Time frame within time frame

The first sentence I put on here is going to be a word of caution. What you are about to see and read may not make any sense to you at all. I will attempt to show how time frames are fractals of each other, and also that price follows within this time cycle or phasing of the market. One thing we cant change is time, it is a fixed value and one of the few things in trading we have as an absolute.

Lets see how this pans out and if I create more confusion rather than offer a clear picture.

Ignore the chart time and what the commodity is, it makes no difference to this post and it is the principle behind this is what the lesson is about.

Yes I know, how odd looking. But I am showing price like this so that your eye is not distracted by price candles. This is a closed price line chart. It is as clean as charts get and show where turns are in crystal clear fashion. The lines on the chart are there to show only support/buying. But before I get to that, lets pretend that price has hit a high time frame demand area and this has just been tested on the lower left of the chart where the first line is.

You can see the retest of the line and the area has held, now lets say this is a place we want to enter long at some point in the future if we did not take it on this retest. The next line along is another long entry and price has come back into the break we previously missed. If you follow along all these entries are taken from recent historic demand and take note of the higher lows, which I consider to be a bullish trend. I am unconcerned about the higher highs, let that stay in text text books.

Same chart and time frame with candles, looks more chaotic now doesnt it?

The main difference is all the visible wicks and tails. Does the effect of these hit home to you?
They dont stay long enough for pro money to follow through, so they must then be instruments of fear and greed for the herd to get their emotions in a knot. It is all designed to get you into a trade at the wrong time, either at the top or bottom of each swing.You know by now where to look for the best entries.

Back to a line chart again and this time with more detail on it. See those blue arrows, they show the long entries and after each arrow, follow price up and look for an X. That is the end of that move when price hits supply. It repeats over and over again, until the trend on THIS time frame is broken.

One small addition this chart, which is down one time frame from the previous chart. Note how dropping lower in time will give you additional trading opportunities if you keep an active mind always open for what is key. In this case it is the green up arrow, which is a retest of the major support and resistance line on THIS time frame and within the amount of time (space) I have on this blogs screen width. If I keep going down to lower time frames, there will be both long and short entries, even though we know the market is bullish on THIS time frame. Lets move on.

Now I am gone down another time frame from the above chart. The green up arrow is still there and now that new long entry is even more visible. Here is a place where many day traders get stung all the time. The market you know is going up, but thats new here?

Remember my definition of a bullish market is higher lows?.....see the small grey box, is that not a new lower low?....so to me this is a break of the bullish trend and I wont enter long. But I will wait for price to leave that box and what happens then?...price and the green down arrow hits recent supply and we know there is weakness in the backround, otherwise price would not have made a lower low. If market timing, as in the opening time of this market is still well before the close I would consider a short down to the support and resistance line, which price may use as a test to see will it hold and if fresh new longs come in.

Finally the same time with a candlestick chart and a lot more detail in price action for you to look at every day and on all time frames. It is easy to get lost in the noise unless you train your brain to filter out whats unimportant and see the real price action in areas where it matters.

As price rises and falls in either a bullish or bearish market there will be times when you can be both long and short at the same time, but of different time frames. You could be long on the 1hr and short on the 5min, each of course will have its own targets and each entry has to be taken with a very very clear picture in your mind and preferably with supply and demand marked on the charts so that you have good awareness of what is coming up to effect current price movement.

If you only use two time frames apart, then the opportunity of being long and short is far reduced and rather risky. Some traders will use a trend line on price to see when its time for a trade, or when to get out, or when the trend to their method is changing, this is in my opinion is ineffective and unless you know where price reacted in the past on all time frames, you are missing out on too much valuable information.

If you took any of the above charts and keep dropping down in price, you will find dozens of long and short entries, even though price is moving higher. Each high time frame price leg, will have a few lower time frame legs within it, and in turn, lower time frames, yet more legs within that. If you turn in the other way around, the bullish price on these charts may well be nothing but a bullish pull back on their bearish price movement. I havent checked for that, just trying to get this concept across to you and I hope it makes sense and I do understand that it is not an easy thing to grasp. Even if you cant understand this fully, take at least one thing from this, long entries are only ever taken off the end of pull backs into support. Bearish entries are the opposite, taken on bullish pull backs into resistance. If either of those pullbacks break their support and resistance, you simply do not take the entry. Let it go and wait for some new area to hold.

