FOREX Market Reversal Levels

What rac's example earlier, as well as Andrew's latest EURUSD chart, show is that the risk is highest around the reversal levels.

And if you think about it, the money is to be made between the levels. So the way to utilise these levels is not to trade at the levels but between them - unless you are very experienced.

In other words, wait for price to reverse from the level and then enter with momentum. A robust and simple way of doing that is to use a multiple timeframe momentum strategy.

As an illustration, put the attached indicator on a €/$ M1 chart for today and take a look at the sections of the chart where all four indicator rows are red. Plenty of "easy" pips to be had.

Please be aware that this is just an illustration, not a complete strategy. If you want to take a look at one, check out MissPips' MTF THV strategy on Cobraforex' THV thread. Comes complete with rules to follow and it works.

Hope that helps.

EDIT: I should also say that MissPips' MTF strategy is by no means the only one (simply search 'MTF strategy' and similar terms). Neither is it geared towards taking advantage of the FMRL levels as it is a scalping strategy. So, as always, do your own research and thinking.

Scoobs, thank you for taking the time to make a comment based on my post. You just stated a very valid point, and these levels might be much more accurate than other pivot levels, and honestly I don't have your knowledge or Old Dog's experience to give a professional judgment about that yet. I was referring to the marketing approach Andrew was using and my comments were made because of the change of words (from possible to safe), I believe that it would actually help to preserve the thread while giving experienced traders the chance to give a fair opinion and even contribute with methods and ideas if they feel inspired by the thread. Who knows, maybe one of these days more respected and professional trader like yourself feel like write a post with more technical advice for other people.

I also notice that Andrew is improving accuracy and now he uses a closing bar to count the potential pips, that is a good step towards reality.

Once again, the term Potential or Possible is much more suitable than safe... and when I'm proven wrong I will be the first one suggesting using the word safe.

Good reference!

Certainly, but the problem is that the value of experience is known only to the experienced. Just like some teenagers think they know everything, the inexperienced trader may think he knows more than he does.

And to such a mind Andrew's marketing message, that by simply "following PA" at these levels there are 100s of "easy" pips to be had every day, can be the road to disaster as it makes things look deceptively simple by presenting them as if there were no risks involved.

It really does not matter how simple or complex a strategy is, a lot of traders will still screw it up."Yes" the concept does look simple enough to trade, but it still does not go without saying, that trading is still down to screen time.
You got to watch the price action! Look in the background and see how PA has behaved previoulsy around these lines. Of course this all takes experience.
Without an idea of how the market moves, no strategy will be good enough untill you understand these concepts, and that is again down to many hours of practise and screen time. I'm sure we have all heard that there is no such thing as an holy grail in this Industry, but there are some good close strategies. This is one of them. You just got to know how to trade it. Andrew has given us a great strategy, but you got to understand the logistics behind it. Look for past strengh and weakness at these Lines. Thats your clue.
:-)

Look at the example of a safe trade.
I looked for weakness in the background and waited untill price met with FRML, then took a trade for 30 pips to the downside.It looks easy, but it comes with experience.
:-)

Hi Scoobs, Medici, rac and hardpippin,

Please accept my apologies being slow to thank you for sharing your wisdom here.

We all share a common concern for novice traders ... and remember ... we all started the hard way.

In particular we want to thank you, hardpippin, for showing us how to do it. Could you possibly explain how you recognise weakness in the background?

Please do continue to help viewers learn.

Andrew



PS Will post charts later today.

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Andrew



EURUSD



GBPUSD



EURJPY - 50pips



USDJPY - 20 pips



USDCHF - 60 pips



USDCAD - 50 pips



Continued in the next post as reached the maximum number of charts.

AUDUSD

GBPJPY

EURCHF

NZDUSD

GBPCHF

audusd



gbpjpy



eurchf



nzdusd



gbpchf

Our subscribers live all over the world. Some are experts, some are automated, some have great methods … but many are still learning how to trade.

