How to perform accurate market analysis

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Lydia Warner
5 years ago
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1 How to perform accurate market Roman Sadowski

2 Good market combines the fundamental and the technical. This combination is essential to form a longer-term bias in the market. Good market needs to consider other parts of financial market; stocks, commodities, futures. Good trader understands correlations between stocks, bonds, interest rates and knows how they impact currencies. Once the trader knows where is the market likely to move, he will apply technical to position his/her money accordingly. Daily research routine should include Is the market risk on or off? Look at stocks first Economic calendar. Look for important news and expectations. Prepare for risk events Research what is the market sentiment/mood. Fundamentals/base Price charts and technical. Support & Resistance, Pivot Points, Candlesticks Trade the market not the timeframe Many novice traders ask me, what timeframe do I use in my. This is silly question indeed. I analyse the market as whole. Here is the snapshot from my daily. It includes weekly, daily and intra-day charts. How to perform accurate market

3 Firs I look at the weekly charts and the Commitments of Traders data. How to perform accurate market

4 I don t remember times when I traded without looking to see what is smart money doing in the markets. I can t imagine trading without C.O.T. The COT report is not design as a market entry tool. The Market can be short term bullish in a long term downtrend. The COT report is designed to gauge supply and demand of important market participants. It can be used to confirm mid/long term fundamental bias in a given market. C.O.T. report is designed for traders with longer horizons. Those who plan their trading a few weeks/months ahead. Swing traders enter markets a few times a quarter. The mid to long term bias is very important in this case. Trader must be certain of the long-term market direction. He positions his orders accordingly and uses short term fluctuations as an opportunity to add to the portfolio. C.O.T predicted market swings many times before with deadly accuracy. Check out: How Commitments of Traders predicted higher prices In AUDUSD How Commitments of Traders report predicted USDJPY decline How Commitments of Traders predicted GBPUSD decline Then I look at daily and intra-day charts to analyse the price action. Once you position yourself on the right side of the market, you must learn to spot support and resistance. These levels comprise of a large number of orders and trades are entered near them and CANNOT BE IGNORED Lets see what are Support & Resistance and how these levels can be used to generate low risk entries. How to perform accurate market

5 Support and Resistance These ideas are at the very core of Technical Analysis, and almost all Chart Patterns involves them in some way. We will now define Support and Resistance and describe the ways they may appear in the markets.support and Resistance are psychological levels which price has difficulties to break. Many reversals of trend will occur on these levels. When a certain level is difficult for price to cross upwards it is called Resistance. When a certain level is difficult for price to cross downwards it is called Support. The harder for price to cross a certain level, the stronger it is and the profitability of our trades will increase. Try to trade on levels that price stopped on at least twice. The most basic form of Support and Resistance is horizontal. Examples: RESISTANCE How to perform accurate market

Price bounces off horizontal Resistance level at 115.

6 Price bounces off horizontal Resistance level at Price bounces off horizontal Resistance level at 2405 SUPPORT How to perform accurate market

7 Strong horizontal Support level at Horizontal Support level at Let s put it all together. Let s take the USDJPY chart as an example Weekly Charts How to perform accurate market

8 Speculators took profit this week. They covered 11K longs and 7.5K shorts. They were 30K net short, up from 26K last week and 30K two weeks ago. Profit taking would suggest the market to collapse from 113 resistance in the short term. Drop in Open interest on rising prices also suggests, the top might be near. How to perform accurate market

9 Daily Charts How to perform accurate market

USDJPY formed weak engulfing daily candle. The pair closed the session at 113.85, few pip lower from yesterday s close.

10 USDJPY formed weak engulfing daily candle. The pair closed the session at , few pip lower from yesterday s close. Daily engulfing candle in the WR2 Pivot Point zone is a strong and reliable reversal pattern. Weaker US yields and SP 500 confirm that the top could be in place. It is possible that this market will test resistance once again before finally rolls over to the downside. Intra-day charts How to perform accurate market

11 Waiting for the reversal pattern to form to confirm short entry So From the above, we gather: Speculators are getting long in JPY Futures, which suggests, USDJPY is likely to collapse Daily charts tell us the price formed daily engulfing candle within a major resistance zone Now, lets look at other strongly correlated markets for more confirmation. US 10 YRS Bonds Below is a daily chart of US 10YRS Notes. If the price of bonds falls, yields rise and vice versa. How to perform accurate market

12 We know that Japanese Yen is a safe haven currency and reacts strongly to risk aversion simple speaking If the US Yields fall, USDJPY falls too. From the chart below we see the price of US bonds rallied, hence the yield must had fallen sharply. This fits the picture as the recent US Data disappointed and FED Watch suggests, market lower the probability of interest rate hikes. Looking at S&P 500 we note that the index is trading near all-time high and a major resistance. If the market becomes RISK OFF, stocks will sell off the resistance and USDJPY is likely to fall further. So here it is! This how the professional market should be done. It includes all important trading elements that should be considered before committing the capital. How to perform accurate market

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