Who loves math?
According to some surveys, 60% of the world’s population likes math. Apparently, more men than woman fall into that category. But, what does that mean? Since everything is math, I think it means the surveys are wrong! Not to be argumentative, but whether you’re the proud-lover-of-math type, or the one who generally avoids it, everything we do every day is math, including using math tricks in Forex charting.
Forex Charting Tips Using Math Tricks
You can’t count cards in casinos, but you can count bars in price action. No matter what pattern you trade, I would bet that if it falls out of the pattern in less than 5 bars, it’s not going to happen, so come back later. But, if it lasts 10 bars, it’s probably going to hold the pattern for 20 to 30 more bars. This little trick enables you to estimate how much time to expect your trading pattern to continue, which is very useful when you’re deciding whether or not you want to take the trade.
For example, if you’re looking for a range pattern to trade on a short-time frame chart, look for one that has been working the range for 10 bars and you can expect at least 10 to 20 more bars of similar price action.
Don’t Want to Count Bars? Use the MACD
Moving averages are my favorite indicators, as you know. The MACD (Moving Average Convergence Divergence) is another math hound I love on my charts. It looks at historical prices and gives you a picture of current momentum and direction. MACD crunches numbers on 4 different levels, and that might be hard to do in your head. But, have a look when the MACD line crosses zero, changing from positive to negative polarity, and you’ll know the math is telling you something new is happening in the market right now.
How does it take historical price numbers and tell us what’s happening now or even be predictive of what’s going to happen next?
Mathematically, of course, it can compare what was happening awhile ago with what the price numbers are doing now, and detect change in the algorithmic patterns. When “change” is viewed as momentum starting to build, that math makes you smarter with your trade entries and exits.
Maybe you like to count bars and prices and do the math yourself. Or, maybe you like indicators that do it for you. Whether or not you think you like math, charting price is pretty much the most fun you can have and call it “doing math.”