Market Sentiment Analysis how to approach

In the Forex market million of people are engaging with their own knowledge of economic, political, technical, fundamental analysis in order to catch pips, and understanding market for better. So after technical analysis and also fundamental you have to do work with market sentiment analysis though it doesn't show you entry and exit trade point yet but you should not ignore it. But how? Well I am now focusing on these topics.

*Analysis how many candlesticks are bullish and bearish, how much bull and bear cadlesticks average range. (H1 or H4 frame candlesticks you may count)
*Follow COT report every Friday www.cftc.gov/MarketsReports
*Mark up when price bullish at the bottom and bearish at the top price.
*Mark up if more than 3 candlesticks is about equally high and low.
*Mark up market when price on Pivot, Fibonacci level.
*Mark up how much  market price range.
*Mark up if market is squeezing.

Identify your market environment

Here Forex Schooling  you have learned some topics those are for only alphabet of currency business. Now you may want to know about how to guess market environment. Well .... The market is healthy or weak or simply move as a snail these are you must be recognized firstly for trading. It is called trade-spotting.
Forex learner called these market environments as Bull market, Bear market or sideways/ranging market.
Bull market means the Buyer is in power so market force up-warding. Bear market means the opposite of a bull market. And ranging market moves very small like  a snail.
Fibonacci and Trade line helps you to focus on the  overall market nature for a specific time and Pivot, Support and resistance just tells you if the market is ranging or not.

*Reversal trending: You may notice that the market is down trending but all of a sudden it goes up trending and this time you may cause of losing your profit since you are not still familiar this. It is called a reversal. And reverse trend is the nature of the market. So you have protected yourselves for this.
Reverse trade can occur any time but usually after a heavy bull or bear trading. And long time price reversal is common remember it.

Technical Analysis Harmonic Pattern

In the previous post you have learned about the Elliott Wave extension. There you notice some patterns. Now I am discussing some different types of pattern and these are very useful. Since you are learning Forex for professional level and I am trying to you as many topics and tips on Forex thus you can make yourself Forex professional.
Do you see bats, crab, butterfly? Yes of course but why? Is it important? Yeah this is important. Sound like noise ...um.. bat, butterfly...
Let's turn on the Harmonic patterns.

*You must be use Fibonacci retracement level and extension for measuring these patterns.

*ABCD pattern: It is likely wave and AB length = CD length, AB length time need = CD length time
An AC length retracement is 0.61 and BD length is 1.27 Fibonacci.

*3 Drive pattern: A and B point retracement is 0.61, point 2 and 3 is 1.27
Drive 2 complete time = drive 3 complete time

 

*Gartley pattern: It is discovered by H.M.Gartley.It is inside ABCD pattern and based on W or M shape or structure overall.There are some rules for it:

*Move AB is 0.61 retracement of XA move.

*Move BC is either 0.38 or 0.88 level retracement of AB

*Move CD must be 0.78 level retracement of XA 

*Crab pattern: In 2000 Scott Carney discover this pattern.His observations are

*Move AB is either 0.38 or 0.61 level of XA move.

*Move BC is either 0.38 or 0.88 level of AB move.

*Move CD may be 1.61 extension level of XA move

*Bat pattern: In 2001 Scott Carney discover another patter.It is bat pattern.His own observations are

*Move AB is 0.38 or 0.50 level of move XA.

*Move BC is either 0.38 or 0.88 of move AB.

*Move CD may 0.38 of move XA.

*Butterfly pattern:It is discover by Bryce Gilmore.His own observations are

*Move AB may be 0.78 level retracement of move XA.

*Move BC is either 0.38 or 0.88 of move AB.

*Move CD may be 1.27 or 1.61 level of move XA.

Technical Analysis Elliot Wave Extension Pattern

In my previous post I mentioned that it is not so easy to identifying Elliott Wave perfectly. And the more time you will be find only 1-3 waves or 1-5 waves but not with the full extension pattern because it is rare and 1-3 or 1-5 waves the nature of the market with trader sentiment overall. However some time it found full Elliott Wave and you have to learned this perfectly to be a professional trader. Huh.. Is it? Yeah Elliott Wave now most widely used theory among the professional traders.
Now turn on about Elliott Wave extension wave which is called an ABC pattern and more than 21 types of ABC structure recognizes.

