Economic Fundamental

Share market is very corporate dependant, we need to understand the corporate strategy, what is current corporate trend, who is managing the company? Is the company reliable? Is the annual report reflect true situation?

On the other hand, Forex market is economic dependant among countries. Unlike the financial, political and crisis factors, economic factors occur in a steady stream. Therefore, its very import to keep an eye on the economic announcement in order to make the enter and exit decision on your position.
Some economic aspects:

1.Information source

Update the news on cnn or www.ny.frb.org , forexcapitalnews and so on.

2.Economic data

Measurable values of price and changes in price. For example, the cost to hire a stuff for a month, or the cost of a particular commodity.

3.Formulation of economic activity of relationship

Consumer spending, government spending, ratio of import and export activity, etc. 4 major consumer spending are clothing, food, living and transportation. The economy is considered growing if people switch to consuming from saving. Government spends on building the country facility, construction, government corporate and service, military, etc. A Country economy is growing if the export revenue is more than import demand. Or that means, country‘s income is more than its spending to get other countries’ goods. A strong country is considered independent by supplying significantly more than demanding.

4.Inflation rate

The specific inflation rate involves taking measurable prices, and a model of how people consume, and calculating what the general price level which is from the statistics model. For example, the fuel in U.S. is cost 1 USD 1 litre; To calculate the price level would require a model of how much petrol a person uses in average and what fraction of their income is devoted to this, another factor is how people use the petrol and whether there is any replacement for substitution.

5.Employment

This is another critical economic factor. Its basically measured in the stability of different job and satisfaction in sound.

6.Production

The production is playing important role nowadays as its chain-influence with other economic aspect. The measurable indicators are based on the change in material prices, Quantity orders for supplies and resources, change in manufacture’s durable goods and unfilled orders, sales and supply performance, Index of Production yield to customer expectation, expanding margin.

CHARTS

Chart Pattern and trend line:

Tips: Most people will not consider side way pattern because the possibility to going up or ramping down is the highest. If you would like to trade in side way pattern situation. Here is your 5 sen.

* Play a bounce off resistance
* Play a break off resistance
* Play a bounce off support
* Play a break off support
* Wait for breakout. Don' t do anything.

CHARTS

Peter Bain use mainly daily, hourly, 15 minute, and five minute charts. The daily chart will help you define the overall trend from a position trading point-of-view, and the hourly (one hour) chart will give you a feel for the intraday trend. The 15 minute chart is used for entry and exit – with assistance from the five minute chart, where price is moving quickly, and you need to be closer to the action. Please note that the five minute is not to be used for scalping, as there is a lot of noise there, and you could easily get whipsawed.

Make sure you are using charts that are generated from the same data source that feeds the dealing engine, as is the case with both platforms mentioned above. That way, what you see is what you get when you buy or sell. Some charting packages do not ccurately reflect where price is at any given moment in time.


INDICATORS

Peter Bain really only espouse one – MACD (for divergence only). MACD Divergence is covered extensively in his course and my trading examples MACD is his favorite indicator, and that would be his choice.

The nine and 18 exponential moving averages are okay too to give you some sense of price direction, but he is not a believer in using moving averages for this market – so am not too thrilled about their application and use. Go ahead and plot MACD on the charts you are working with.

He will give you more information in tomorrow’s email on his simple, yet powerful Forex pivot trading system.

S1, S2, R1 and R2

As already stated, the pivot point zone is a familiar technique as it works simply because of the use and trust from many traders and investors. But what about the other support and resistance zones (S1, S2, R1 and R2)? To predict something likely to happen for the support or resistance level with some mathematical formula in some way is quite subjective. We can not rely on that formula blindly merely because of the formula suddenly popped out on the level. For this reason, we have found another simpler alternative way to map our time frame, and somehow it is more objective and effective.

We used the calculation as showed before. But our support and resistance levels are different from others. We take the earlier session high and low and draw those levels on today’s chart. We’ll do the same to the session before the earlier session. By doing so, we are going to add in four more important levels drawn in our chart besides the pivot point .

LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.

Those important levels will show us the strength of the market at anytime. The market will be considered as an uptrend market if it is trading above the pivot point. If the market is trading above HOPS1 or HOPS2, it is still considered as an uptrend market and we only take long positions. However, the market is considered as a downtrend market if it is trading below the pivot point. Trading below LOPS1 or LOPS2 is a downtrend market and it is advisable for us to take short trades.

The significance behind this calculation is simple. We all knew that the market stopped at some levels from going higher or lower than earlier session or the session before that because of some reasons. But yet, we don’t know the reasons. By then we only know the fact that the market upturned at that level. All the traders and investors should remembered that where the price stopped in the previous session, and the probability is that the market will upturn from there again (maybe for the same reason, and maybe not). If not, at least we can find some support or resistance at those levels.

Calculation of Pivot Point

There are many ways to calculate pivot point. The most accurate way that found is calculated by taking the average of the high, low and close of a previous period (or session).

Pivot point (PP) = (High + Low + Close) / 3

Below will be the example:

Open: 1.2386
High: 1.2474
Low: 1.2376
Close: 1.2458

The PP would be,
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439

What is the message behind the number? It tells us about the market that trade above 1.2439, it is bull market. And if the market is trading below this 1.2439, it is likely to be a bear market. This kind of condition will continue until the beginning of next session.

Since Forex is a 24 hours market, we can take the open, close, high and low from each session at anytime. But the more accurate predictions is calculating at 00:00 GMT until the close at 23:59 GMT. There are also have support and resistance levels in this market.

