How do YOU identify key price levels to trade?

_eug_ · Nov 9, 2017

expiated said:
My approach to determining key levels was inspired by the reading of Scripture, where Yeshua took the Sadducees and Pharisees to task for not being able to interpret the signs of the times, and where He admonished a crowd for not knowing how to judge the times in which they were living. My goal was to identify such "signs" in the Forex market.

In applying the principle of "testing everything and holding fast to that which is good," I ultimately "let go" of such strategies as Elliott waves, Fibonacci ratios, harmonic patterns and the like in favor of three or so basic premises based solely on statistical probability.

My first premise is that, generally speaking, the market makers will typically push the exchange rates on the foreign currency pairs only so far within a given 24-hour market cycle. If this premise is valid and a trader is able to quantify it, he or she will then know in advance when and where to anticipate reversals to the north or to the south relative to each day’s open.

My second premise is that there are much better moving averages for determining the direction of the trend than the standard 10-, 20-, 50-, 100-, and 200-period simple moving averages and they make identifying price direction a lot simpler than watching for "higher highs and higher lows" or vice versa.

My third and final premise is that, once again, generally speaking, the market makers will typically push the exchange rates of the foreign currency pairs only so far above or below these key moving averages before bringing them back within the more common deviation levels wherein they spend the majority of their time—something already well established in my system, so I never did anything with it in any of the entries I posted here, which were essentially for the purpose of experimentation. (I call these levels of maximum deviation “statistical support and resistance.”)

In summary: I identify key price levels to trade by using statistical probability to: (1) quantify the maximum distance foreign exchange rates are likely to rise or fall within any given 24-hour market cycle based on the open, (2) quantify the maximum distance foreign exchange rates are likely to rise or fall above or below specific, carefully selected simple moving averages, and (3) identify the precise moving averages whose reversals reflect a genuine reversal in the exchange rates on an intra-day and day-to-day basis.

For example, according to my system, EURJPY was officially designated as bullish when it last crossed above 131.71, and was re-designated as having once again turned bearish only a couple of hours ago when it crossed back below the region of 132.10 to 132.15. Moreover, I was not surprised when USDJPY climbed no higher than approximately 114.05 because that is exactly where my system drew statistical resistance.
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Thats an interesting method. Thank you for sharing. I mostly look at support levels that were gained or lost based on the Leg that we are currently in vs the leg we are retracing.

SunTrader · Nov 9, 2017

expiated said:
No, buy only! If USDJPY falls from 113.83 it means that the analysis of market conditions was invalid, which points to a lack of understanding as to what is going on, which is more than enough reason not to take any action at all.
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And what about UJ?

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How do YOU identify key price levels to trade?

_eug_

SunTrader