Time variables as used in the price action strategy for forex trading

If you are making use of the order flow concept of price action for making money on the forex, you should take a look at one of the key features that is used to predict price fluctuations and trends. Along with the impulsive and corrective moves, candle counting, and pips gained vs pips lost elements when using a chart, you can also use time variables to improve your chances of success. The Elliot Wave Method and pattern recognition go hand in hand and using this wave method we can see how variables are brought into trading. There are, however a number of questions that are left unanswered. There are two methods of using time variables as outlined below: 

 The Time Lapse Display for Patterns 

 When looking at your chart, you will notice the clear Head and Shoulders patterns, also called HIS, the triangles and wedges, and the consolidations. These are important and when examined and analyzed can provide insight into how the market should play itself out, according to a time lapse formula. If the distance between the Head and Shoulders of a pattern is large, let’s say 2900 pips, as the GBP/JPY was between 2006 and 2008, then technicians watch this very carefully and it was indicative of a large break. When the time display pattern was analyzed, something very interesting was found. There was an unclear difference between the time displayed for the left shoulder to form compared to the right shoulder on the chart. The left shoulder from rise to fall took about 4 months and 3 days each time, while the right shoulder was rising and falling in only 3 months. The break of the neckline did eventually occur at 4 months and 2.3 day, showing you that the consistent patterns within a time display are accurate. 

 The Length of Consolidation 

 Another important time variable to note is the length of time it takes for a consolidation to form. If the consolidation is large, the break out will be more powerful and legitimate, therefore making you a lot more money. Breakouts are largely unknown to traders and still a mystery to even the more advanced traders. By measuring the length of consolidation, increased insight is given to this trading problem. When looking at various trading books you might notice a pair consolidation such as with the EUR/USD pair in 2008. During this consolidation the pair was in a 36 pip range for over 18 hours, through 3 sets of different order book sessions, namely towards the end of the London session, through the Asian session (which is not surprising), and strangely, through the first four hours of the European session. This means that there were no significant buyers or sellers during this time and a breakout was imminent. This breakout did occur with a 160 pip move in 4 hours signifying the largest climb of the day. This shows you how identifying long consolidation periods can be a precursor to a large and powerful breakout, thus allowing you to make more money. 

 By looking at the price action in more detail, we can soon begin to identify changes and significant patterns that will indicate when to buy and when to sell. Instead of relying largely on the results that price action order flow gives you, you should rather determine your own methods for understanding and reading the results given. Time variables are very useful in this regard and help you to identify and interpret key trends in certain market pairs. This is one of the most important technical indicators of breakouts, ups and downs, and will also help you to determine your gains or losses each day. Using time variables along with the other 3 forex price action tools of pips gained vs. pips lost, impulsive vs. corrective moves, and counting candles which we have discussed yesterday, you can take a look at it again here. It will help you to achieve much more money in a smaller amount of time with short trading as well as long trading.