Changes, Always Changes...

I've changed my trading strategy again to include a more overarching way to determine high probability trades.

During the past month I ran across some new postings by some old mentors from back east and London. They are employees in a mid sized hedge fund that deals specifically in currencies. In their postings they went over in detail how it is they determine areas(or levels) where they want to get involved in the market. It doesn't matter which currency pair, but they(like me) want to trade the more liquid and volatile instruments(i.e. gbp/usd., gbp/jpy, eur/jpy, etc.). It's amazingly simple.

For the longest time I looked at larger time frames for trend determination, but that's only a part of it.

The strategy is based mainly on 4-hr(240-min) chart support and resistance. The reason is that the mid sized and larger players consider time frames below the 4-hr chart noise. This is the chart they use to make determinations for entry. Here it is:

1. Open a clean monthly chart. Using a blue horizontal trend line, mark off swing highs and swing lows. Color is important as you'll have several colors by the time your done.
2. Change that monthly chart to a weekly chart and repeat using a different color line. If the previous higher time frame line is in nearly the same place, the higher time frame line has precedence.
3. Repeat step two using daily and 4-hr charts. It's vitally important that you can see previous trend lines on lower time frame charts like the hourly, 15-min and 5-min. You'll also notice that as the time frame shrinks the frequency of lines increases.
4. Determine the trend from the daily and 4-hr charts. Try and trade with this trend. It makes life so much easier.
5. Take some time and observe how price reacts around these horizontal levels of support and resistance. You may have to alter how you place your lines to more accurately reflect multiple tops or bottoms.
6. When price reaches one of these s&r levels, drill down to the hourly, 15-min or 5-min chart and apply your favorite setup for an entry. You can add a fib retracement to the swing high/low of the hourly or 15-in chart if you like. Mark a minor trendline that price has to break and retest, or a horizontal area to break out from. The most important concept is to wait for price to get to one of these higher time frame areas of support/resistance(s&r).

That's it. Check out examples below(courtesy of Tess and Jocelyn):