*Always use the Zig Zag indicator to easily identify these patterns.

*ABC Pattern:

*Flat Pattern:

*Zig Zag Pattern:

Technical Analysis Elliott Wave theory

Ralph Nelson Elliott (1871 to 1948)  was an accounting professor who was a mad genius for researching 75 years stock data and discover "Wave" in the market, with having evidence published "The wave principal " in 1938.He believed that a trading market happens in repetitive cycles and he points these cycles for only market traders' emotion or psychology or reaction influences. He discovered some swing point of price and structure a pattern like a wave. Do you learn Dow theory?  Elliott Wave theory is based on Dow theory. He described Fractal (same pattern appearing at every degree of trade ) is the nature of the market.

There were 273 rules and guidelines for Elliott Wave principle. So if you want to know details please read a reference book for wave theory. Elliot believed that market move as cycles or wave and this he called 5-3 wave patterns. First 5 wave patterns are called impulse wave while second 3 wave pattern is corrective patterns. Corrective patterns are called ABC or ABC pattern means one kind of patterns they are. Moreover 21 types of corrective patterns now identify. So the Elliott Wave principle is not so easy as you think. You have to  learn more and more about it. However I hereby show only simple matter of Elliott Wave. Simply learn the following:

*Wave 1 is just sudden a simple wave.
*Wave 2 never goes back to wave 1 completely.
*Wave 3 always bigger than wave 1.
*Wave 4 never same price level of wave 1
*Wave 1,3,5 is always extended waves.

Corrective patterns:
As I wrote above corrective patterns are different types. The majors corrective patters are
*Zig Zag pattern
*Flat pattern
*Triangles pattern

Remember the following facts:

*Wave in wave means when you identify wave 1,2 etc.. Then there may be see a tiny wave into these waves.
*Use Fibonacci retracement in order to forecast future price movement or next wave mean 50% to 78% retracement you should be notice for wave 2 and 4.
*A lot of practice you need to identify correct Elliott Wave.
*Wave 2 & 4 are always short waves.

Technical Analysis with divergence

Do you see what action price does during up trend and down trend? If you see then you may catch point as Higher high and Lower low price. But how you guess it? The answer is divergence. It tells you where those your marking points. And you can analysis price action better for the help of divergence. But careful it needs some tolerant practice, because many times false divergence happened and as a novice trader you may guess it exact divergence. You must be using for guessing true divergence by MACD. When the market is higher high MACD shows to you Lower High and Lower low it shows Higher low. There are two types of divergence,

*Regular Divergence
*Hidden Divergence

Remember the following facts:

*If market moving uptrend then you will find Higher low to Higher high.
*If market moving down trend then you will find Lower high to Lower Low.
*you must be search the last level double top or double bottom patterns.
*Divergence tells you if price moving continue direction or opposite direction.
*Hidden divergence is difficult to recognize for newbie.

Technical Analysis Dow Theory

Today in the Forex you can notice that many indicators which are mostly uses currency business understanding or technical analysis is collected from the stock market and refined.So we have to go back a little understanding today's Forex market theoretical or concept.How many  ideas or concepts that reflect today's Forex market along with the stock market? Well one of the concept is Dow Theory.Charles Dow was born in 1851 and he was not learned yet likely modern graduate.But he was a genius for his brilliant observation with stock chart.In 1882, he founded Dow Jones & company and he created Dow Jones Industrial Average,20 Stock Rail road Average(Now Transport Average).Dow himself never refers his theory as Dow theory.Actually Dow did some editorials and later W.Hamilton, R.Rhea and S.A.Nelson, E. George Schaefer,Richard Russell refined the Dow theory as they did research and published their own observation.

Dow emphasis the stock market movement into 3 paths. A certain time period each movement defined, and these movements may be a major or minor trend. Dow called them as Major movements, Secondary movements and Intra -day-cycle. These movements familiar now as Bull markets, Bear markets, Ranging markets.

