Low and High Link Strategy in Forex

You will get a simple trend line indicating an uptrend, for a downtrend, connect any higher high and lower. This trend line gives you the direction of the trend and great reference points for support/resistance for future price movement. 3. Dynamic support/resistance tool, which is EMA (Exponential Moving Average). I personally use the 20 period EMA on my chart when trading price action because it reacts to the price quickly and follows the price action closely.

The bars usually stay fixed above or below one side of the EMA, and most of the time they do not touch the EMA for hours until a deeper correction occurs. For the daily range, it is very clear that the price interacts with the EMA very closely. Another use of the EMA is to monitor the price movement around the EMA when it is touched, and based on the reaction, find tradable setups. EMA is not like a trend line, which is a straight line.

The Forex EMA indicator follows the price and acts as a strong support/resistance reference point

But it works best only when the price is trending in one direction, when the price moves sideways, the EMA loses its efficiency and does not produce any reliable settings. As long as the price stays above the EMA, you will only buy, never sell. The opposite is true for a downtrend. One trading pattern I often use is to enter the “first deep pullback.”

In a strong trend, the price moves far away from the moving average (EMA) and does not touch it for hours, but when it does for the first time, this deep pullback is a very reliable preparation for the resumption of the original trend. Some experts call the EMA the “average”. When the price moves too far from the “average,” it can create a rubber band effect, and the price may extend back to the Exponential Moving Average (EMA).

Monitor Forex Exponential Moving Average

Traders who monitor the Exponential Moving Average know that the possibility of the first pullback of a strong trend turning into a reversal is very rare. So when the price returns to the moving average (EMA), they will enter, hoping that the original trend will resume. Now let’s talk about trading range (sideways price action). Trading ranges can be very difficult because it is very difficult to distinguish between a range and a trend.

It’s understandable because they have some similarities. The relationship between trend and range is that it is interactive. No one can live without the other. A trend is basically a breakout phase. The range is basically the consolidation phase. The market revolves between trend and range. So how do you actually read the price action range.

Forex trading range wicks

It is a trade full of wicks especially at the top and bottom of the approximate range parameter. The reason behind this is successive failure. When the price is pushed to the upper limit of the range, sellers leave it to see how far the price can go.

It creates a vacuum effect, when the price becomes excessive, sellers will jump in and sell to buyers, pushing the price towards the lower end of the range. Entering at the extremes provides a high risk-to-reward ratio for traders. You should try to embrace range days, as they are somewhat “predictable.”

Look for many long wicks around the edge of the Forex ranges

Wicks are failure The upper wick means buyers fail, and the lower wicks mean sellers fail. Remember this: a domain will have several failed hacking attempts before a real hack occurs. When the real breakout happens, you can’t miss it because it is convincing in terms of size and bar size! Any lower breakout will fail within a short period of time, generally within 5 bars.

Look at wicks within this range. Notice this area full of Dojis and overlapping bars. This bar shows the real breakout of this range. The tape is strong, large, and sealed high with a simple wick. 2. Alternating between bullish and bearish force. This indicates that both sides are active. There is no sense of continuity on either side. There is no symmetry of power on either side. The red bars and green bars are fairly equal in quantity. Their strength is weak, they brighten and die very quickly.

Extending Forex profit points at the trading range

Often times you will see a huge bar in a range, it takes over the entire space, and then the follow-up is on the other side. So there is no momentum continuation, and traders trying to trade the first bar are now trapped. The price moved in the opposite direction.

Again: No Sense of Consistency Range days can create a strange feeling that the market is not really active and feels lazy. But in reality both sides are very active, creating a balance between buyers and sellers. This is why the price does not go in any one direction. All the settings that worked best in trend trading are now losing their magic power.

Remember this when range trading: Patience! Wait for confirmation and proof that one party is indeed a failure, then go to extremes.

Trading Forex Dojis and Overlapping Price Action.

When you start to see a lot of Doji and bars overlapping (sideways movement), the market is likely ranging. Doji are the early signs of a range formation. Doji is essentially a single bar trading range and has many variations and the names are not important, they all refer to the same character which is frequency.

Summary

Price action overlap simply means that the size of the bars are either similar or inside each other. The price is moving sideways, not going anywhere. Sometimes, you will see two or more bars that have the same high or low.