What is Common Sense Trading?
As a trader, you have 3 choices.
1) 100% fundamentals
2) 100% technicals
3) A combination of fundamentals and technicals.
I will assume that most mainly follow technicals and this is where common sense trading comes in.
Many follow technicals, whether it be moving averages, patterns, Elliot waves or anything else with a touch of blind faith.
My approach is to explain why markets move, why what I will share with you works and what the logic is behind it. The more you understand why something works the more confidence you will have using it in live trading.
This is why I call it Common Sense Trading
Let me sum up a common sense approach to trading with 2 statements of fact.
1. Identifying the side to trade is more than half the battle in putting on better odds trades
2. Forex market is always looking to run stops
In forex, I focus on specific chart levels
Why?
Because forex has a common price feed. This means everyone sees around the same prices on their charts. Therefore, one can predict a market reaction if a level holds or is broken since everyone is looking at the same levels on a chart.
FACT: In forex, there is a never ending quest to run stops
You want to position by identifying the side least likely to see stops run against your position. Identifying where stops may be lying is a skill you can develop, especially by using The Amazing Trader.
Where do you find stops?
1) Above/below the high/low of the day. Algos will probe the high/low of the day to see if there are stops or not and react accordingly.
2) Above/below the high/low of the current week, prior week, prior month.
3) If in a trend stops often rest above/below the recent high/low in the direction of a trend after there is a retracement off those levels.
4) Stops are often are placed at prior support or resistance after a currency retreats from a high if bounces off a low
5) Market will often probe for stops around the “50” level (e.g. 1.0850, 1.2850, eyc). We will discuss this at a future time.
Here is a a illustration oif stops being run above the high of the day after a retracement of a major uptrend ended.
It is different with CFDs.
Brokers can have different symbols (e.g. NAS100 and NDX100) for the same underlying instrument.
They can also have different price feeds for the same symbol.
So I focus on patterns for CFDs rather than specific levels as there is not a common price feeds.
This just scratches the surface surface but gives you an idea what can drive the forex market,
We will see how to take advantage of this knowledge as we continue this journey.
Opening Week Gaps
(Reply to a Q&A)
In addition to using The Amazing Trader to illustrate and discuss the market, I will also share insights you might not find elsewhere.
There is a long-time Global-View member who says that opening week gaps in the price of a currency are more often than not filled. He is specifically referring to a gap between the closing week price and the opening price of the next week.
Take a look at this EURUSD chart for the week of July 1, 2024 and note the opening gap on the upside, moved down to fill the gap and then moved sharply higher in the following days.
The Amazing Trader charting pattern (red lines) gave confirmation to a bullish risk after the gap was filled (for another discussion).
Why Does Technical Analysis Work?
Most traders use charts to trade but my guess is that few have stopped to ask why the technicals that they use work. Once you understand why, you will be able to anticipate which levels or tehnical indicators should produce a market response, as you will see in this short video and the write up below it.
Why does technical analysis work?
The answer may come as a surprise but it will help you to use technical analysis to predict future price action. This is a concept I want you to understand so you can use technical analysis and charts to your advantage.
Some pure chartists may want to take me out and burn me at the stake for heresy as I have a different view of why technical analysis works. Some see it as predictive, like Elliott waves. I see it the opposite. It is not predictive by itself but rather you can use it to predict price behavior and here is the reason why.
There is nothing magic about technical analysis. It works because those who trade and follow markets use it. If they didn’t use it, then it would not be considered useful for trading. Let’s say the 173 day moving average was considered to be more important than the 200 day moving average. There is nothing magic about this level other than it becomes significant because more people use it in their trading.
In other words, the more people who use the same technical indicator, the more significant it becomes, I personally prefer to focus on chart levels, as I explain below, as it becomes easier to predict the reaction when a level holds or is broken.
Models by themselves do not predict future price behavior. Anticipating how technical traders will react to changes in price can give a clue as to market direction and momentum. This is common sense.
So if I am the only one looking at a specific level, does it really matter?
I prefer to focus on specific chart levels as they are more likely to appear on most traders’ charts. As an example, I am keen on using trendlines but I have to keep in mind that my line may differ from others based on my data differing or how I draw it. The same is true for moving averages (depending on what closing rates are used) and retracements (depending on what range and time frame is used). This is why I focus mainly on chart levels as it is easier to predict the reaction knowing others are looking at the same points as well.
For example, let’s say the key support/breakout level on the downside in the EURUSD is 1.0660 seen across multiple time frames. You can then assume there will be a reaction by technical traders if this level holds or is decisively broken.
So why does technical analysis work?
It works because people use it. The more people who use it the more significant it can become. How can you predict price behavior? The first step is to identify key chart levels and then anticipate the reaction if they hold or are broken.
You can find ways to identify key levels on your own but I find the best way for me is by using The Amazing Trader charting algo, which is programmed to use my uncanny ability to identify key chart levels and deliver them to charts in real-time.
In my updates in the Trading Club, I plan to show how to use this knowledge to take advantage of predictable behavior by technical traders and use it to trade.
Day Trader’s Guide to Beating the Market
Let’s get started with a video I created to show you a way to look at the market and identify what I call the strong side to trade.
You will find that I take a common sense approach to trading and one that should make sense to you.
If you have any questions post them in the Q&A forum.
If you would like to take a trial for The Amazing Trader, Click Here.
To watch the video click on the image below.
Introduction to the Amazing Trader Classes
and
(A Key to Successful Trading)
Trading is not rocket sciecne.
It is all about odds and the ability to put them in your favor by identifying what I call the strong side (i.e. side least likely to get stopped out) at any point in time.
In my discussions you will see me using my Amazing Trader charts, which come from an algo I created.
My approach is to keep it simple with a logic that will make sense and is easy to follow.
I will also share insights from my many years of trading that you might not find elsewhere.
I will share how to identify the risk, what side to trade, and a strategy to put this knowledge into practice. You can use the same logic with your charts but you find it easier using The Amazing Trader program.
This is what one of my charts looks like.
And here is what I see as… (click on the image below)
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