W. Hamilton focus on the main points as:

*The price average discount everything.
*The 1st or primary trend cannot be manipulated.
*Both 2 types of Dow's creator (Industrial & Rail) must confirm each other.
*Trending spotting Higher high & Lower low. 

E. George Schaefer points some new view of Dow's as:

*He believer both Hamilton and Rhea were far from the Dow reputation for "Values".
*He believed that R. Rhea just some took advantage from Hamilton research and tried to improve the Hamilton system.
*He prove that some points of Dow theory cannot play today's modern emotion stock market such as secondary trend retrace 1/3 to 2/3 of the primary swing.
*He use 50% retracement concept.
*The yield cycle.
*200 SMA use
*The ratio of the short interest to the daily volume.

I hereby write few lines of Dow's as it is important to learn the "Wave" concept in the Forex market which is now familiar as Elliot Wave and it is based on the Dow theory.

Introduction to Chart Patterns

Now you probably familiar with candlesticks and market a little more from time to beginning Forex learning. With stick the candlesticks chart you may be see that some structure are formed in the candlestick charting. And these structures you will find easily once you have known about clearly. So lets us journey to learn these types of chart formation. Are you ready?

*Double Top & Bottom: You may know the candlestick formation called double top & bottom. Now gather some candlestick you also see the double top and double bottom formation.

*Head & shoulders / Inverse Head & shoulders: Like to see about a human head and shoulder.









*Rectangles: Like a box shape price consolidation into the box and rectangle line break.

*Triangles: Just look systematic triangles, ascending or descending triangles.

*Wedges: Wedges are consolidation price into support and resistance line and ending a parallax line. Then price break trade line and market moving bullish or bearish trade.

*Pennants: These formations during after a big up or down price movement. It is like almost the same as triangle formation but little difference you may be notified.

Bullish / Bearish Flag Pattern:Like a flag shape candlesticks gathering or consolidation or ranging and break upper / lower trade line.

How to trade chart patterns:  You should always wait for the formation of chart and identify these and must trade some far from these line breakout levels because it may mislead you unless you do not do that. And a lot of practice you need to do that. These patterns are easy to see and most of the traders look these along with you. So make sure that you enter trades a secure distance.

Technical Analysis with Trade line

Do you know the only Trade line tells you market movement present or future? O...F.w that's true? Yes that's! But you have drawn trade line exactly. It is a handy tools so does not draw the trade line as you wish. But draw trade line to high to low exactly. You will be find some interesting for this......

Technical Analysis Fibonanci

Leonardo Fibonacci was an Italian mathematician (1170-1250). He described a numerical system which is generated by a sequence of numbers later knew Fibonacci numbers. In the Fibonacci sequence each number is the sum of the previous two numbers and starting with 0, 1.
So the sequence begins at 0,1,1,2,3,5,8,13,21,34,55,89,144,233,377,610,978.......
Higher up in the sequence the closer two consecutive Fibonacci numbers of the sequence divided by each other all will approach the ratio approximately 1:1.618 or 0.618:1.
You will find some other Fibonacci level these are called Fibonacci extension. They are 0,0.382,0.618,1.000,1.382,1.618........

Fibonacci retracement: In the Forex market traders use Fibonacci retracement in order guess where the market may be going and where may market move turn on trending. To do so you have to find out where swing high price and swing low price then drag Fibonacci retracement and watch carefully. Normally 50% retracement follows but there is not guarantee 50% retracement, the market can break 50% to high level it is just a potential guess of  market movement.

Remember the following facts:

*Fibonacci is used for potential trade movement.
*Fibonacci uses for potential temporary support and resistance level.
*When Fibonacci level broke market will be usually go the next level.
*When market break Fibonacci level 0 and 100 big movement may happen.
*Look at this level with candlestick confirmation such as Doji, engulful, pin bar, etc. This will be improve your trading performance.
*Use minimum 4 Hours time frame for Fibonacci tools. However short frame can be used.

Technical Analysis Part 5

 Donwload my chart for better understanding

https://www.dropbox.com/lightbox/home/Forex%20Schooling

Pivot point: Expert trader and also market maker use pivot points in order to identify potential support and resistance level. Remember many traders watch this level so you should take an eye with it.It is useful for the short time frame who wish to catch some pips very quickly. You can learn to trade just look at this level and identify major trending.

