Chart Reading- Fibonacci and Price Analysis
This is how to read your charts and know what to expect
Nexgen’s educational material will provide everything you need to complete this core component. Learning to read your charts should be your entire focus when beginning the Nexgen Software educational process. Trading the market is 90% chart reading and 10% trading. Chart reading is your ability to become one with the market, knowing when to trade and, equally as important, when to stop taking trades. Chart reading is not trading; therefore, 90% of your day will not be trading. Chart reading is akin to learning a new language, and it takes time. Gaining the ability to be open and receptive to what the market is saying to you is of paramount importance to successful executions of trades. You must understand and cultivate absolute faith in what the current market tells you by sharpening your price analysis skills.
Chart reading mastery incorporates three essential elements; where the market is “LIKELY TO CONTINUE," “LIKELY TO GO,” and where it is “LIKELY TO STOP.”
Learning these three essential elements of chart reading will be a skill that you will master using Nexgen's training material. After careful study and witnessing the same patterns hundreds of times, you will innately see, understand, and believe in those patterns. The trigger line reading you have learned will now be applied when reading Fibonacci areas.
The following picture focuses is on the "location" and "direction" of the trigger lines at the Fibonacci areas. Location, in addition to direction is a critical concept to master. When location and direction agree, traders may take trades because the trend is likely to continue. When the location of the triggers does not get beyond a Fibonacci area, the location and direction disagree, the trend is likely to stop or the Fibonacci area must break to continue trading in the direction of the trend.
click to enlarge - trigger lines will determine if Fibonacci areas hold or break
Please watch the following video. The video offers an in-depth explanation of chart reading focusing on building the necessary skills to identify when the trend is likely to continue or likely to stop. This video offers lessons on how to "grade" the quality of a turning point in the market. The better the turning point, the easier the subsequent trades will be.
How to analyze good tops and bottoms vs "bad" tops or bottoms
Daily classroom discussion of the information in the video above will be common when you are presented with a 50-50 5-1 trend trade on your 13-2 chart. Following a bad high or low, the market will show strong trigger lines which will present you with 5-1 trend trade opportunities. If you pay attention to the quality of the tops or bottoms, when needed, you will be aware to more assertively manage your 5-1 trend trades with things such as pivot stop-outs, or higher lower divergences or not enter a trade that has a 5-1 divergence without a market flow signal to time entry. You will build on these techniques in the trade entry and trade management sections.
defining a 50-50 look
The following picture is from the "Trend Analysis is the market going up or down?" section and shows a simple version of what to expect prior to reaching a potentially good bottom at Fibs when the market bounces prior to reaching the areas.
how to visualize trigger line reading
The following picture and example represent a common chart configuration at Fibonacci areas
#1 #2 #4 and #5 represent trend trades (yellow highlighted boxes) that may be taken with the trigger direction. The circles represent key areas that you must learn to build an expectation around.
The low at #2 represents the first divergence (-#) at Fibonacci followed by the small trigger rolling up. This will represent the first opportunity for long trades by HVA line rules on the market flow or 5-1 trend trade. #2 long's target is only expected to reach the mid-band & Fib area. When price reaches the mid-band and Fib At #3 area, you must evaluate the prior trigger strength at the first divergence #2 low as well as the current state of the large trigger lines which are still crossed down as price reaches the mid-band (#3). Prior strength at #2 low and large triggers down at the mid-band, will give you the expectation that the market may go down one more time.
The #4 low is defined as a pivot stop out of divergence low at Fibonacci areas. #4 low represents a "VERY GOOD" bottom as described in the video above and next section in this material, termination conditions. After the low at #4 and after the large triggers are then crossed up, as long as the small triggers remain above the large triggers, long trades are the expected high probability trades to take. As per the video, the mid-band and Fibs are more likely to break after a good low at #4. Remember each yellow box represents a potential trade setup area, and each white circle represents a potential bounce or turning point based on accurate chart reading.
Learning expectation based on quality chart reading.
In summary, chart reading mastery incorporates three essential elements; where the market is “LIKELY TO CONTINUE," “LIKELY TO GO,” and where it is “LIKELY TO STOP.” In the following example, a trader learns that the trend is likely to continue when the price reaches the Fibonacci areas. This knowledge allows traders to trade the Fibonacci areas confidently.
click to enlarge- trigger lines will determine if Fibonacci areas hold enabling trade setups
The following picture from the tops and bottoms video (above) highlights when Fibonacci areas may hold or break and assign a strong or weak value to the tops and bottoms in the market highlighting when the market is more likely to continue or end the current trend.
click to enlarge- video tops and bottoms example
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