The principle of trade Raya Honer

[Андрей Сырбу]

Rice is a Hohner professional trader with more than 15 years of experience in the markets. She taught the technique of technical analysis and graphical strategies to students all over the world.

As an international author, rice taught Forex, futures and equities for over ten years. Specializing in charts and price action, rice continues to teach the tools and strategies to help traders focusing on the deep learning of technical analysis and market psychology.

Using the experience of real trade in their strategies, the rice has perfected a number of technical tools to develop automated charting tools for active traders and investors.

She has been interviewed by several radio programs, and led his own radio program on training and technical analysis. Rice a popular lecturer and held seminars all over the US, Canada and Asia. It is also frequently invited to teach technical analysis on the Forex market.

Rice has written over 100 articles on investment, trade and market psychology. She also advises financial managers and hedge Fund managers. The graphical analyses and comments often appear on various specialized websites and in magazines and she is a regular customer of radio "MoneyWatch".

 

[Андрей Сырбу]

Two simple steps

"The basic principle of my trade can be divided into two simple stages:

(1) the Definition of the trend: short and long term.

(2) Finding potential reversals within the trend."

Let us examine this principle further because it is a psychological installation, which I ask myself at the conclusion of their transactions. This may sound quite obvious, if not trite, but the deal consists of three points:

Entrance

Potential profit target

The potential level of the stop order

I use three tools in order to make these decisions: Fibonacci levels, trendlines and trend indicator. Below is an example of a typical schedule:

Fibonacci levels, trend lines and trend indicator

Graph 1

Three tools are active on this daily chart of the currency pair EURUSD. First, let's look at the trend indicator built triple purple line. Then, we can look at the two trendlines on this chart and, finally, the Fibonacci levels on the right side. All three tools are automated and adjusted based on the price action.

So how do these tools help me make decisions about my three points? I'm just starting to ask myself some questions – of course, this is not about rocket science, because all reflections are made by answering questions.

First question: I'm on a "weak" or "strong" side of the trend? It is easy to determine by looking at the market instrument is trading above or below the triple purple line. In the case presented in this article, you can see that we are on the weak side of the trend.

Weak side means that the short position will be with the trend, while long will be counter-trend position. When trading on the Forex (as you can see in the first graph in this article), I usually see two time format: 60-minute chart and the daily chart. (A trader can see any number of time formats. For example, the 240-minute chart is another popular temporal scale). If you trade during the day, it is always necessary to see whether intra-day trade in the direction or against the direction of the trend of the daily chart, so make sure to check out the long-term trend.

The second issue relates to finding potential reversals within the trend. This is, in essence, means that to accurately determine the profit target and stop order levels, I have to decide where I think the market will turn. A u-turn in my direction of trade is the profit target, while a turn against my direction of trade is an area where I will place stop orders. Let me explain this:

 

[Андрей Сырбу]

I use Fibonacci levels to achieve this. These levels allow me to find support and resistance within a trend or "the last of the main motion". The following chart shows how this works:



levels allow me to find support and resistance within the trend or the "last basic movement"



Chart 2



The Fibonacci levels on the right side of the graph show where the market instrument is most likely to be traded, and then potentially find support and resistance. With a sharp decrease from the maximum (marked with a blue triangle), we can see that the market is very short-term tool is stopped at the level of 0.500 and then instantly passed through the levels 0.618, 0.786 and 1.000.



Level 1.272 finally had some support in the way of that free fall. Each level may have been a potential entry or a profit target for short positions. (Remember: I only consider here a management deal, not rules of entry.)



The levels are not complied with still a full role! Now, all of these potential support levels are potential resistance. At the moment, we see that the level of 0.786 prevents price from going higher.

Think about Fibonacci levels as a skyscraper. Each floor is a support and each ceiling is resistance. However, the ceiling of one floor is for someone above him. That's how support and resistance work, so it is important to monitor the levels going up and down.



I can also use these levels for placing stop orders. For example, a short position would be closed at this level 1.272, because the price has bounced from this level and now the level of 1.000 can be a ceiling (i.e., resistance) and above it can be placed a stop order, if I decided to write a short position and wanted to protect their profits.



Most of the transactions depends on a successful exit. The entrance is a fairly easy part of the deal. Timely way – that's what often determines the result. And when I say exit, I mean the outputs like loss and profit.

 

[Андрей Сырбу]

There isn't a single profit target, because there is no single level of the stop order. These levels supported the price action. If a trader enters the market, based on the graph, any output, whether profit or loss should also be based on the chart. That is why I am always looking for graphics, follow my two steps as described in the beginning:

1). The presence of the trend: short and long term.

2). Find potential reversals within the trend.



So I hope that perhaps raised some questions and caused you some curiosity. Let me show you another chart with all active tools so you can make some own conclusions. Check out this chart of EURUSD on a 60 minute time frame with Fibonacci levels, trend lines and trend indicator and then I'll give you some points on which we should focus:



EURUSD 60 minute time frame with Fibonacci levels, trend lines and trend indicator

Chart 3



What you should see:

The trend indicator is neutral. See how he rather shows the lateral movement, and prices traded within it, not above or below it?

The 0.786 Fibonacci level is resistance, as mentioned above. If there's other resistance?

Pay attention to the trendline.