These thoughts are for them. We hope they are helpful and easy to read.

They are the observations of simple mathematicians. We are not ourselves expert traders.

Please will expert traders let us know what needs changing, removing or adding.


About Charts

Conventional charts show closing positions. Candlestick charts show the range of activity during a time period.

These time periods are artificial as price movement is continuous while the market is open. Activity is broken into time slices to make it easier to understand what’s happening as the data changes.

... same ...

These are from the same one hour chart. The line chart display only shows the last price in every hour. The candlesticks option shows the Price Action information – open and close – high and low – in every hour.


About Prices

Prices go up when more people buy than sell. Prices go down when more sell than buy.

We know of three kinds of people who buy and sell currencies.

 

1. Companies which need to change currency for business reasons.
2. Traders who believe a currency is over or under valued relative to another.
3. States who want to increase or decrease the value of their own or another currency.

There may also be large traders who buy and sell small amounts of a currency to stimulate trends to reach a price where they can buy and sell larger volumes to make big profits.

When you place a buy or sell trade and the price goes up or down you make a profit. The person you buy from or sell to may have bought or sold the currency at a lower or higher price and may also make a profit. But the profit you made is their loss by definition.

FOREX trading can be seen as a zero sum game as profits made are always exactly equal to profit not made by the other party.


About Trading

Buy if you think the price will go up or sell if you think it will go down.

Novice traders get it wrong most of the time. Experts are right more often.

Novices run out of capital for margin. Experts are better at money management.

There are three kinds of normal trading methods.


1.Technical traders project historical price action into the future, often using indicators.
2.News traders anticipate how news items will change the perceived value of a currency.
3.Sentimental traders use price action to deduce the market’s perception of value

Novices generally lose and experts generally gain whichever method is used.

Manipulators add energy and direction to price action until it becomes a trend.

Occasionally a new price is established a long way beyond the current price because,

 

1. States push or pull a currency price to try to establish a more desirable pivot level.
2. It is widely believed that sometimes prices are moved to activate stop losses.
3. By accident when the price jumps an impossible distance and immediately recovers.

FMRL and Price Action

A good trade is when you guess the right direction and get out before it goes too far wrong.

 

1. Price Action is used to see where to open or close a trade.
2. Support and Resistance levels are used to know where a change is most likely to occur if it is going to happen.

There are two kinds of SR levels in widespread use,

 

1. Fibs are produced by mapping Fibonacci numbers between high and low points in a trend. They are used to show where retracements are likely. Retracement is when a trend makes a temporary change of direction before recovering and continuing.
2. Formed around Pivots sometimes calculated, often derived from historical price action.

FMRL levels are centred on Pivot points. Our calculations do not use historical price action. We call them reversal levels because they are where our maths says the price is most likely to change direction if it going to change direction.

FMRL levels exert a sort of gravity which makes them effective SR levels as well.

How to become a Successful Trader

We strongly advise novice traders to do three things that really work,

 

1. Only trade demo accounts until you have three consecutive profitable months.
2. Learn how PA works. There is a good and simple beginners guide here (http://www.nysco.co.uk/Candlestick.zip).
3. Understand and USE sensible money (risk) management discipline, see how here (http://www.babypips.com/school/what-is-risk-management.html).

Then, when you understand the basics of price action and money management, you will be equipped to get real value from the expert advice provided by members of Forex Factory.

Good luck.

Hope some of this has been useful.

Andrew

Hi Andrew,
Some of the points you metioned are a great start, However the following qoute may get alot of newbies into trouble:
About Trading

Buy if you think the price will go up or sell if you think it will go down.

The term "think" is where a lot of traders fall over.
Chart patterns are also another aerea where alot of traders fall over too.

You have to to trade what you SEE on your charts, NOT what you think the price will do. I'm sure many expert traders here will agree with me.
Charts patterns are invariably mainpulated. It's harder to manipute a trend line.

