USDSGD price action: step by step guide for new traders

Trend of currency pair USDSGD

There are small trends and big trends for all currency pairs. Which trend it is always depends on the time frame being inspected. This is the nature of multiple time frame analysis. That’s why traders must always have their individual plan and stick to it. Without discipline, one can get knocked round and round. This post is a step by step guide for new traders. We show USDSGD price action, recall important technical analysis concepts, ask key questions for traders, and then provide the answers.

 

Big year to year trend of USDSGD; big winner against the US Dollar

The big trend of USDSGD is down. This year to year trend is for big players and long term investors. Most traders are unlikely to deal with it although the big supports and resistance like 52-week high and lows must be kept an eye on. Businessmen and institutional traders look at it. If you have children you intend to send to school or you want to buy a property in the US or for any other reasons that you may have exposure to US Dollars, this time frame is where you look.

 

Currency pair into fourth month of fall for medium term trend

The month to month trend is down. This trend is of interest to traders who are keep to play month to month, to swing trade or to pick up carry trades like AUDUSD. The place to look is the daily chart on MT4. This is how you do it.

Steps:

  1. Draw boxes
  2. Inspect highs and lows
  3. Recite ‘up trend = higher highs, higher lows, down trend = lower highs, lower lows’

Price action says the pair is undeniably down trend

USDSGD technical analysis

Clearly, USDSGD month to month is trending down

 

In the near term, pair is up since 3 weeks

The week to week trend is up. This trend is of interest to swing traders who like to open positions at the beginning of the week and close that the end. Some may hold positions over the weekends. This type of trading requires bold targets and big stops to deal with volatility. The good news is one can earn while you sleep, or make money from stress-free forex trading while holidaying in Korea. No need to stare at screen.

Steps:

  1. Go to 4-hourly chart
  2. Repeat steps 1-3 above
usdsgd-week-to-week-is-up

USDSGD in third week of rally

We can continue down to lower time frames but these are weak, small trends that qualify more as intraday noise. It is usually traded by scalpers and day traders. For the purpose of this article, no need to go into.

 

Individual trading plan and reconciling the different pictures

So buy or sell? Each investor or trader should have his own plan according to trading objective, method and risk tolerance. Once this is available, focus on the right time frame and don’t let your focus wonder away. It is just like driving. You mind your own business with your route and your steering wheel. No need to wonder what other drivers are doing inside their car.

On the other hand astute traders like to put everything together and understand their part in the whole picture. If you are such an individual, it is possible to piece the different pictures together.

  1. Year to year USDSGD is down.
  2. Month to month USDSGD is down. Together they show that the SingDollar is gaining against US Dollar. This is the big big trend.
  3. Week to week is up. Can this be a retracement? Can it be a bullish reversal?

It is time to overlay price action from different time frames onto the same chart. You can do this manually or use an nBox indicator by Markt Timing Pte Ltd.

USDSGD multiple time frame overlay

For simplicity, let us call this a multiple time frame overlay

 

Putting it together

Inspecting the overlay according to principles of multiple time frame analysis

  1. The bigger time frame represents the bigger trend and is also stronger.
  2. Trends are defined by highs and lows.
USDSGD highs and lows

The chart shows USDSGD price action in waves; sequence is still down trend

 

Key questions that new forex traders ask:

  1. Why did USDSGD stop here?
  2. Is there a bullish reversal?
  3. Should I go long or short?
  4. What is the danger if I am already short?
  5. What is the danger if I am already long?

 

Question #1: Why did USDSGD stop here?

Answer: USDSGD was stopped by a trend line. To find this trend line, zoom out often to spot big patterns or trend lines.

USDSGD at trend line

USDSGD fall stopped by trend line

 

Question #2: Is there a bullish reversal?

Answer: Does this resemble a bullish reversal? No. Bullish reversals must be found in two ways: 1) Look for bullish reversal chart patterns. Bullish reversal chart patterns are VV-shaped double bottoms,VVV-triple bottoms and Inverted Head and Shoulders. 2) Look for bullish expansion. None of these exist in USDSGD at moment.

There are two ways to look for bullish reversal

There is no bullish reversal chart pattern in USDSGD

 

Question #3: Should I go long or short?

Answer: Since there is no bullish reversal pattern nor bullish expansion, do not go long. The trend is your friend.

 

Question #4: What is the danger if I am already short?

Be careful if price breaks this horizontal decisively. Above this level, a VV-shaped bullish reversal pattern emerges. The keyword here is decisively because there are real breakouts and then there are false breakouts.

USDSGD resistance

Above this level, USDSGD prints double bottom

Question #5: What is the danger if I am already long?

Answer: If you are long you are counter-trend. If you are counter-trend, watch this level. Below this level, continuation is confirmed. Bulls die.

USDSGD support

Below this level, trend continues

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005. Soh Tiong Hum is a member and regular speaker at Technical Analysts Society Singapore events and has a bi-monthly lunch time event at IG Singapore on forex and stock markets. He is an avid blogger on technical analysis topics; his Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX. Come find Tiong Hum on Google+
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