.
I have exited my EURUSD short with a good profit on both positions, so now I can watch what happens with the NFP without any nerves.
I guess if EURUSD dives I will have a chance to get on back board when it settles down again with more PASR
Good thread in here as always I coudn't help myself to post ,just out of boredoom.For those who are still learning myself including I propouse to put 10 ema as well and to watch how the price react to this moving average.You'll be surprised to see that many times the price just bounce of it and to continue its direction.That way you'll spot institutional buying or selling whatever.Ah forgot to tell sorry for posting to Mr Strat the Fortuneteller
Think of the 20 ema as a magnet which attracts price (equilibrium). Outside forces greater than the power of the magnet ( buyers or sellers) pull prices away from the magnet. As price pulls away from the magnet, it takes the 20 ema with it but at a slower and lagging rate. The price reaches a certain point beyond the 20 ema where the 20 ema invokes its elastic limit and pulls prices back in line.
If you take the time to study each pair going back as far as your data allows, you will find that there is, for each pair, a certain number of pips that price moves away from the 20 ema before the 20 ema pulls price back into line (equilibrium)
The slope of the 20 ema gives you a “rough” approximation of momentum – use this with my TLs and you have a very good Momentum system.
The slope of the 20 ema and the cross of the 20 ema above the 50 sma tells you which direction you should be trading in.
The 50 sma is not as powerful as the 20 ema but when price “uses” the 50 sma, take note.
As per our style of no spoon feeding, we have given you the pointers, now you do the work and prove the value of the 20 ema for yourself. Nothing works better than something you have proved for yourself AND therefore BELIEVE in.
Add the knowledge of the power of the 20 ema to our PASR and we have an edge over most traders. In case of any conflict, PASR rules over EVERYTHING.
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The first thing is that we use 2 MAs. A fast one and a slow one. The second thing is that MAs only show the past i.e. they are lagging indicators (as we all already know).
When a lagging indicator (a moving average) begins to react to price, it is able to show you a smoother picture of what might be coming down the pipe and to be watching for it.
The fast MA ( 20 ema ) is the first indication that a change might be on it's way. When price merges with and then crosses the fast MA, it tells me market momentum is slowing and the market is either catching it's breath or unsure of where it wants to go. Reason being, when an MA begins to hook, the visual result is that price bars begin to bunch up and grow tails and shadows.
The next indication is that price and then the fast MA crosses the slow MA ( 50 sma ). Rather than being an indication to trade, this tells me that momentum has begun to build in that direction and thus 'more prices in that direction are likely'.
Once the slow MA begins to turn in the same direction, this shows that price has built up enough momentum to impact a larger average and that higher prices are even more likely. This is where the physics of once in motion it stays in motion comes into play.
As the faster MA now begins to pull away from the slower MA, this is simply a smoother way of visualizing steadily increasing prices and that higher prices are now even more likely to follow. Furthermore, momentum (now being a function of the distance between the 2 MAs) is increasing.
The rubber band effect is really just a retrace or wobble where the market is catching it's breath…the MA just helps you to see it as such.
When you see an MA acting as support or resistance you have a combination of self fulfilling prophecy, since traders use them, and a simple indication of momentum by the angle of the MA. But the beauty of it is that you can use them as such.
So to sum all of this up as it relates to the worker, boss and big boss and why the higher time frames rule the lower:
If price has been going in a direction so long that it is able to move the 50 SMA on the big boss, then it's momentum is the equivalent of a freight train. Don't try to stand in front of it then expect it to stop and suddenly go the other way…even if it's going slow. This is why the big boss tells the boss what to do.
The boss is more sensitive to movement than the big boss but is still a city bus. Don't fight it. Also note that a city bus doesn't argue with a train. We've all seen the videos of what happens to the ones that do.
The worker does what the bosses say because ( in relation to the MAs ): As price heads in the general trend direction, it retraces and changes…these oscillations have an overall impact in a direction on the big boss MAs. A very slow one. Monthly is is the ultimate price smoother and why you use it and it's MAs as the big boss.
So, if you see momentum decreasing in the big boss ( MAs getting closer together or the fast MA beginning to hook and price is crossing it ), this an indication that the overall trend, while still intact, might be at a pause because price is now between the MAs. Pay attention to SR close by.
What you will see on the boss as a result, is that weekly price is showing good headway in that direction already. Pay attention to SR close by.
STEPPING BACK on the worker will show that same picture but with all the wiggles, wobbles and retraces that are tradeable. Look at the HH/LL in relation to SR and interpret them accordingly. If they are at SR, do your PA analysis and trade accordingly in the direction of the trend.
