Long-Term Traders the big market movers.

If you at times suddenly the market is making a huge movement, it could be that the effect of long-term traders are starting to join the market. Based on market movement analysis these traders are not dependent on technical indicators such as MACD, Stochastic, Bollinger Band, etc.

They based their trade by looking at the support resistant level, chart pattern, candlestick formation, and of course the economic data summary. As you can see last Wednesday and Thursday, the market is making big move on the GBP-USD because it is has already reached the support level on weekly time frame. At this point the long-term traders expect a profit taking place and also potential buying situation causing the market to move up.


Based on technical indicators the market should have been continue downward movement as shown on the chart below where stochastic and MACD is moving down.


In summary the big movers of the market usually targeting the weekly and perhaps also monthly time frame based on chart pattern, support resistant level, candlestick formation, and economic data summary.

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Trend Line Is One Key in Forex Trading

Probably all traders is familiar with the terms trend, however how many is really paying attention to this important indicators of the market movement. Especially the beginner traders who are so focus of finding their own trading system and strategies are most unaware with the significance of trend in forex. Therefore In this blog I just try to provide a reminder about the importance of trend.

In his book title "The Technical Analysis of the Financial Markets" John J. Murphy explained that a trend in motion will continue in the same direction until it reverses – therefore one should ride on existing trend until it shows a signs of reversing. This is very simple explanation in general about trend which you can see on your daily trading chart. When trend moves it will keep moving until it stops somewhere and look for new level to break or otherwise reverse. At the point of breaking new level or reverse it is call support and resistant fluctuation area where the market moves up and down before making continuation.

Follow the guidance of John J. Murphy on "John Murphy's Ten Laws of Technical Trading" HERE

The following are John's ten most important rules of technical trading:

1.Map the Trends
2.Spot the Trend and Go With It
3.Find the Low and High of It
4.Know How Far to Backtrack
5.Draw the Line
6.Follow That Average
7.Learn the Turns
8.Know the Warning Signs
9.Trend or Not a Trend?
10.Know the Confirming Signs

What is forex trend?

Many novice traders are still confused by the terms of trend. This is no surprise because trend can be many if you see it by time frames. In order to make easy understand traders divided trends into 3 most commons terms which consist of short, intermediate, and long trends. Each of this category are made up of one or more time frames for example short-term trend are consist of 4 hourly up to daily time frames. And intermediate trend is displayed by the weekly time frame and lastly the long-term trends is by monthly.

Short terms trends usually complete cycle usually take up a minimum of 2 days or a week. Intermediate trend will take a month and long term trend maximum up to 5 months before they make correction.

Usually the general term of trend that most people are talking about is the long-term trend. So commonly they are referring to the monthly time frame because it takes at least 2 to 5 months of continuous movement before major correction is taking place. How to estimate how long a trend is making a complete cycle is by using the candlestick counting method.

Take a look at the chart and how many candles can you find in a complete long-term trend cycle.





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Multiple Time Frames Systematic Analysis

How to build a systematic approach to analyze the multiple time frames movement. If there are someone who knows about programming language it would be better because you don't have to record them manually. Unfortunately I don't have any of those skills so I will show you how to do it manually.

I am going to use 3 of the following indicators

1. Bollinger Bands – To determine support and resistance level
   
2. Slow Stochastic – To determine the short-term movement
   
3. MACD – To determine the overall movement
   

Put them in a table. I am going to use GBP-JPY to make the explanation specific.

The initial setup will start from the top of the Bollinger bands for monthly time frame and our expected target is at the bottom of the Bollinger bands. Assume that the first move all stochastic and MACD in all time frames moving downward.

According to the natural movement that it must move and past through support and resistance level before any movement reaching its target. These are obstacles we have to consider so that we can utilize the situations to our favor.

The monthly time frame is a long time to wait especially when it comes to support and resistance level it will take months to break before moving to the next level and continue to the targets. Based on the GBP-JPY chart it takes approximately nearly a month or more to successfully battling each of the obstacles along the way.

Now the question is how do we determine the support and resistance level? The key is the weekly time frame which is the closest to monthly time frame. Therefore the strongest support and resistance area will be created when the weekly stochastic is moving upwards. The rest of the minor time frame 1H, 4H, Daily will be easily broken because they cannot stand the long-term traders power. These minors time frame will be active again to create volatile price movements at the support and resistance level.

Upon reaching the strongest resistance level weekly stochastic will move upwards heading toward the middle Bollinger bands. It will sometimes reach the middle but most often not exactly. However on the daily time frame target will be exactly in the middle or a little bit more because both daily MACD and Stochastic are moving parallel upwards. Upon reaching the highest point, this will create the limit peak for fluctuation for the support. Based years of observations i've come to note that the market will generally fluctuate to create 3 peaks in sideway direction before breaking the resistance level to continue the trend downward. As you can see on the chart below.

Keep in mind that the overall trend is still going down as MACD and stochastic monthly time frame is still go downwards direction. This is to reduce the amount of doubts to think the trend might reverse upside suddenly. Don't be afraid of the reversal because every trader including those with the most money also fears that they will lose money if they go against the market direction.

The next setup will be located in the middle and as the slow stochastic moving downwards it is definitely going to move down to the bottom of the weekly time frame trying to break the resistance level. When it is broken the trend will move down until it reaches the next resistance level when the weekly stochastic start to move up again. At resistance level fluctuation start to occur again before make any continuation.

This process will go on and on until it reaches the monthly bottom Bollinger bands. After that then the market will retrace to the middle of the monthly time frame. If you want to be good in this you need to practice to look at the market behavior based on these three indicators you will be improving better in your trading. This system is based on the mathematics of moving average, where it round up the best average from all trading activities.

If you have any confusion or in-depth questions about this system leave me your thoughts on the comment i will try to help as much as i can.