Forex Value Areas and eSignal

They say a picture is worth a thousand words. Good charts are worth a lot more than that because they can be used to show us exactly what levels a particular market is using for support and resistance. I’ve always been a big believer in Mark Likos’ futures and Forex Levels, which is why I added them to the Tradesight services. Using eSignal Formula Script (EFS), our futures and Forex subscribers can now receive these levels each day automatically in their eSignal charts under the appropriate futures and Forex symbols.

The accompanying chart shows a classic example of combing the Likos Value Areas, now available in the Forex markets as an industry first, with a Forex-adjusted pivot series. The time zone here is Pacific Time.

eSignal is one of the few platforms that shows volume in the Forex pairs. Although this isn’t a total volume number, you can see the times of day that activity typically picks up in the Forex world. On this chart of the EURUSD, you can see that volume started just before midnight Pacific Time.

So what are we looking at? The dark blue lines are our pivot series for the session, with the pivot line being the critical point for this example. The light blue lines are the Value Area High and Value Area Low, the range of the current day’s Value Area.

For those unfamiliar with the Value Area, it represents a key slice of the prior day’s trading range. Classical use of the Value Area is to begin the trading session outside of the range and then go short or long as we enter the Value Area. The goal is to see the underlying Forex pair cross the Value Area to the other side.

In this particular case, we had the added benefit of the pivot being right under the Value Area High. The pivot then served as support 6 times during the session, at points A, B, C, D, E and F. Once that level broke at G, it was a clear run to the other side of the Value Area at the VAL for a nice gain of almost 40 pips.

Again, eSignal’s scripting language allows us to see these levels in advance so that we know why the market is using the levels it does for support and resistance. This makes it easier to determine critical entry and exit points that are the key to success.

Mercer loves trading and has done so professionally for more than 15 years -- 6 on a NASDAQ trading desk. Mercer is an analyst in the Tradesight Chat room 5 days a week and provides in-home teaching and mentoring across the country. He presents seminars (in person and on line) and gives speeches and lectures.