Thank you for coming and watching this video
today we're going to talk about how to determine swing highs and lows for Forex
trend trading but actually this applies to stocks commodities emini futures
pretty much anything you can chart but here's the question that comes in and an
answer to that question the question that comes in is very how do I determine
how your highs and higher lows so we're all taught that when we look for an
uptrend you want to see a higher highs higher lows higher highs higher lows and
that's great in theory but then when it comes down to actually applying this to
a chart how do you do it objectively it's really a pretty subjective thing so
you know you look at this chart and you say well which highs do I want to
measure is it going to be that high and this is going to be my low or do we say
well those bars really are all kind of just bunched together there so that high
doesn't really matter because you know these bars are all kind
of covering each other up in other words that part is inside that bar that
person's high that one that one inside that one so maybe we shouldn't count
that one so maybe instead we should just say well okay you know that is the high
and that's the low but then we get another question well wait a minute what
about that low but there's no real like significant high I guess maybe that and
anyway point is you see how it can get very subjective and different people
looking at a different chart or at the same chart rather they will look at
different highs in upper lows so there would be one but then is that a lot
higher here because we get a green bar does that qualify okay
so let's learn a way to make this objective instead of a subjective all
right so here's one way of doing that so first of all I'm going to bring up the
indicator and this is an indicator that I think about pretty much all charting
platforms I've ever seen it's just called the zigzag indicator let me move
this over here so you can see it clearly this is exact well right now there's
going to be different parameters you can set it varies from platform to platform
I'm sure but usually they do allow you to do it by points or percent or they
might have some other options as well this is NinjaTrader 7 so I like to use
percent because if you use points then you've got to be changing around for
each market that you're trading deviation value now that's going to be
very important and there's no one right answer with that so again that's where
you want to look at the market you might want to change it for some different
markets I've got it at 3 and it's going to be measuring more major highs and
lows so the bigger you make that number you're telling the indicator I just want
to find the big highs and lows if you want to make it more granular and plan
all the little moves in the market then obviously you make that number smaller
alrighty so let's put it on the chart so that's what it looks like all right so
now you don't have to guess you have an indicator that is mathematically
calculating for you which highs and lows based on of course the numbers you chose
so there you go cool now what what does this mean so we set a bigger number and
therefore it skipped a bunch of these highs and lows and it's marking this low
as a big one that one is a big high and skipping all these other little ones and
if you made the number smaller get with them catch those fact let's do that
let's just show you what that looks like here real quick so if I bring the
indicator up again go back here change the setting change the deviation value
to oh I don't know let's say 1% so then yeah it does that ok so but now you have
to ask yourself ok how meaningful is that all those little honey's and lows
that really can be helpful in your trading so for me no not so much so
that's why you don't have to use that that's we use the bigger number okay
let's go back to the bigger number so what's the practical use of this how I
use it is more for support resistance support resistance levels I would say
some of the most important support resistance levels are major highs and
major low was that stand out to pretty much
everybody in the market who's looking so for example you know these little ones
these are not going to provide major support resistance but these big ones
are everybody see this is a euro US dollar daily chart so a lot of people
are looking at this timeframe and a lot of people are going to see that low in
that high and then that becomes a self-fulfilling prophecy and that
therefore causes people to behave in certain ways when the market approaches
those levels the way they behave as they buy off those levels they sell off of
those levels they take profit into those levels so let's just show one example
here we'll just take this first one put a horizontal line on it okay there we go
and move forward I'm going to change the scaling here just a little bit so as you
can see I actually have to change it quite a bit the market came down to it
here okay close enough I mean yeah didn't quite touch it
but remember support resistance levels are zooms so don't get carried away with
the line don't analyze every pixel of the line on your chart for support
resistance they are zones and so that's close enough for government work and
close enough for the trading of the Mouse's around the globe but notice what
it did it went down okay provided support came back up you can
see the line there breaks through it this time comes back now this is of
course the technique known as reach or support here it becomes resistance and
goes back down so that is primarily how I like to use it so and we can even look
over here and you know this is within the zone of that hi there mark that high
and it came right up to it there so it's provided so this high provided
resistance for this move up so this is one way to do it
you don't have to be sitting there and guessing you can put it on your charts
and have a something do it for you mathematically based and it's beautiful
it really provides these wonderful support resistance levels that lots of
people see and again there's no manager to that it's just that when a lot of
people see it then mass psychology kicks in and when a lot of people see
something they respond to it and therefore it does affect the market so
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