The pullbacks are places where pro money takes profits and places additional orders, if they do it, so should you. You cant go broke taking a profit and dont hold a winner for so long that when the market turn you are left sitting there waiting for the final pull back to end and the trend continue. Thats how you turn a winner into a loser. Take profits and be happy with little bites a few times a day, it all adds up and you will develop good habits.

Day traders wont see 60+ point wins every day per trade, the time frames you are trading off will just not give up that much of a move. Look at the average points movement of the time frame you prefer and see what you could make, and be happy with taking those. Also set your stops and dont be afraid to take small losses. These allow you come back tomorrow and trade again, whereas waiting and hoping for the market to stop and come back in your favor will soon get your account blown out.

Dont be worried about missing a move, there will be another one and rest assured nobody has ever been able to call the market, and neither will you. It better to wait for the turn, then get in...yes you guessed it, on the next pullback where price proves to you that the old trend is dead and gone.

Broker's, Media and market talk all in your best interests

In the past few weeks some emails arrived which has shown there is a great deal of bright people who have seen what truth looks and sounds like, but equally there are a lot more who just dont understand that they are being fed a BS story.

Allow me to elaborate. When you trade your money only you have earned the right to spend this money. Why then do traders spend so much time looking at the financial news, the myriad of financial websites, forums and printed media which all feed them old information and well past its sell by date. Perhaps it is a case of the herd want to be led and the fear of the unknown is worse than being able to make decisions based on what you can see for yourself, especially when you know that most retail traders will not make money in trading.

Who has your best interests at heart?

Your broker?
The newspapers?
The financial TV news channels?

Why not employ some logic to this and look at who the above target as their income stream, could it be the advertisers are the ones who are really in control, after all they all spend millions on adverts and unless they see results they would not advertise. And with all advertising there must be a customer. Who could this customer be, after all these big names have all the information in real time from the real news services all over the world who charge them big money to stream this into their offices 24hrs a day. The advertisers have no real interest in making money from the mainstream news, because the pro money people are the ones who make the news the media reports......smell anything yet?

As this mental picture slowly builds, now think about what it is you see and are being fed. All the content you see and hear is old news, far too old to make money from and all these stories and adverts are of no use to pro money, they have taken positions long in advance of the 'breaking news'. It stands to reason the target of the big three, is you.

For over a hundred years it has been proven and tested over and over again that people react to news, and if you get the news before the next guy, guess who has the better deal?

There is more power in the fear of loosing than there is winning, and so any held money in a bearish market will see much faster declines over rising markets. The pro's are of course all well positioned with open arms to take your dumping panic. They call this bag holding.

Dont take my word for any of this, but go and conduct a simple test. Find a stock that has had a major news release and watch for its gap opening, it doesnt matter if it gapped up or down, just look for the gap. Now go back in time on a chart over at least a weeks trading and see has the stock been bought into or sold off.....slowly to not tip off or create volume spikes.

What you will see if pro money dont get caught on the wrong side most of the time, they know that if the news is bad, the herd will have a ton of sell orders waiting at the next mornings open and there will also be lots of market sell orders on the day. These orders must have buyers, who are the buyers?....pro money, and they wont be buying unless they know the direction in which the stock has to go and will be driven by them.

You can see a similar effect before earnings, in particular note your favorite stocks and watch for a few weeks before earnings and see can you spot the stock tapering off, or a slow rise. It can be very telling.

I mentioned stocks because most of this nonsense cannot happen in the major Forex pairs due to the high liquidity and the non existence of a currency ownership instrument. Gaps in currencies are less frequent and dont cause the same ripple effects as seen in stock trading. I wont even get into stock manipulation, you can see that in the charts around news times, earnings and quarterly results etc.