Pivot point calculating = (High + low + close price) / 3
1st resistance level (R1) = 2*pivot point - Low price
1st support level (S1) = 2*pivot point - High price
2nd resistance level (R2) = PP + (High - Low)
2nd support level ( S2) = PP - (High - Low)
3rd resistance level (R3) = High + 2 (PP-Low)
3rd support level (S3) = Low - 2 (PP-High)

Another way calculating pivot points are woodie (High+Low+2*close/4), Camarilla, Fibonacci method. Which way is best? Ow..w this depends on your trading style.

You don't calculate it while available indicator has done this job for you. Search over the internet such an indicator which feel you comfortable.

Remember the following while use Pivot point:

*watch if the price come to pivot point if price ranging at pivot level after it will go a certain direction.
*watch if the price above R1/R2/R3 level then the price will drop down.
*watch if the price below S1/S2/S3 level then price will go up.
*watch market movement carefully for understanding major movement.

Technical Analysis Support & Resistance

Do you know most trader firstly recognize what's in the Forex market? Guess it...Yeah it is support and resistance level. Traders should find out where these levels are. Support and Resistance keep you a  trading safe and secure, and also determine you where you should put stop loss & potential take profit area. Learn the following observations:

*Find out Mazor support & resistance level.

*Find out minor support & resistance level.

*Find out how support & resistance level strength is (more than one times price touch the level but not broken mean this is strogger level)

*Support and resistance can be broken if price close near it ( but not always why? This you will learn by trading)

*When a resistance level broke the last broken resistance level is turned on support level.

*You may mislead by fackout mean false breakout of support or resistance so put stop loss more than some far from support and resistance level.

Technical Analysis Part 4

Download my chart for better understanding
https://www.dropbox.com/s/w0im0c9vxy6mc36/ATR.gif?m 
 https://www.dropbox.com/s/gsbv0rbvdq658mg/New-Picture-%288%29.gif?m

ATR ( Average True Range) : It is developed by J. Welles Wilder along with RSI, Parabolic Sar, Directional Movement Concept in 1978.However it is a volatility measure indicator since it is designed for stock but today it is used in fx market too. But careful it doesn't provide market price direction. It provides range which means the high and the low price distance of a day/ periods. ATR uses generally 14 days of moving average true ranges. It is important to the traders to set of stop loss, take profit. True range is measure the following possible way.............

*TR = H - L (current high low minus) ( TR = True Range)
*TR = H - CL ( current high minus previous candle's  close)
*TR = CL - L (previous candle's close minus current low)

Let's say that market previous high price is 1.3000 for Euro / Usd pair. You want to trade a previous day price breakout. In this case you may enter buy trade at 1.3005 but you may be mislead by fackout (False breakout). Here ATR (14) helps you just where should entry. Look at the ATR value. Suppose it is 100 pips. Now if you decide 20% ATR value then it is 100*20% = 20 pips so buy entry at 1.3000 + 20 = 1.3020 prices for a secure entry. Now question where to set off stop loss ? Well if you decide  2 to 4 times ATR value then above example 100pips*2 = 200 Pips your secure stop loss of ATR value. Can I use trailing stop loss this case? Yes you can choose 30% or 50 % ATR values of it. Like 100*50% = 50 pips your trailing stop loss.

*Ichimoku Kinko Hoy : It is discovered by Japanese. It means "may the  be pips with you. It is a future momentum indicator, and 3 in 1here you find mean 3 types of indicator works do it only Ichimoku. Wow...right fantastic! wait you have to point some topic here, and you will not be disappointed with me! Promise you believe or not doesn't matter. Japanese word hoy mean 'chart' kinko mean 'equilibrium = balance, Ichimoku mean 'a glance' huh! This is right. You have looked at 2 Sen and 2 Span in Ichimoku to understand it. They are

