You were introduced to the construction of the charts and logic in the most recent article. However, the advent of the computer have brought focus on real-time charts which can have bring more noise than signal.
A lot of traders like to use smaller charts because it helps them to look inside the daily candles. Using the example above, because the daily trend is higher, traders should be looking for dips as potential buying opportunities on the shorter term charts. EURUSD recently bounced nicely off the weekly pivot as well as a key Fibonacci level which can give you confidence on your trade entries. The 3-box reversal chart is akin to a daily chart except it only prints a new column or mark when a breakout occurs and the 1-box reversal chart could be similar to the hourly chart or smaller.
Therefore, we can use these different charts to complement each other and help you devise trading signals apart from the noise. Combining multiple reversal box analysis can provide two key benefits. Second, you can use the smaller-reversal box chart 1-Box reversal to see when a current trend is near resumption if you want to reallocate capital to higher probability opportunities.
On a candlestick chart, this is known as a double-top or double-bottom breakout. However the fulcrum is the main signal that helps you recognize reversals where semi-catapults help you recognize continuation of a prior trend. The name of the 1-box signals help you visualize their purpose. The fulcrum, above on the left, helps you see when price pivots away from the direction of the prior trend and is a reversal signal. The next signal for the 1-box chart is the continuation signal known as a semi-catapult.
Because 1-box charts only have 2 signals, or one for reversals and one for trend continuation, you can see how these type of charts can simplify your trading. The 3-box chart keeps you looking for double-top or double-bottom breakouts or breakouts out of congestion.
To contact Tyler, email tyell dailyfx. Tyler is available on Twitter ForexYell. In the course, you will learn about the basics of a FOREX transaction, what leverage is, and how to determine an appropriate amount of leverage for your trading. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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