Thursday, April 17, 2008

Price History Indicator

There are times where all kind of indicators fail to signal exactly where a movement should reverse or making corrections especially in the overbought/oversold situations. As a result novice traders who are in-experience in this usually fall into a trap of making early setup on their positions based on the indicators signal.

As the market keeps continue its movement this will create psychological stress which could possibly force them to close positions prematurely resulting in substantial losses. Then upon reaching its target limits the market suddenly reverse and so will regrets followed up ;). For those whose deposits are big enough to stand the pressure may be patience enough to wait to save themselves and gaining small profits. These mistakes are unavoidable if you have little experience about the various possibilities of the market actions.

How can experience traders still able to handle such an unpredictable situation even when all other technical indicators fail? The answer is simple and it is call price history. Just like people use to say history repeat itself, and this statement also hold true in the forex trading. Price movement usually targets a place where it has been reached previously. If you are a savvy trader who observe the chart closely you will notice that price will go up and down very identical to their previous reached target. See the chart below…

price history formation

price history indicator

price historyNotice on the above chart how identical is every target movement of the the market.

So next time when you are looking into all the failures of your indicators don't worry look for the previous target and hit the place your position around there you will see fast profits moving piled up within minutes.

If you need to read more about this read here "The Memory of Price Strategy" written by Kathy Lien and Boris Schlossberg from Investopedia.


alysia said...

Nice blog. Thanks for your work on it.

I've recently created a completely free forex website which hopefully will be of use to you.

The purpose of this site is to show you how the forex market reacted in the minutes and hours after news was released. Patterns have emerged. For instance, if the USD Non Farm Payroll number is significantly better than expected, the USD will initially gain against the GBP and Euro in the minutes after the number is released, and then lose value shortly there after.


Rookie said...

Thanks for the site. I've never been into any in-depth research on the fundamental factor especially the most dangerous Non Farm Payroll data because there are not enough time yet for me to do it.

And thanks for the coincident site you recommended me and hopefully i will be better on the fundamental trading someday.

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