1. Kijun Sen (blue line )
2. Tenkan Sen (red line)
3. Chikou span ( green line)
4. Senkou span ( orange line)

Kijun sen is calculated average highest high and lowest low last 26 periods.
Tenkan sen is calculated average highest high and lowest low last 9 periods.
Chikou span focus on today's close price pointed 26 periods behind.
Sekou span (1st line) calculated by tenkan and kijan averaging 26 periods ahead. 2nd Chikou span calculates averages of the highest high and lowest low 52 periods and plotted 26 periods ahead. So how do you can trade with it. Well, makes this point carefully:

*Look at where the price is it above or below Senkuo span (orange line) if up then 1st orange line is 1st support and 2nd line is 2nd spot. If below price then 1st line is 1st resistance and the 2nd line is 2nd resistance.
 ( I will be talking later about support & resistance details another lesson)

*Kijun sen provide future price movement if the price goes up blue line then it will be up and if the price below blue line then it will be down, OK.

*On the other hand Tenkan sen just provide a signal that the market is moving. If redline is horizontally that mean market is sideways or ranging or not so move or lazy as what name you can learn.

*Chikou span ( green line) signal to you buy or sell but where. Oh! Wait before jumping to catch pips. If green line crosses from up to down direction then sell and if it crosses from down to top buy.

Technical Analysis Part 3

 Pls download my chart for better understand

https://www.dropbox.com/s/emen0ke9i5hq50z/stochastic.gif?m

 https://www.dropbox.com/s/ble3co86ipukbdh/New-Picture-%286%29.gif?m

*Stochastic : It is a momentum indicator. It is developed by the Dr Gorge Lane in 1950.It provides the trader the location of a current  price and a relation of the price range over the periods. It calculated where high, low, close price and and %D of 3EMA of K% and %D of slow EMA %D. It's formula = %K = 100[{C -L14)/(H14 - L14).
It displays the over bought and over sold area. Traders usually enter trades by stochastic when price is overbought/oversold area (above 80 scale and below 20 scales)

*RSI (Relative strength index): It is developed by J. Welles Wilder in 1978.It's a momentum indicator. It measures volatility and direction of price movement over a period. Generally 14 day time frame measure 0 to 100 scale where 30 and 70 scale show price oversold and overbought condition. Wilder recommended 14 EMA smoothing periods. Wilder also believed that divergence between RSI and price action is also a strong clue market turning point.

*Parabolic Sar ( Stop & Reversal)  : It's a trade following indicator mean lagging indicator. It also developed by J. Wilder. It finds potential reversals of the price direction. The sar is calculated one period in advance using present data. The Extreme Point value is set off 0.02 in parabolic sar. When the market up trading or preparing up then sar point you find below the candlesticks and vice verse. But be careful you may be mislead so wait for 3 dots above or below and then enter a trade. If dots below buy signal and above then sell signal.

Technical Analysis Part 2

 Download Chart for better understand below indicator analysis

 https://www.dropbox.com/s/3uivk81n30gv3rg/Moving%20Average.gif?m

 https://www.dropbox.com/s/5jm4su8y3zl5x0r/Bollinger.gif?m

 https://www.dropbox.com/s/yh9xs34s40d7xgv/MACD.gif?m

*Moving Average : We confirm price which is numerical or number or points in the meta trader4.For example 1.3200,1.3205,1.3209,1.3045 so on.These are price and price always move to move at a direction up or down.So what average the price on a certain period?Now you probable calculating it.Wait! Moving average an average price for a certain period.
1.3025+1.3026+1.3027+1.3028+1.3029 = 6.5135/5 = 1.3027
Now what useful information you get from it? You just get now what is moving average price, it is just simple but have some clue too......
In the meta4 you will find some kinds of moving average, like ...
1. SMA ( Simple Moving Average)
2. EMA ( Exponential Moving Average) 
3. Smoothed
4. Linear Weighted
Moving average used by Open / Close / High / Low /Median / Typical / Weighted close prices.

