Why my FOREX workspace is set up with three charts of different time frames.

This probably the most often asked question about my trading method. I was explaining it the other day to another trader and for the first time I used weather forecasting as an example. That Trader seemed to pick up on my thinking much faster than any other explanation system I have ever used. So I decided to write it down for all to reference now and in the future.

The essence of trading is that we are attempting to forecast the future, albeit a very short time into the future. But there is a correlation to weather forecasting. A serious weather forecaster usually uses about three forecasts: A long term forecast, a short term forecast and a real time look at the weather using current radar images.

That correlates perfectly to our FOREX use of three intraday charts: A long term forecast (the leftmost chart), A short term forecast (the center chart) and a current radar image the (chart on the right).

Weather forecasts use time frames, like five days, one day, and current radar (as do most traders, who use minute bars). However our charts are constructed by numbers of ticks per bar (simply variable time frames).

The long term forecast is usually the number of ticks per bar that will yield about 12 bars within the trading day (twenty four hours).

The short term forecast (chart) is most often one-tenth as many ticks per bar as the long term.

The current forecast (chart) is usually one-tenth the number of ticks per bar as the short term.

The chart shown in Figure 1, below, is set up for 10,000 ticks per bar, 1,000 ticks per bar and 100 ticks per bar.

PCE_FOREX_Workspace.bmp

Figure 1:  My FOREX Workspace

With the USDJPY pair, the long term chart usually ranges from 5,000 to as much as 12,500 ticks per bar.

We usually construct our trade using the long term chart (on the left); select entry and exit points from the short term chart (in the center), and monitor the shortest number of ticks chart (on the left) for imminent changes that might affect the longer term charts.

We will usually stay with a trade as long as the left and center charts are positive for our position, even if the leftmost chart is (temporarily) not positive for our position.

The center chart usually determines our soft stop loss value (usually about half – at most) of the price range within the Bollinger bands.

After a trader becomes familiar with his trading parameters this system enables him to analyze his position and quickly determine his course of action.

You can read all about my trading method in my eBooks at:

www.Tradingbetweenthelines.com

You can get a free trial of my proprietary indicators for TradeStation at:

https://tradestation.tradingappstore.com/search/all/rating?search=RMI

 

 

 

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