There is other calculation of the PP as below:

Support 1 (S1) = (PP * 2) – H
Resistance 1 (R1) = (PP * 2) - L
Support 2 (S2) = PP – (R1 – S1)
Resistance 2 (R2) = PP + (R1 – S1)

H =High of the previous period

L =low of the previous period

Let’s say, PP = 1.2439

S1 = (1.2439 * 2) - 1.2474 = 1.2404
R1 = (1.2439 * 2) – 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 – 1.2537) = 1.2537
S2 = 1.2439 – (1.2636 – 1.2537) = 1.2537

These levels are used to mark down the levels of support and resistance for the present session.

By using the same example above, the PP was calculated by using the information of the earlier session (the day before). From that, we can see clearly about the resistance and support levels. However, we also can use the previous weekly or monthly information in order to calculate the support and resistance levels. By doing so, we are able to notice the market flowing over a longer term. In addition, we are able to see the possible levels that the support and resistance levels might have achieved throughout the week or month. Most of the long term dealers calculated the pivot point by using the weekly or monthly data, and sometimes it also used by short term dealers in order to get a good idea about the longer term trend of the current market.

Pivot to Map Time Frame

A use of map is that you can see how the market goes relative to the earlier market movements. We can see the responses from traders and investors at anytime and get a general idea of where the market is heading to. It helps you to trade wisely.

Pivot point in Forex market is a turning point or condition. It is the market level changes from “bull” to “bear” or vice versa. It is a bull market if the market continues to go up level and if the market is expected continue goes down level, then it is a bear market. There are also have some support or resistance levels in the market. A possible bounce is considered reasonable if price can’t break the pivot point.

Pivot points function well in liquid markets as well as in other markets.

How does pivot point work? It simply works out with traders and investors use and trust, as well as bank and other traders’ companies. All the traders should know that pivot point is an important measurement for the strength and weakness of any market.

As already stated, the pivot point zone is a familiar technique as it works simply because of the use and trust from many traders and investors. But what about the other support and resistance zones (S1, S2, R1 and R2)? To predict something likely to happen for the support or resistance level with some mathematical formula in some way is quite subjective. We can not rely on that formula blindly merely because of the formula suddenly popped out on the level. For this reason, we have found another simpler alternative way to map our time frame, and somehow it is more objective and effective.

What we should know is that support and resistance levels are not merely a level resulting from the mathematical formula but they are measured objectively. These levels which have upturned there before have a higher probability of being more effective.

Mapping method works on trending and on sideways market conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets, it tells us about the possible turning levels.

How does our mapping method function?
Mapping method can function in three different ways such as

(i) As a trend identification (measure of the strength of the trend)

(ii) A trading system using important levels with price behavior as a trading signal

(iii) To set the risk reward ratio (RR) of any given trade based on where is the market relative to the previous session.

Pivot Forex

The Pivot techniques work well in markets with a wide daily trading range, such as the Forex. Pivot lines steers traders away from “no man’s land” and identifies “high activity” areas in which the equity has a high probability of reversal. These areas are important trading zone watched daily by floor traders and computer trading systems.

The levels for the trading ranges and pivots are the support and resistance levels of the market in the next time interval. It is important to note that the predicted levels only give the range in the next time interval.

They do not indicate when the levels will be reached by the currency price action. The pivot is a level at which the underlying asset can be expected to change direction and/or move rapidly away from.


DAILY PIVOT DATA

My pivots program provides not only Pivot, R1, R2, S1, and S2, but also the M1, M2, M3, and M4 points as well. It is common to find many traders calculating only the Pivot, R1, R2, S1, and S2 levels.

In the Forex market, however, you will find my additional points of support and resistance to be very significant indeed. These pivot data points are published daily and is available for access to you once you start the course. The Forexmentor video course also shows you how to calculate the Pivot points using our proprietary Pivot Calculator.

After you have calculated the pivot numbers for the day, place horizontal lines on your 15 minute and 1 hour charts at the pivot numbers for the day, or at least as many lines as your chart has room for. These pivot points will guide your trading throughout the day.

Learn Pivot Points

My trading system is based on pivots. Pivot points are targets, or mile markers, used for assessing price movement and determining direction. If you’re unfamiliar with pivot points and how I use them, below is an overview

Pivot points are rarely understood and even rarely used by the Forex trader. However, they are gaining in popularity, once traders realize there is nowhere else to turn.

Used by professional floor traders, pivot trading is one of the oldest and most valuable technical trading methods available. Professional traders calculate pivot points in preparation for each trading sessions. The pivot lines system is an indispensable guide for making profitable decisions. For an active trader, the pivots can mean the difference between winning and losing.


WHY PIVOT POINTS WORK

Pivot points are 'super-sized' resistance and support levels. They are more important than normal resistance and support levels because they're objective, and it’s not easy to ‘read back into the data’ what a trader may be subconsciously looking for. Many indicators and pattern recognition systems used in technical analysis are subjective and prone to human error.

For example, two traders drawing Fibonacci lines might take entirely opposite trades because a Fibonacci line does not inherently contain rules for objectivity. The same goes for Elliot Waves (very prone to ‘oh that was the 2nd wave!’) and other common systems. Common technical analysis indicators like Parabolic SAR, EMA and others generate so many false signals it again becomes difficult to be objective in choosing combinations of indicators and knowing when to execute. This is why objectivity is the pivot points system’s greatest strength, as it takes the analysis out of the trader’s hands, and puts it in the capable, mathematical hands of the computer. Why are pivot points so good at forecasting short-term price levels? Pivot points are reflective of both short-term volatility and trader psychology.