free download links about online stock trading, forex, futures, stock investing, market, trading systems
TIME FRAME'S IMPACT ON FOCUS NUMBER, PRUNING THE FIB SERIES
Back to contents page

If we then lengthened the Time Frame significantly, as in Chart 10-10, the resulting Market Swings would show up as much simpler waves. Think about it; if you go from a five minute to an hourly chart, there will be fewer discernible retracements, i.e. Reaction Points will disappear. It's the same situation any time you increase your Time Frame. Likewise by reducing your Time Frame, you will get more Reaction Points, more Confluence areas, and more opportunity to fine tune your entry and profit objectives.

CHART 10-10

We'll discuss mare about moving the Time Frame around and what it will do for you, in the next chapter. If your eyes are crossing, don't worry about it, there will be lots of examples coming along. Once you discipline your mind to follow the preceding rules, these ideas should fall into place with amazing ease. Ifyou are wondering how I came up with this theory, it was from trading a five minute S&P. When support came in where I didn't expect it, I'd work my way back and calculate the likely Focus and Reaction numbers necessary to produce such support or resistance. I then went through a very lengthy verification process. After three years or so I had it down.

LESS IS MORE

If you haven't yet figured out why that statement is true, you're probably still in your twenties, or maybe your thirties. With regard to trading, this is a critical issue. Individuals often challenge themselves up to the limit of their ability and beyond. Some traders believe that keeping track of 23 indicators and 94 support levels provides them with more comprehensive analysis than two indicators and six support levels. In trading for profit, look at more markets ifyou must, but don't foul yourself up with a spaghetti chart.

PRUNING THE FIB SERIES:

With respect to keeping things as simple as possible, let's look again at how we can eliminate Fibnodes as they become irrelevant and thereby simplify and clarify the path to our objective.

CHART 10-11

Chart 10-11 shows a clear progression of an up Movement with shallow retracements until price reaches point E (Enough). The price then makes an OP move down into Agreement with the .618 Node of the entire up move. That simplifies our life as

traders, since we are now able to remove from consideration all of the Fibnodes that the down price action has penetrated through (less is more.) F5, off the primary reaction low '4', is the only active support Node left on the chart.

CHART 10-12

Try to label this, before turning the page.

The next Chart 10-12 is a favorite of mine from private tutoring sessions. It's a five minute line chart depiction of the S&P on a day the Federal Reserve cut the discount rate by two points, the First Lady was rumored to have had an affair with the Chief of Staff, and the President was wounded in a related incident. China also invaded Taiwan, Congress approved the capital gains tax reduction and ... well you all get the idea
.

There are only two active Fibnodes remaining on this chart which are probably more than the number of traders still solvent. All the others have been taken out by the price action.

Smarter trading The art of day trading Trading Chaos Sane Investing In An Insane World
Beat The Odds In Forex Trading Robert Kiyosaki - Rich Dad, Poor Dad The Five Rules For Successful Stock Investing