You will still be lied to your face on the financial news channels which I treat as the best fantasy entertainment there is and I laugh happily at the screen most evenings. During live trading the TV is firmly off. It is great fun listening to the 'big dogs' as some call them and how they call the market, especially when it comes to currencies and commodities. One clown said a few weeks ago he was strongly bullish on Silver.

Below is the daily chart of Silver. Our big dog who was so strongly bullish on silver paid enough money to the TV channel to allow him come on air and help him sell into the herd buying.....cos they heard some expert on TV saying Silver is a strong buy. The dog is close to ending his run now and a choppy market will set in. Our hero is now out of his position and any of the herd who bought in are screwed.

Another example will help cement this in your mind. How about we look at the much pimped South African Rand, one of the many developing countries who have 'been on a successful bullish trend' according to the media in recent weeks. The result of this not to be missed buying opportunity for your whizz kids?

Oh dear, you were lied to again.

And to really hit it home, use your own means to detect when anything is being hinted at you to buy or sell from those who do not have your money in your best interests. Here is the Rand on a monthly chart.

Down she goes in grand style.

Many years ago I heard a good saying.....if you want to truth, follow the money. For us, it is great to see where the money trail is leading, either into supply or demand and even better, we can wait until we see the pro's lead the way.

I could put show some charts from the London session which is where most of the currency action takes place and where the open and close is treated just like the above chart, but at a much faster pace.

Day trading is being able to see what kind of market we will have for the day, and expect early on for a push and reverse, they must get most of their orders filled in a limited time and getting to new supply or demand is very important for them, and then get to the opposite side before the close.

eur/gpb

eur/gpb on the monthly time frame.

Lets look for the obvious and walk through this one. Price has come up from below and with one big push on the first up arrow price hit resistance, and on the second arrow this became support and price shot up again. This was back in the silly days where the world boom would never end, no different to day traders who think a nice day or two move they are in will continue to the moon.

Price went into full parabolic mode which I hope you now know as the ultimate sucker punch. The first triangle shows the peak of the move, but the next candle was a deep retrace, clearly you can see the desire for others in the market to buy into this from the price action that followed into the second triangle. If your head was screwed on correctly this would have been seen as a test of the break down and sure enough it proved correct for the bears. Down price goes, because it has no option.

It did reach the origin of the bullish break above the support line after the third triangle and as expected it rallied again due to clean long orders waiting there. The best the bulls could muster was into the most recent supply and also knowing full well that the possibility of pushing up through all that selling in one go is too much of a cost. So price once again falls back and hits the black line I have drawn in place.

Cast your eye left of the black line and look for where else price reacted off this rough price. It is between the second and third triangle. There is interest here given it held before and was also a place where the clearest buying was seen from the push off support the first time around. Current price sets up where no recent low was broken and also has pushed up from recent buying. All the triangles show selling which was deeply tested each time. While none of us can predict what will happen, its an interesting exercise to see will the black line be test or will price break the most recent high and break that last lot of selling. The two ellipses show an unconvincing sell off, and immediately after price shows much cleaner bullish activity. Perhaps sign of early bullish interest and to weaken any sellers left in the market. It takes a lot of money to turn a market and wearing out the other guy is important and clearing away those who want to take your orders and soak it up and/or sell even more into you.

This is very early days for longs and months will pass before we see a break/retest. Then the most orders will flow in and this will move....wait for direction first.

Down to the weekly.

Line on the bottom is our support line and clear in its effect. The up arrow shows clear buying and price shooting through supply, again clear to all that the bears are not in control. I cleaned up the two ellipses to show how the price action looks a little different as you drop down in time frames. Cast and eye into the second ellipse and see the second attempt by the bears...yes it bearish and not bullish. Price was taken up and deep into a selling area from its left and the following engulf was all you needed for a short. Eventually and with not the cleanest price action we hit the black line and this is the price area where the bulls became active and would have been pointless holding for more down side.

So far the last there candle show the bulls in full control and with a lower amount of sellers over head. The deep pull backs help in removing the sellers and they have little to sell from, they have no foundation.

Daily chart.

