Levelmodule

Levelmodule
Direction and Timing

For an outsider there doesn’t seem to be anything simpler than trading with financial instruments:

Buy, wait until the price rises and then sell at a higher price. Sell, wait until the price falls and then buy it back at a lower price.

What seems at first glance to be so easy quickly develops to apparently unsolvable problems for traders.

Prices rise and fall all the time but:
How can one recognize their direction and the right time to buy and sell?

 

This second point is what makes trading into such an incomparable challenge. Because it can be tough.

It’s no wonder that some traders dream of finding a clear and sure orientation in the matter. However, the problems are not quite as easy to solve in real life as they are in dreams. The problem surely cannot be solved with the combination of a handful of technical indicators set in a chart.

So TradeMaster has developed Level Modules with multi-faceted solutions.

 
 
The Level Modules
Resistance and Support Module
Fibonacci-Retracements Module
Pivot Point Module
Clear price markers and complex values
with limited usage

Important moments for trading are high points and low points in the prices, that much is clear. Word is also out that these markers can be derived with a certain degree of certainty from the monthly and daily price developments. However, how can one be sure that a high or a low will hold or that the security will break out?

The TradeMaster module levels for resistance and support provide the trader with a powerful tool which not only examines the price levels but also illustrates the likelihood that the price level will hold or the price will break out of a level.

It is very important for the active trader to first define what price levels are interesting for him. But even the selection of specific price markers for resistance and support for the previous price change is often associated with high levels of uncertainty in practice.

When it comes to price activity, a monthly high is not always more important than a daily high or to name a different example, a support derived from an intraday sideways movement is not always the most important price marker for the next minutes or hours.

Only the combination of all the important price levels from various time periods results in a total pattern which is then sensibly weighted and where individual price levels can be derived, and used to mark a sensitive point for future price developments with a high level of probability.

  Such a task is almost impossible for the individual trader to master. When you are not simply active on one market but active on several different markets and also want to be able to react immediately to developments, it is impossible to keep an overview of these important points.

The decisive next step:

Risk estimates with TradeMaster

Even a complete overview of all important resistance and support levels will not help you all that much. Since the knowledge about the individual prices is not enough to participate as a price can drop and break through every level.

To sensibly calculate risk, it is absolutely necessary to recognize whether or not the resistance or support will hold or be broken through. The resistance/support module with levels has been integrated as an instrument into TradeMaster that helps you recognize the important price markers and which also indicates the probability that relevant resistance and support levels will be broken through or held. An essential tool for precise and risk aware trading.


 
 

Resistance and Support

As in the other modules, you can select the desired currency pair in the upper left menu and the time period .

To present the complex connections between price levels as well as resistance and support, a new and tangible graphic form was developed to be as intuitive as possible. The center has a red horizontal line , which shows the current price.

In the center of the window the current price is displayed numerically. The two lines above the current price indicate the two closest resistance levels.

The two lines above the current price indicate the two closest support levels. The current price is displayed numerically in the middle of the module here as well. Only the resistance and support closest to the current price are displayed, however, dependent of the time period. Thus for example, the “long-term” setting for the next resistance level for the pip interval to the current price might be far larger than the “short-term” setting.

 

An area in the left is enhanced with colors to display the pip intervals for each resistance and support level at the current price. Resistance in the area is signified with blue and support with red.

In the right half of the window individual price levels for resistance or support are shown as numbers in white circles .

The numbers are used to set alarms. If you want to set an alarm for the next support for example, select the number 2 in the alarm settings.

To the right of the numbers for the alarm settings, you can see two percentage figures for every resistance and support level . These numbers describe the probability of a price breakout or a bounce back from the current price level.

The colors of the arrows are also used to illustrate the likelihood of a breakout from each support level or resistance level or if the price is about to bounce back.


Here are a few examples


   
Example 1:
Resistance, high likelihood of price breakout

Display: Example 1
  Example 2:
Resistance, high likelihood for price rebound

Display: Example 2
     
 
The module, of course, also works with real-time prices. Depending on the selection of time periods (very short term, short term, medium term, or long term), the relevant resistance and support for the time period shall be calculated and the two prices closest to the current price will be displayed.

Another detail supports you in risk aware trading: Should there be a breakout from the resistance or the support price levels, a safety mechanism will kick in. The software will check whether there has been an actual breakout from the price marker or whether it is only testing it and the price will return to the previous level.

