Allright, before we start our trading days tomorrow I'll share you my view on GBP/USD. This time I'll go through a more comprehensive, detailed view on each time basis to give you example how to analyze each wave using different approach and tools.
Why trouble ourselves with so many tools? Well, thing is nobody knows where and how far the price might go, so we need as much data as possible to judge the situation and minimize risk. Here's where our chart analysis concept comes into play. Chart analysis itself is all about gathering as much information as possible, using certain concept or approach to get a good view of market condition.
There are basically two important things we want to find out, the tendency of price direction, and the critical levels that the price might go to (I take these levels as "frame" within which the price is moving).
But in the end it's all just prediction and probability, so there's always room for error, therefore risk is always part of the game, that's the reality. Well, if you can't accept it then don't trade forex at all :D
We'll be using some tools, the core tools of KG analysis concept, they are KGB levels (modified fib), Bollinger Bands (BB) SD 1, BS band, LSMA, and range calculator.
Allright here we go, first is monthly
We'll go through wave analysis first, notice the KGB levels (it's the aqua modified fib. The price is still playing above the B (Buyers) level (1.6094), it's indicating that here buyers are still in control of the market.
Notice that price is moving up leaving the B level, so buyers might try to retest the H (high at 1.6343).
Next take a look at the BS band (1.6161), it's dynamic monthly median level. This level is important because that's where the dynamic balance is, a level where buyers and sellers strenght is equal. Now based on this level, price is already above it meaning buyers are having the upper hands.
So far our conclusion is buyers win.
Next is based on bollinger bands (BB). Take a look at the BB shape, notice that the bands are flat, indicating sideways condition. Notice also that price is moving in range within the bands and currently is trying to break SD 1 band. So based on BB price is still in normal or sideways condition, it's a consolidation or staging phase before the next move.
And next is the LSMA. Notice it's previously pointing down and now it starts pointing up, indicating that based on regression the direction tends to be upward.
And last is the range, notice that current month range is 367 pips, about 56% of the average monthly range which is 654 pips. So there's still vast room to move either up or down.
And now our conclusion here, monthly is in sideways or consolidation phase, but overall condition buyers are still in control and there's tendency the price is heading up.
Assuming the price is moving up our first focus should be the SD 1 band, if it's broken then our next focus should be the high (1.6343).
On the other hand if this consolidation continues then our focus should be the middle and the SD -1 bands, also the B level (1.6094). If SD -1 band and B level are broken, then monthly will enter downtrend phase and next target might be the B (Balance) level at 1.5845.
Next is weekly
Wave analysis using the Magenta KGB the current upwave is retrace from the previous downwave. Notice price is trying to break the B level (1.6252). This is a critical level to watch, if it's broken then buyers will have total control and might try to push the price towards the H (1.6344), otherwise price might go down trying to hit the B (1.6161).
Now based on BS band (1.6115), the price is above it indicating buyers are in control.
Next based on BB. Watch the shape, notice that the middle band is pointing up and the bands are expanding, also the price is moving up outside the SD 1 zone, indicating that weekly is in uptrend or abnormal up phase.
Now LSMA is also pointing up, and already crossed both BS band and BB up, it's also indicating uptrend.
And last the range, current weekly range is 278 pips which is 88% of the weekly average. So it might be there's only few space left for the current uptrend.
Okay our conclusion is weekly is clearly in uptrend phase, so our job is watch the B level (1.6252), if it's broken then next destination might be the H (1.6344) otherwise it might go down and try to hit the BS (1.6161), and don't forget based on range there's not much space left so we might see a pause or pullback soon.
And lastly, daily
Based on wave analysis we still have the magenta KGB as our basis and our conclusion is similar to the weekly analysis above, focus is the B level (1.6252).
Based on BS band (1.6157) it's buyers winning.
Next based on BB, daily is in uptrend phase, notice the shape, the angle, and the price position is outside the SD 1 zone, everything is indicating uptrend.
Now based on LSMA, it's uptrend too.
Last is range, notice current range is 194 pips, 147% of the daily average.
Allright, what do we have here? Daily is clearly in uptrend phase, our nearest focus is the B level (1.6252), watch if this level is broken or not. But based on range, it looks like buyers are already overstretched, so here we might expect to see some pullback soon, it might even lead to reversal, who knows.
Thing is if there's really pullback, then our focus should be the SD 1 band and LSMA, if the price manages to play under LSMA within the SD 1 zone, then daily will be in consolidation phase, and if LSMA flattens or turns down, then direction may change.
Allright now we have clear view on monthly, weekly, and daily basis, what's next?
Next is trading plan or strategy, it depends entirely on individual style.
First determine which basis we're focusing on to make our trade, and specify in what condition or criteria we make our trade, and when we cut our losses.
Are you looking for a trend, or reversal, or whatever it is, you should be able to identify the condition, set the criteria you want, set your target and stop loss, and then make the trade.
Allright, that's all for now, hope it helps, it's moto2 race starting by the way, I'm going to watch it :D
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