Candles and price action
Price action is king in forex. Chart indicators are nice but what price is doing right now gives the best clues as to what she will do next. I am a big proponent of candlestick analysis and chart patterns, these patterns can help traders be ready for the next trade set up if they can recognize them. The sections on candlesticks and chart patterns in www.babypips.com are super great for learning how these help the trader. I especially like to check out the daily chart at the end of each day to see how the daily candlestick closes. This can give me an advantage, a bias, for tomorrow. For example, check out the close of the GBPUSD for today. The past 5 daily candlesticks were all up candles, and then today’s candle was a bearish engulfing, the body of the candle engulfs the entire candle of the previous day. Since this bearish candle occurred after hitting the 61.8% retracement of Jan31 down move, I see a good chance that this pair will be heading back down next week. But, today’s candle closed right on the 38.2% of that down move, so there is still potential for upside. Our EURUSD has reached the 50% retracement of its Jan31 move down at 1.4693 and closed below this price. I do not see a candlestick or chart pattern pop out at me on the daily chart, but Monday price action should tell us whether this 50% area will hold for further down side or not. These two pairs, GBPUSD and EURUSD, often move in the same direction so it might be a good clue for down for these two, both hitting significant retracement levels. Good trading!�
February 21st, 2008 at 6:06 pm
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