Naked trading is a somewhat popular idea; this style of trading has its focus set on the current market price with no indicators. Naked trading is mostly complemented with the support and resistance levels of price action. What it barely focuses on is time. Time is an important aspect of trading which is overlooked, and this is where the period separator comes in.
This lesson is a continuation of the topic on pullbacks, but some facts have to be established before we get to the pivot levels.
To the rightmost of a Forex chart lies the price and to the bottom lies the time (or date if you may). As Forex market traders, since we are dealing with the buying and selling of currencies, price is our main concern whilst leaving little to no attention on time.
The period separator is a simple property in the Meta Trader platform that simplifies the way time is beheld with respect to trading. As the name suggests this property divides the charts with vertical dotted lines into specified periods as you change timeframes.
If you ever tried to find a week on a 4-hour timeframe, it would take a careful look at the bottom of the chart to point it out. The period separator is there to take that stress away.
This property is not a default setting on the Meta Trader platform so in order to lay it on your chart, you would have to;
- Right click on the chart and scroll down and click on “Properties” Or press F8 on your keyboard to display the properties.
- Click on the common pane.
- Tick “show period separators in common” and voila!
Rightly so, the chart would be separated into periods after following the simple steps above.
- In the 1-hour timeframe, it divides the chart into days.
- The 4-hour, it divides it into weeks.
- In the daily, it divides it into months.
- On the weekly and monthly timeframes, it divides it into years.
NB: Anything below the 1-hour timeframe is still a daily division.
Why the period separator is so important?
The main benefit of this property is to simplify the periods for the eye but that’s not all there is to it. Support and resistance is a widely known concept but plotting it for beginners can be a headache and this property is there to aid in doing so easily.
Every turning point (swing highs and swing lows) on the chart is viewed as a possible horizontal support or resistance level. On a naked chart this is done randomly. On a chart with accurate divisions of the time, it is done with confirmation.
This is so because, support and resistance levels are established according to time. The highest and lowest price points within a period defines these levels. When looking for support and resistance within specified periods; the highest price point within a period is resistance and the lowest price point within a period is support. Look to those first when plotting your levels.
Establishing horizontal support and resistance levels with the period separator.
- Yearly highs and lows (W & M)
- Monthly highs and lows (D)
- Weekly highs and lows (4H)
- Daily highs and lows (1H)
Trade ideas with respect to breakouts, retests and reversals can be based on these more precise levels.
That is not all there is to it really! The midpoint of each of the above periods also bring about a very important level in trading that is “hidden”. The pivot level of a specified period. To “unhide” this level, the Fibonacci tool comes into focus.
Pivot level trading.
The midpoint of a specified period is the 50% Fibonacci level. To get to the midpoint of any period, hold the fib tool on the lowest price of the period and drag to the highest price of that period; the 50% level is the pivot. Alternatively, it could be from the highest price to the lowest price.
It doesn’t really matter since the level in focus is the 50% which is not completely sensitive to trend direction. It is unlike the original use of the fib tool which implements all the other Fibonacci levels for timing retracements.
Talking about retracements, that is the whole point of the pivot level with respect to this lesson. Within specified periods, price would retrace to the pivot level before continuing its initial move. I talk about how to trade retracements or pullbacks extensively over here.
Worthy to note.
When timing retracements on the pivot level to trade, look towards the most previous period. In the NZDUSD chart above, we can see that January 2020 hadn’t completely formed so I couldn’t use that to illustrate.
Price of NZDUSD attempted holding on the monthly pivot but the bulls failed. Lets us look at some correct examples below.
You’ve hopefully learnt that the period separator is not just a random aspect of your trading platform. When used judiciously, traders especially beginners wouldn’t have to plot support and resistance blindly again. Also, traders would know about how crucial the 50% fib level is; and benefit from it.
Your questions and additional comments in support or against this lesson are welcome in the comment box below.