50 pips Price Action Analysis

I post my views here because I see a lot of traders struggling to understand the dynamics of forex market. I was in similar position a few years back and always glad to share my experience for the benefit of others. I cut my teeth here and I love sharign some of my new tricks here. Forex is an "organised chaos" and you need to an "helicopter eyeview" of the market to discern the pattern. 50 pips price analysis, which I explained belows, is one of the tools I now use to know the intention of the "big players". .

50 Pips Price Action Analysis (50-PAA)

50-Pip Price Action Analysis or 50-PAA is something I stumbled upon by accident. There was a day I had problem opening my MetaTrader and I had some trades running. To monitor live price action, I went to www.bbc.co.uk. There was a live forex chart on the website divided with horizontal lines which are 50 pips apart. That day price was consolidating within a very tight range of 50 pips. After about 8 hours, price was still within that 50 pips range. When price broke out of tight range it moved for about 150 pips. I found the observation interesting and replicated similar lines on my chart for closer analysis. I will now discuss some of the benefits of 50-PAA based on my analysis.

Daily Candle

50-PAA easily shows the average price movement in a single day. For example the cable generally moves about 80-120 pips per day and around 200 pips per day when breaking out of consolidation. The benefit of this is that you can fairly predict the range of a daily candle, identify consolidation, identify a breakout including support/resistance level. For example from the daily chart below it is clear that price has been consolidating between the yellow and red points (about 250 pips) for the past 11 days.

H4 Candle

As I mentioned in some of my previous postings here H4 is the key for day traders. It is easier to pick temporary support/resistance areas. Furthermore, you have the luxury of adequate notice to take a trade (this could be up to 16 hours in some cases) . From the H4 chart below, you can see where H4 candle consolidated for between 12-60 hours within a 50 pips range around support/resistance areas before a big move.

The benefit of 50-PAA for day traders is that H4 candle will give you up to 12 hours or more notice to enter the trade a good trade that would yield over 150 pips. You can then go to lower time frame at M15 to enter the trade. With this knowledge it will be easier to recognize 1st class trading opportunities and will never be under any pressure to enter into a trade.

H1, M15, M5 Candles

With 50-PAA it easy to see many H1, M15, M5 candles within a 50-pip range and easily recognize a break out or a continuation of a strong move.
Using this analysis it becomes easier to understand price movement without any complicated and confusing indicator.

See the relevant charts below as usual.

Benefiting from the greed of “big boys” - 1000 pips trade set-ups

What I will share with you today is how to benefit from the greed of the “big boys” using the 1000 pips trade set-up. As I mentioned in my postings on the Mastercharts that the major resistance/support for GBPUSD and GBPJPY are encountered after every 1000 pips price movement. After every 1000 pips movement for these pairs, expect a pull back. A circle for GBPJPY is divided into two parts of 500 pips each, while that of the GBPUSD varies. In a generous trading environment, the GBPJPY could complete this circle within 2-3 weeks and between 4-8 weeks in most times. GBPUSD takes between 6-12 weeks to complete this circle as a result of its numerous pullbacks.

The “big boys” are greedy and they don’t let go until they get between 900-1000 pips even when there is no justification for such price movements. That is why you see 300 pips wicks on weekly candles. How do you benefit from their greed? This predictable circle of 1000 pips price movement gives a very useful signal that a medium/long term trader could utilise to trade this circle successful over and over again. You cannot predict his circles, but the weekly chart provides very useful and insightful signals. To trade these circles, this is what to do:

a) Wait for a weekly candle to print a new high or low
b) Draw a horizontal line or circle at the lowest or highest point i.e. the wick of the candle.
c) From the lowest or highest price on the weekly charts calculate 1000 pips and put a draw a box to identify the likely target areas.
d) If price has not moved far from these points (less than 100 pips) you can enter the trade if you are ready to wait for some few weeks.
e) If the price has moved far (300-400 pip) it is better to place a pending order at the point where the reversal is expected (900-1000).
f) Follow the ride and jump off if you make some sizeable pips.

Look at the weekly chart for GBPUSD and the 1000 pips movements indicated by the red and yellow boxes. On the GBPJPY chart the levels are shown by the price movement between two yellow line or two aqua lines. Based on this analysis the expected target for GBPUSD if the bearish run that was reversed at 1.57800 is completed is around 1.67800. The target for the GBPJPY is around 135.00.

I have mentioned it very times, success is only guaranteed only when a trade has “helicopter view” of the market. Remember, the important thing is to take only first class trades because it is your money that is on the line. If the opportunity is not right, forget it and look for better ones. There are always better opportunities in this market. The reason is simple - this market is driven by greed!