  Should the safety mechanism determine that a breakout has actually taken place, the support (or resistance) broken through will no longer be displayed but the next price level will then be displayed in the presentation. It means that two resistance levels and two support levels will always be displayed even if the price has broken through one of the levels.
 
 

Fibonacci-Retracements

Leonardo Fibonacci is considered one of the greatest mathematicians in Medieval Europe. He is known in particular for the series of numbers he developed to describe growth patterns in the natural world. The calculation of the price level is based on the calculation of prices that years of trading experience have shown to be highly likely as resistance or support for further price trends. The valuations are calculated using the difference between the absolute high and the absolute low for a market within a certain period of time.

Example:
Should the spread between the absolute high and low for the selected period be 100 pips, then the ratio figures from the Fibonacci series are: 0.382, 0.5 and 0.618, the Fibonacci Retracements are thus 38.2%, 50% and 61.8% and can be included accordingly in the chart or set as notable price markers. The sample chart illustrates the EUR-USD exchange rate for a day. The Fibonacci Retracements have been included for the spread between the absolute high (1.6037) and the absolute low (1.2328).

The retracement levels are: 38,2%
50,0%
61,8%
(1,3744)
(1,4182)
(1,4620)

Regardless of whether the market is in an upward or downward trend, or is tending sideways, the maximum spread for the time period shall be measured and then used to define the price markers in the lines.

 

The module is structured like the module for resistance and support. The current price is always in the middle (red horizontal line). Above and below are the real time calculations for the Fiboanacci price markers.

In contrast to the Resistance and Support Module, none of the lines will disappear, if there is price breakout, the values are simply re-calculated and presented in the appropriate lines.

Should a Fibonacci line be above the current price, then it shall be labeled as "Resistance”.

Should a Fibonacci line be below the current price, then it shall be labeled as "Support”.

The screen shall include both of the Fibonacci lines closest to the current price . Our module can thus display the relevant values for resistance and support . at any price level. An additional feature in TradeMaster is that you are provided with a clear percentage probability for a breakout or a rebound from the displayed price.

Our TradeMaster thus provides you with another proven orientation marker for your trading success. As usual, you can select various time periods for the module and use the alarm function to adapt the instrument to your personal needs and habits.

 
 

Pivot points

Pivot, from the French, means turning point. Exchange traders refer to the pivot point as mathematically derived price level from the last completed bar chart, i.e. a pre-determined trading interval, which marks the probable resistance and support for the current bar chart. The calculation for these points is made using the high, low and close values from the previous trading day, where the median has been calculated and corrected for extremes. Two resistance and support levels can be determined for each price bar chart.

This is the basis for the presentation method
in our pivot module:

At the very top:
Beneath:
Beneath:
Beneath:
At the very bottom:
Resistance 2
Resistance 1
Pivot point
Support 1
Support 2


The module is structured like the Resistance and Support Module. The current price is always in the middle (red horizontal line).

 

Depending on whether the market rises or falls, the lines for the pivot point, resistance 1 and 2 as well as support 1 and 2 shall be above or below the current price.

In contrast to the Resistance and Support Module, none of the five lines disappears in a price break out. There will always be a maximum of two lines above the current price and a maximum of two lines below the current price.

The lines for the pivot point shall always be labeled as such. Should a pivot line be above the current price, then it shall be labeled as “Resistance”.

Should a pivot line be below the current price, then it shall be labeled as “Support”.

This module also contains the function to select the time period as well as the alarm function with which you can adjust the display as you see fit. As in the Support and Resistance Module and in the Fibonacci Modules, TradeMaster will also display the likelihood in percent for price breakouts or rebounds for the individual price levels in real-time.

     

For more precise understanding

The pivot point is a median value from the high, low and close from the previous day. The first support is calculated by doubling the median value and subtracting the value of the last high.

The second support is calculated using the difference between the pivot point and the difference (high minus low) of the previous trading day.

The calculation of the resistance is done by doubling the value of the pivot point and subtracting the value of the last low. The second resistance is the product of the sum of the pivot point and the difference (high minus low) from the last trading day.

 

Interpretation

Should the point be crossed from below, it is considered a buy signal and the price now has room to run until the next resistance. Should this marker also be exceeded, then there is a high likelihood that the price will climb to the second resistance level. A sell signal is created when the pivot point is pierced from above to below.

Then the first and second support levels shall be considered the target price. As with the Fibonacci markers, this knowledge is based on the interpretation of the pivot point from years of experience and the fact that the marker is used by numerous traders as a signal.

 
All functions in detail
More: Functions
Signals
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