Forex Mom

Archive for the ‘Consolidation’ Category

There are many ways to determine whether the market is trending or sideways. Here are a couple ideas:
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A penant is a formof consolidation. We do not trade penants, we wait for a breakout.
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70% of the time the market is in consolidation, only 30% of the time is it trending. A trending market is making higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend).

When we are in consolidation we draw lines of support and resistance. If the distance between support and resistance is 60 pips or less, we have small consolidation.

We cannot trade small consolidation. We must wait for a breakout.

Waiting for a breakout of small consolidation

70% of the time the market is in consolidation; only 30% of the time it is trending.

When the candles are no longer making higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend) then the candles are in consolidation.

We do not follow the fibonacci’s when we are in consolidation. We do not follow crowns either.

We draw the lines of support and resistance. If the distance between support and resistance is greater than 120 pips, it is large consolidation.

When the candles go down to support and we see a good bullish candlestick formation, we enter long. We place our stop 10 pips below the support line (or low of the candlestick formation) and we place our limit 10 pips before the line of resistance. It is a good idea to move your stop loss each time a higher low is formed.

When the candles go up to resistance and we see a good bearish candlestick formation, we enter short. We place our stop 15 pips above the resistance line (or high of the candlestick formation) and we place our limit 10 pips before the line of support. It is a good idea to move your stop loss each time a lower high is formed.

Trading large consolidation

It has been especially helpful for me to watch my mentors trading large consolidation. I learned more from waching them than from reading theories all day long. My mentors are Market Traders.