The most heavily traded time frame for most instruments. I have taken a slightly different tact here and not have you bored from repetitive text. On the very bottom we have our established and tested support. The lowest three arrows show buying, lots of buying and its coming off a good foundation and in the right place on high time frames too. If you only looked at this on a daily chart none of this would ever make sense. You miss out on the intel from the weekly and monthly charts.

Price moves up from a good place, gains additional long orders as it goes and breaks over head resistance. This break will have taken out lots of shorts and weak holders, and also have taken in day trader longs on shorter time frames. My earlier comment about price reaching for the moon is applicable to them here. Look at some facts, we have seen strong bullish activity, we have had support on the way up, we have the herd involved, we have broken resistance, we have taken out the most recent shorts, we have taken out the weak holders, all this means we have a lot of cheap entries for more longs.

Ok, so with all this cheap money what to do next?

The right thing to do as a pro trader is to dump the last of those hanging on our coat tails. How to do that, well a nice sudden and deep pull back would help. I see that on the second last candle. But is that enough?.....only time will tell, but it more of a shake out is needed, a nice deep retrace will soon get rid of all but the most well funded traders who can take the heat.

All we do is weight up the possibilities and plan for each one, then nothing comes as a surprise and there is something we have in mind...when...it happens. The top two lines have around 130 points of profit between each one, enough of a target and just eye balling what I see, one possible outcome is to let the herd come along for the ride and hit the next line above price, then fall back into the top of the current most recent high area where there is a reversal, gain support there and off up again. This is talking aloud and planning on what could play out and plan for it. You can think of other eventualities and watch price unfold but not trade unless what you see makes sense and there is an obvious direction and target.

4hr chart and low as I go for the present.

the bottom line just visible is our support line, two up arrows show buying which from the higher time frames was not as clear as these. A good reason why you must do a top down analysis is to see these, because they wont appear clear on every time frame, or on your preferred time frame. Open eyes see useful things if you look in enough places.

The resistance and support line here now shows multiple tests which is both good and bad. Good because its holding, bad because each test removes further long orders and makes it difficult for price to rise. The very last test came close to the week end and may have been nothing more than profit taking.

The last weak leg up is nothing I would read into, it was a Friday and end of week and all I can see is that the most recent selling from the single down candle I arrowed has been over come. We have a new week starting and it will be an end of month week and some good action may come our way. For those who dont know how the profit taking works, there are end of month and end of quarters where books need to closed and new positions taken. These events can over take pure price action and supply and demand, just keep tabs on it and expect it to happen. If you see crazy things happening around those times, stay out, or get out and wait for normality to return.

usd/cad

A quick view of the USD/CAD pair.

Here is the ten mile view on the monthly chart. I wont take it to any lower time frames because there is a lot of open air between price and historic price action way to its left.

Now we will look and what we see and not we think we can see. On the bottom of the chart there have been two months with quick test into low prices. Each attempt to push lower was quickly bought into, indicating professional money was uninterested in taking this lower and means there has been a bullish change in sentiment.

Price rallied quickly and broke a support/resistance line and closed very strongly above this, the effort to rise that quickly tends to be all consuming and will have had the herd on board delighted with all the points they were making and that the next stop was the moon. You will know by now this is never the case and good trends come and bite hard when reality sets in, but the herd takes a real long time to see reality for what it is, and not what they think. You will have heard me say this at the start of the previous paragraph.

Price hit sellers where there was a pull back, within this area several attempts for higher prices have brought selling instead and price broke down rapidly. Another thing you will hear me say, is what would any buyers here have been buying against?....there was no solid foundation to take it higher and nothing but a wall of selling above. As price dropped is went striaght through a minro support and resistance area, but came back quickly to test this. When I see good quality tests of areas like this it gives me intel on shorting again.

As price drops back more, it reaches the purple line (ok purple ish for you purists) where the origin of the bullish break can be seen on this time frame. Price then drops with no hurry and restests the underside of this now resistance which holds and price is sent down further. All good news for those who can see this unfold in real time. It means you can see the big picture building and that this move down is unlikely to break the two large bearish candles.