Mostly use SMA & EMA.If you wish to trade longer time frame then use SMA if you trade shorter time frame use EMA because EMA display quick price average movement since trader want to trade in short frame quickly.
When you use it you find a curve line or graph line upper and lower. Trader usually enters trades when the line break since its focus on pressure for price movement. And SMA & EMA generally use the close price method. ( Please download my chart for better understanding)

*Bollinger Band: It is developed by John Bollinger near 1980.Mr. John uses Moving Average and deviation, where upper, lower and standard deviation in the middle. It is Volatility indicator. It provides the trader a relative definition of high and low price act as upper and lower bands.
Traders usually trade by Bollinger bands when its band breakout or buy at  lower band and out at middle band sell at the upper band and out of the middle band. The middle band they use just neutral purpose.
Another way by  Bollinger band when Bollinger bands become squeeze and wait for breakout!
In 2010 Mr. Bollinger release 3 types bands know as BBImpulse,percent bandwidth(%),bandwidth delta.1st is measure price changing 2nd is band width over a certain periods.3rd measure how changing the width of the band.

*MACD ( Moving Average Convergence  Divergence ): It is created by Gerald Appel in near 1970.It is a momentum or oscillator  indicator which measure direction of changing trends and strength. Today it is vastly used in currency business. It displays trader signal calculating over a periodical data of closing price. It used 12,26 EMA and 9 EMA. There are 3 signal lines in MACD. Blue line (Minus of 26,12 EMA), Red line ( 9 EMA of blue line), Histogram (Bar graph) Minus of blue and red line.

How do you can follow it:

***Look at when the MACD (blue line ) cross the  signal line (red line)
***Look at when the MACD (blue line ) cross the zero scale.
***Find out Higher high or Lower low on the chart
 (Later I will be discussing these on the chart pattern lesson, OK )

So MACD is 12.26.9 EMA (Fast, Slow, Signal). Another popular set of MACD is 5,35,5 for short time frame. The longer time frame you use it then it provide the best results.

Technical Analysis Part 1

Technical analysis is based on indicator/s ( indicators are trading tools, it's inside is coded mql4 language or lite c  ) which is built in meta trader4 and also you can use more developed indicators, these are called custom indicators. For technical analysis I hereby notice  you there are only 2 types of indicator in the Forex market. They are

1. Leading indicators / Oscillators : Tell you market movement before trend occurs. Ow..w you think that's very nice. I just use it and make pips easy and be rich very quickly. You are wrong. Many times it doesn't work or mislead you  because the market may be  change very quickly. And these types of tools just help to guess or analysis better for profitable trading.

2. Lagging indicators / momentum: Tell you signal after a price changing movement and new trending is going to happen so that you can be prepare yourself for  some catch pips....

And costumes indicators are either leading or lagging indicators.

Which type of indicator best? A million dollar question? Um....m it is depending on trending and vary from trader to trader. Remember indicators are just helping tools for trading. So you won't relay with it but learn market deeply.

Fundamental Analysis How to Approach

Fundamental analysis for the Forex market here you have to  draw attention of Economics, Social and Political affects or force which guide market movement for longer periods. You have to look up why the country's economy is better now or why it suffer and how? This is basic economics that probably you may learn at school.
Economics has a lot of data or parameter that influence over the economy. If a currency is strong today that means that country is better economy now. But how do you determine it? Since these data  passed away day by day.
*If a country having a strong economy then more invest will be coming that influence the whole economy. Now a big question why and what types of economic data that must be followed by an investor? These are

*GDP rate (Gross Domestic Products)
*Interest rate
*Labour cost / Manpower cost
*Employment rate
*Monetary Policy of  the Central Bank
*Bond
*Taxes rate
*Inflation rate of the currency
*Export & Import ratio
*Earn / Income  & Cost/ Expense ratio
And more............................................................................

Therefore you have to gain knowledge  a country profile from its Gov. Web site and analysis data to determine if its economy is OK or not or If any chance to turn on good in the near future.

2nd Stage of Forex learning

From my previous lesson you may read these topics  1st to last. Now I am turning on the 2nd stage of learning Forex market. I say 2nd stage because you are now a little familiar the Forex Market. So now it is time to learning  deeply.
To be a professional in this market you have to be an expert in knowledge three types of analysis, they are
*Fundamental analysis
*Technical analysis
*Sentimental analysis
You also have continued your  journey about learning this market. And of course updated knowledge. Today for this you have a lot of resources over the internet. But to gain professional knowledge you have to search better. Here I am always wishing to assist  you to do so you believe or not doesn't matter.