Forex Currency Trading System Possibilities

By: Bret Freak
So many people continue to discuss the use of common technical indicators in trading systems, without realizing or perhaps just not bothering to look at more predictive trading tools that are available to trade the forex market.

And so the purpose of this article is to present to you a few alternatives to using lagging indicators and instead incorporate leading indicators in your system, and that means looking directly at price action which some refer to as trading naked.

What I’m about to explain here, is a number of analysis techniques which I have combined together giving you an idea of what is possible. Now just because I have combined the use of all four market timing techniques in this article, doesn’t mean you have to use them together in your trading system, rather incorporate the use of one or more of these tools in your own forex trading system to suit yourself.

The first thing to do, is to identify a main market move, then apply fibonacci retracement levels to that move. These fibonacci resistance levels will now act as a reference point. We will now refer to other tools to indicate a possible reversal around one of these resistance levels.

We now wait for a candlestick reversal signal to occur around one of the main fibonacci resistance levels to indicate a possible reversal trend. When you think about it, fibonacci and candlestick reversal patterns are a great combination of analysis tools to use. Think about it for a moment. Once you observe a natural level of resistance in the form of a fibonacci, and at the same time you notice a candlestick reversal signal occurring aroung this level, for example a shooting star pattern, it gives you added confidence that a change in trend to the downside may be about to occur.

This brings me to our third indicator which gives further indication of a reversal occuring. This third analysis technique is called Elliott Wave. Now it is not my purpose here to go into detail about the Elliott Wave Principle, but rather show you the possibility of the tools you could use in your forex trading system.

To give you an idea of what Elliott Wave is all about, I quote from the Elliott Wave Principle book:

“In the 1930’s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns, the patterns he discovered are repetitive in form but not necessarily in time of amplitude. Elliott isolated five such patterns or waves that recur in market data. He named, defined, and illustrated these patterns and their variations. He then described how they link together to form larger variations. He then described how they in turn link to form the same patterns of the next larger size and soon producing structured progression.”

And further on into the book it goes onto saying:

“The primary value of the wave principle is that it provides a context for market analysis.”

And that is exactly how you should use it in your own forex trading system, in context with your other indicators or tools such as Fibonacci retracements, and candlestick reversal patterns.

Now to the fourth and final market timing technique you could incorporate in your forex trading system, or use with the other technical tools I have presented here in this article. This last market timing technique is called the Delta Phenomenon. More information about this technique and all the others presented here in this article can be found on my website listed below.

Basically the Delta Phenomenon is a cyclic phenomenon that was observed to be common in all financial markets around the world. Here is a quote from the book:

“Once one discovers the number of points that repeat and where the repeat begins, he is able to predict where in time each of these points will occur as far in the future or the past as he may want to go.”

The interesting thing here is the fact that this sounds similar to the paragraph I read out of the Elliott Wave Principle book which stated that, Elliott Wave patterns are repetitive in form but not necessarily in time or amplitude. This is where the Delta Phenomenon could complement EW, since DP gives you an idea of the time period to expect a reversal.

I would also like to mention here that the delta phenomenon is one of those market timing techniques that can be incorporated with any trading system, and it’s definitely worth looking into further if you’re interested in increasing both profitability and accuracy in your forex trading system.

Conclusion

It is up to you which market timing techniques you choose to use in your trading system.
However you should be able to add an extra layer of both confidence and accuracy, by incorporating the use of any of these four market timing techniques in your own forex trading system.