At the bottom of the chart I have a black horizontal line which is THE retest long term traders look for. Always expect a reaction here and plan in advance for it, which is the purpose of talking you through this pair. Now that we have hit the real origin of the move, we see a bullish engulf immediately after the origin was reached. This says, for the moment there is no further bearish interest, it also says the bulls have stepped in and showed their hand.

The fourth candle on this black line shows a subtle retest and again no interest in taking this further and again more bullish activity. On a lower time frame there would have been an entry right there. If you missed it, there was another long entry where price came back to test the last bullish move up, this is icing on the cake for longs and was where lots of longs came in to help push price to where the first target lay, the support line above.

Given that the support line has been blown straight through it shows clearly bullish strength that even the herd can see. The last months candle closed with a test of this line, very important and the current months candle is looking to push up even more.  As price rises more and more sellers will bail and aid price to rise with less in its way. If you look left and up a little, there is a down arrow. This is an area I will watch for waiting sell orders. There was a powerful break down here and some orders will still be sitting. The next few weeks will answer that question if the current bullish momentum is maintained. Over head are two areas of stacked supply, fortunately these tend to aid price to break through because the first lot of selling was tested quickly which takes in many more bearish orders. So now little should remain there.

eur/usd

A few emails arrived about eur/usd and a few charts here to help shed some light on this pair.

Monthly chart first.

My ten mile high long term view in order to see the big picture of where we have been and what direction has been taken in the recent past. Clearly there has been major sell offs (down arrows) with highly volatile buying which has historically been sold into over and over again since the crash in 2008.

Given this is all historic it is useful to look for where no further down side came in, indicating a protected price level. We see such an area on the first up arrow. This was a retest of the lowest price to its left in February 2010. Getting closer to today's price there has been a retest of the first up arrow bullish break and a fast (or relatively fast given the time frame) retest where I have arrowed a bullish candle to the right of the box. This is showing bullish strength and there can be no doubt the bulls are in control and looking to break the bearish sentiment in this market, why else would pro money buy so strongly with supply close over head. All this is simple logic. On the last up arrow there is yet more bullush pressure which was sufficient to break supply and price is now at the horizontal line. There is supply from here to where I have a candle marked with an x.

One benefit in favor of the bulls is this candle was quickly spike on the way down and there will not be as many pending orders waiting when price returns. This will greatly aid price to rise with less resistance from sellers.

Weekly chart.


I zoomed out a little here to aid clarity. The placement of thex cable and box are original and I have some up arrows for more recent price action. Take note of how price has used the box for a support area below and on top. This is proof of bullish intent all the way back up. Something new shows up in the time frame, see how the horizontal line now shows a spike on last weeks candle?...good news for the bulls yet again because its taken some of the selling pressure out of the market and with less sellers and bulls still looking strong we are setting up nicely for longs. Give today is a holiday the move is unlikely to happen today. Looming over head is the x candle and watching how price reacts when that gets hit will be very telling.

As you will know by now, if you take this too far down in time the price action gets noisey and the false moves will be account killing. Let the herd get pushed around until pro money takes it and then follow. There is still room for a false move down on this given some obvious buying that has not been retested and may or may not be tested. The pro's will do what they please, when the please and there is no particular movement favored by them.

Daily chart.


Last of the most reasonable looking price action of late on this pair. The lower box is just visible and again you can see how price has used that area. The major buying is marked with up arrows and at the time would have looked bearish. On the top of the chart I marked up two candles where false breaks resulted in trapped longs, when these price get hit they will stall bullish progress for a time and this has to be absorbed by the bulls and choppy price action will be the norm at that stage.

Over on the right of the chart is another box. This has so far acting as a support area for price and its been touched numerous times and not broken. This area is just under two two false breaks where bearish activity had taken place and the most recent spike has not driven price down very much at all. Today may work against the bulls with the holiday and nothing to support the price. If we fall back there is a potential 150 points of down side. Anymore than that and it will be a deep retracement or turn into another small leg down. Getting up and out of where we are would be a clear sign of a bullish year to come because its where all the best profit lay.