CHART ANALYSIS - Part 1

Jun 15, 2021

I thought it was about time for me to re-start posting my chart analysis ideas again. To start my analysis of a currency pair the first thing I do is to get a look at the BIG picture. To do this I turn to the monthly chart time frame. In this time frame, I want to mark out the major Swing Levels. A swing level is a level that has once been a Support level and has turned to a Resistance level. So how do I find these swing levels? On the chart, I have identified four swing levels. On one of those swing levels, I have placed small red ovals. These ovals mark the price levels that came down to a common price and reversed directions. Now if price only came down to this price level and reversed back upward then this line would be called a Support level. However, notice also that at different times price also came up to this same price level and reversed back downward. Now this line is called a Swing Level because this level has changed from a support level to a resistance level. Now, the more times a swing level changes from a support level to a resistance level the more significant this price level becomes. Once this swing level becomes more significant we know there is a high probability that when price reaches this swing level that it will reverse directions. Now that you have a good idea of how I find swing levels see if you can determine how I found the other three swing levels.

The next thing you may be wondering is why don't I use the daily chart to find swing levels. The reason for using the monthly chart is because each candle takes 30 days to complete. So a swing level takes several months to complete. This means there have been more than 30 times the trading decisions involved in the formation of a swing level on the monthly chart than on the daily chart. Therefore, swing levels that are formed on the monthly chart are more significant than those formed on the daily chart.

KEY TAKEAWAY 1 - Swing levels are a common price level where support becomes resistance. The more times this swing level changes from support to resistance the more significant the swing level becomes because it has a high probability of reversing price the next time price reaches it.

KEY TAKEAWAY 2 - Swing levels formed on the monthly chart are more significant than those found on the daily chart.

Jun 22, 2021

Note

I didn't quite explain this key takeaway correctly. I have the second sentence to correct the mistake.

KEY TAKEAWAY 1 - Swing levels are a common price level where support becomes resistance. The more times this swing level is tested as support or resistance the more significant the swing level becomes because it has a high probability of reversing price the next time price reaches it.

Jul 18, 2021

Note

KEY TAKEAWAY 3 - I don't think I explained why Swing Levels are so important and how they are different from the normal Support and Resistance levels. A price level becomes a support level when the price moves down to a certain price level and then reverses and starts to move higher. The opposite with a resistance level. After a price level becomes a support level and then the price moves back down to that support level and cannot break through it, bounces off and heads back higher again that support level becomes a swing level. Why? Because it has been re-tested as support. After a re-test of support, there is now a very high probability price will not move back below it for quite some time. This is what makes it a very good price level to enter a Long trade because there is a high probability the trade will work out and hit its profit target without reversing back down to hit the stop loss.