Remember; Its alot easier to make some pips trading with the trend than against it unless you're going for quick scalps (for the more experienced)

As I type this it's now 04:15 EST and the trend is DOWN on the EURUSD, so I would NOT be looking for any trends at the moment going up!
The area I would be looking to take a long position between today and tomorrow is 1.3505 & 1.3481 if the PA gets there. I see strengh in the background

for the benefit of the newbies,I'll post a few more charts of my explanation of weakness and strengh at various points where safe pips can be gained throughout the coming week.

Together we'll make trading easier...
:-)

Look at the example of a no trade for me just yet.
Reason:
1: We are stiill in a down trend
2: although there is a little sign of strengh in the background, the previous
low has not been taken out.
3: If you were an aggressive trader then you could probably trade a bounce
for some pips upwards off this point, but for me-I prefer to look and wait for a higher probablilty.
Hope this helps.
:-)

Sorry guys, I forgot to atatch image to last post.
There we go...
:-)

Hi hardpippin,

Thanks for your comments and for correcting us.

You are absolutely right.

Unfortunately the post has been turned into a quote and I can't change it.

Do you think it's worth adding to our first post as a permanent and changeable feature of the thread?

And thanks again for explaining your trades, which helps us all.

Bests,

Andrew

So true, and the next step where the beginner may stumble is the definition of a trend and how to trade it.

It is easy to get bogged down in indicators, the statistical/predictive relevance of which is questionable. The beginner tries out system after system touted by other beginners and ends up frustrated and poorer.

It is useful to recall the words of Leonhard Euler, one of the greatest mathematicians ever:

Although to penetrate into the intimate mysteries of nature and thence to learn the true causes of phenomena is not allowed to us, nevertheless it can happen that a certain fictive hypothesis may suffice for explaining many phenomena.

The point being, of course, that one may stop trying to figure things out, and rather settle for a robust definition of a trend and how to trade it. And the problem with the indicator route is that it leads to the domain of stochastic control theory, for which most traders do not have the navigational skills required.

So the requirement is a robust and simple definition of trend and how to trade it without use of indicator readings. One such method is the Multiple Moving Average method developed by Daryl Guppy. See, for example,

(http://www.forexfactory.com/showthread.php?t=5933)

and

(http://www.forexfactory.com/showthread.php?t=267184)

A couple of examples of "selling weakness" from this morning's €/$ session attached.

Yes, One of the things newbies have to undesrtand as quick as possible is do not fall the scams of so called "Majic" Indicators and such. Just like going and doing a 3 year colledge course, you got to put in the same effort in this game too.
NO MAJIC Formulas!

"Andrew" I would'nt worry too much about the slight error in your posting. You made it clear you guys are mathematicians. There are many guys on this forum who are willing to help each other, and most of all people like you who provided a great piece of the jigsaw has certainly helped.
:-)
We're greatfull just for that info alone.

"Anyway", attached another chart to show the benefits of waiting untill the criteria is met!
It gave me 50 safe pips!

Example of sitting on your hands and waiting...
We are looking for high Probabilty trades!
:-)

A slow start ... to a slow week?

Below are today’s trading results using FMRL.

And a selection of charts showing possible trades.

Our numbers are available by subscription.

Subscription to FMRL costs GBP20 a month.

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Andrew



EURUSD

GBPUSD

EURJPY

USDJPY

USDCHF

USDCAD

AUDUSD

GBPJPY



EURCHF - 120 pips



NZDUSD



GBPCHF

And another example where to look for entries...
:-)

Find attached chart of the trade taken looking to get out 1.6178 (Entry was 1.6109)
My direction was right, but price action did'nt make it there. What was strengh in the background has now become weakness shown by the marked
candle.
This goes to show that ift does not matter how clear your signal is, always
put money mangement first; In other words "Where am I going to get out if it dont work out?".