Indicators seem to predict the Forex market at times. However, it’s difficult to turn this into profit.
A typical example of that is overbought conditions in oscillators. So, if the RSI is already very high (over 80), this condition points to reversal. But the problem is in timing. If you followed markets for some time, you know that such powerful trend can go on and on.
Siimilar situation is with Elliot waves. Even though we might have a very clear impulse wave pattern, the moment of reversal is hard to pinpoint. It is known that 5th waves can quite often be extended.
So basing the trading on indicators is difficult. In addition, the indicators are widely known, so a lot of traders might wait for the same event. And it is known that when market is commonly expected to go in some direction, it quite often behaves completely differently.
The only sure thing we can predict in the Forex market is that there will be ups and downs. Regardless of the market direction. Ups must be followed by downs and so on. This comes from the nature of the market – price discovery process.
The shorter is the timeframe, the better your timing can be. But if you try timing on e.g. M30 graph, you might lose hundreds of pips before the reversal occurs.
On the other hand, using the tick graph, even if you can time the reversal, you can’t tell the big picture. The pivot point can just be a local extreme.
In our opinion, the only way to tackle this is to react very quickly by generating pivot points signals on the tick graph and then use them to predict the action on longer timeframes.
You will never predict all market movements but you might be lucky more often than unlucky. You just need to be faster than others.
Many try to act only when market starts moving in a certain direction. This is already late. Here automated algorithms are the only way to go.
Trading manually, you can’t react as fast and – most importantly – equally error free for long time. To say nothing of the natural needs to do breaks.
We are developing the price actions algorithms that can be used for trading automation. We based them on our own pivot points detection algorithm. The figure below show the sample results of the detection in real-time.
You can try it with our Pivot Points Analyzer software (free download).