Analyzing the forex market: Going back to the basics

Your charts look like this one?

C’mon, give the market a break! It’s not like the more lines you put on your charts, the more consistent you will get!

With all these lines and indicators it’s almost impossible to determine what the market is likely to do, I mean, I even had to put on my glasses on to see the candlesticks!

Now, take a look at this other chart?

What do you think about this one?

It’s much clearer isn’t it? I like it because I don’t have to force my eyes here, but there are other benefits I just see what the market is likely to, doyou see it too, don’t you?

If you don’t, this is the information that I can get from this chart:

  • The market is trading in a long term range (we are looking at the daily chart)
  • Once the market gets close to the top of the range, it gets rejected
  • Once the market gets close to the bottom of the range, it also gets rejected
  • When the market gets rejected from one level, it usually hits the next one.

Ok, that’s all? What can I do with this information?

I thought you’d ask that. Let’s talk about “now” (not what happened 3 or 4 weeks ago, everyone would know what to do there, the challenge is to do it on the right hand side of the chart, right?).

Since the market was rejected from the top of the range, and every time the market got rejected from the upper extreme it went all the way down and hit the lower extreme, I’m just going to look for a short opportunity (on a shorter time frame of course, this way I will use a tighter stop loss).

I’m going to set my take profit order just above the lower extreme of the range, and that’s it!

It doesn’t matter what system you use as your trigger signal, you can use indicators, candlesticks, price action, Fibonacci, Elliot Waves, I don’t care, if you trade in the direction of the long term charts, you will always have a higher accuracy on your trades.

It’s amazing what two simple horizontal lines can do for your trading, do you agree with me? I hope so, because it is probably the simplest and most objective way to trade the Forex market (and any other market).

Now, please do something for me, go back to first chart, how does it look like now? It’s a joke isn’t it! Ok, now go ahead and open your charts, get rid of all those lines and start from scratch! Go back to the basics!

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Leave a cool comment! I appreciate it.

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Raul Lopez

I've been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community .