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Combs on Daily Charts

 

A formation such as a comb doesn’t exist in technical analysis. This is my own definition of the specific formation, which sometimes appears on daily bar charts. (It is also common on intraday charts.) A comb repre- sents a specific kind of trend. The specific feature of a comb is that you can draw a trendline on a certain part through highs or lows of any three of five consecutive daily bars. The trendline will make sense if it’s directed

 

 

 

FIGURE 8.16 Combs on USD/DEM daily chart.


 

 

 

FIGURE 8.17 Medium-term local trends on the USD/DEM daily chart. I called these kinds of patterns Combs.

 

 

under some angle upward, drawing through lows, and angled down, draw- ing through highs. The examples of such formations are shown on the for- mations in Figures 8.16 and 8.17. A comb is one of my favorite patterns, which gives a reliable signal to enter the market with the appropriate posi- tion in the moment of a trendline intersection.

 

  OTHER FORMATIONS ON DAILY AND WEEKLY CHARTS  
   

Identification of various formations on the intermediate and long-term charts should be conducted in accordance with technical analysis rules. Identification includes head and shoulders, double (triple) top (bottom), rectangle, triangles, wedge, flag, diamond, and so on. Usually, if you have basic knowledge and some experience, it shouldn’t be a problem to iden- tify them. However, I repeatedly found myself in situations in which even relatively experienced traders were unable to identify formations that were quite obvious from my point of view. Sometimes they saw such pat- terns in places where I, having sufficient imagination and significant prac- tical experience, was unable to identify them as such—with all my diligence and even with the help of another trader.


 

 

Different interpretations of technical patterns and formations are fre- quent among traders. Their interpretations of possible market behavior based on such identification also differ. As I already mentioned, the FOREX market is densely filled with technical traders, and for this reason formations frequently do not fulfill their destination to give a trader a reli- able signal to enter a market and make some projection for the future. Ac- cording to this fact, a trade on a projected target frequently can be unsuccessful. However, we shouldn’t ignore these formations also. We will discuss how to use these formations and how to ensure that we are safe in the chapter devoted to trading signals.


 


 

CHAPTER 9

 

 


Date: 2015-12-17; view: 780


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