Here’s what happened with GBP/USD Friday last – it’s a great example of price movements in an entirely news-driven market – if you fancy yourself to be trading the news, it’s well worth a look.

For background, GBP has struggled against USD for the last 4 months, taking the trip from 2.08, through 1.70’s, down to these 1.50’s, accelerating as she went – pronounced downtrend.

9.30 AM GMT (4:30 AM New York) saw the release of quarterly economic growth figures for the UK. After a quarter where growth stood still, the prediction for the overall figure was -0.2%

Predicted at -0.2%, the overall headline figure came out as -0.5% – the news absolutely confirming the trend.

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Speed Resistance Lines, or speed lines, produce a fan similar to the Fibonacci fan. Developed and popularized by Edson Gould, rather than using the standard Fibonacci retracement levels, speed lines involve a simple division of the trend in thirds.

Let’s look at the example of an up trend followed by a down turn – see diagram. (Theory is obvously reversed for retracement of a downtrend).

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or as successfully as it’s ever likely to get…

You’ve hit a problem – a trade hasn’t been filled properly, major slippage, they’ve made a margin call on you when you know they shouldn’t…

First, count to ten and try to calm down. If the situation is under control and if at all possible, give yourself ten minutes off, (make a cup of soothing herbal tea, yeah right).
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Not really an indicator of pivot points, I think it would be fair to say – more a generic recipe for predicting high and low in the coming period.

Where H = previous high, L = previous low, O = open, and C = close

(if C > O_new) x = 2H + L + C
(if C < O_new) x = H + 2L + C

New High = x / 2 – L
New Low = x / 2 – H

Simple enough, and nobody would suggest its use in isolation – what analytical tool could be used in isolation? – and probably a consensus opinion is that it has a better record in a ranging market and definitely over a longer periodicity as opposed to shorter.

Following on from a previous post, where we ran through the basic math of the Fibonacci series and the golden ratio… here’s how it’s all supposed to fit together with an actual forex (or any market price) chart.

There are various garbled – and sometimes totally inaccurate – explanations to be found, for example, here

Let’s take Fibonacci retracement – which is supposed to indicate support/resistance.

First, locate the high and low of the chart. Then 5 lines are drawn:- the first at the high = 100%, a 2nd at 61.8%, 3rd at 50%, the 4th at 38.2%, and the fifth at 0% (the low, giving you the scale). Most likely, you’ll have charting software that’ll do this bit.

Following a trend, bull or bear, new support and resistance levels are close to the Fibonacci retracement levels – that’s the claim… Take a look at the chart below, which illustrates some retracements:

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Good news, I do believe, and particularly if you were on the right side of the argument yesterday – with GBP on the slide and looking very like it will trickle on down to its GBP/USD levels of 4-5 years ago.

This bearish mood looks very much as if it’s a preparation for Friday, when quarterly economic growth figures will be critical.
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A brief departure, because these 2 posts, at the beginning at least, are more about arithmetic than forex trading – it’s the basis of Fibonacci retracement, taken right from first principles, and hopefully as simply as possible at every step

For all those that want it – and even if you think you don’t want to know, it might just worth checking out….
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In a well-defined downtrend, you will (sometimes) see the characteristic pattern of the Morning Star appearing:-

Three candles

1. A relatively large falling candlestick – (filled or red in color)
2. A small candle (either rising or falling).
3. A large rising candlestick, closing around the center of the first bar.

The morning star is taken as an indicator that the previous downtrend is going to at least come to an end or may reverse.
To which you may say: well, I’m going to suspect the trend might have changed because it’s already reversed over at least one time-period – and you’d be right in that…

There are a lot of wise words out there – don’t even think about it for 3 months, 6 months – well, most people’s patience doesn’t last that long.

If, and only if, you’ve put in the work to understand what’s going on with a practice account and you have that $250-500 that really can afford to kiss goodbye to, instantly if necessary, then go for it.
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It’s often said – and this time, I’m sure there’s a lot in it – that one of the main factors in not showing a yield on your investment is that you’re in the wrong chart.

The newbies rush into the violent world of the 1-minute or 5-minute chart – with these you’re getting apparent signals coming at you constantly, and it does take a pro to sort out the gold from the trash (if it can be done at all).
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