Same currency, different analysis

Same currency, different analysis There are many ways to look at the market and current situation on GBPAUD currency pair proves it. Trading results depends on our view to the market and even there are few different approaches to this currency pair right now, all those approaches can bring positive results as long as trader sticks to his or hers understanding about the current market situation and takes appropriate actions.

First let’s take a look at the weekly chart for GBPAUD.

As you can see weekly chart has one consolidation after another and currently stays inside some sort of forming triangle (not valid yet) and as we can see market is down at the moment with the expectations to reach 1.4800~. Below that line there are enormous possibilities to drop another 1400~ pips. That is the situation on the weekly chart, but as traders we can use smaller time frame to decide where to get into the market and clearly define risk/reward.

If there are problems with the weekly chart, analysing daily chart we have few possibilities. First of all I will present to approaches using classical technical analysis and third one will be my own approach to the market.

A. Possible H&S Two days ago market set new support line on the daily chart and picture started to look like Head & Shoulders formation:

If we measure move (MM) from the Head to the Neck line and add it to the place where price is going to break that Neck line, we would find that the next stop in this down market should be at 1.4698. As you can see rising weekly triangle's (?) line would match this plan, because it is most likely continuation down should last at least to this lower weekly line.

While this sort of analysis makes sense, there is some slight problem: I have ignored previous daily support. Analysing market requires a lot of concentration. Let’s take a look at the next option B.

B. The same H&S, but different neck line Option B has the same H&S picture, but in this case trader should already be in the market with the short position and at the moment trader would be in profitable position.

According to this analysis measured move should last to 1.4971, which is close enough to the weekly line to be valid (you never know at what point market will turn around).

So, this is a perfect example how two analyses on the same pair at the same time in the same situation would bring different results. That is the beauty of the market. It fits to everyone, but not everyone will get positive results. Even more, let’s take a look at my analysis, where H&S simply disappears.

C. Simple view using two lines.

First of all I would like to say, that I just simply following a market and never try to predict anything.

Chart below will show what I mean.

Move down, consolidation, another move down expected. And after target will be reached I would expect some another consolidation and another move down. Using few time frames allows me to make some corrections. As now we know on the 4 hour chart, market is already in consolidation and I can project another move down using different measurement:

As you can see, daily chart has a target of 1.5179, my 4 hour chart has a target of 1.5163 and if this consolidation will break now, another target will be 1.5080. I can expect market to progress to 1.5080 as it stands now. Will it be true? I do not know, time will tell.

Conclusion All above illustrates few different approaches to the market. All of them are correct and at the same time – all of them not. Just market knows exactly what is going to do next and trader’s job is to identify CURRENT (not past or future) situation and find the ways how to use that current situation in order to make money. Technical analysis has a purpose; it is not just drawing lines. This article has a purpose as well. Recently I came across some traders who are asking what kinds of analysis are best. I certainly do not know what is best. I think all kind of analysis is good as long as it is prepared with care and understanding. And most importantly it should help you to make trading decisions. It should not confuse you, it should help you.

I wish you all best trading experiences

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