Forex Focus: Fishing For Trading Systems by Alexander Sabodin
Here’s a step-by-step look at a trading system that you can
incorporate into forex as well as other markets.
The essence of the trading system I discuss here was
already proposed by Charles Henry Dow, the founder of the Dow Jones indexes and Dow theory, at the beginning
of the 20th century. Dow pointed out three categories of
trends: primary, secondary, and minor. The primary trend
tells you which way prices are flowing. The secondary is
made up of waves that form the flow, and the minor trends
look like ripples on the waves. As traders, our task is to define
the major trend of the direction of prices and then to find a
wave inside it as a good point of entry.
IS IT THAT EASY?
Very often while analyzing the market, we can come across
contradictions. Let’s point out two major ones:
1.) At various time scales, you can observe conflicting
trend directions. For example, on a weekly chart the
trend may appear to be ascending, whereas on a daily
chart the trend may be descending. And when it
comes to intraday charts, the direction of the trend is
2.) Various groups of indicators may show contradictory
signals. While a trend indicator may suggest that the
trend is ascending, the oscillator may show that
traders are outbidding and therefore give sell signals.