as I think this is the most important part of price action that can be seen in charts.
If you look at the two charts above, you can see the long tails on the candles on the top chart just before the break to the top side. These tails were caused by traders selling from prior high on the left side of the chart and new traders looking for a double top. When the break came, it was a 55 pip move in 5 mins, trapping traders who did not use a tight stop or worse again, no stop at all into a loosing trade. On the first time back to this break area about 9 hours later, these traders had their first chance to get out at breakeven or a small lose so these sellers became buyers and with new buy orders, causing prices to rise. These areas give a trader a higher probability trade but with no guarantees, ie big news events which can cause chaos. How long the areas last, depends on volume and market sentiment like trends but all areas get broken. Generally, the first and second time back, being strongest but even these can be broken, so caution is always needed. Hoping this post will help. Sorry about clarity of charts. I will work on this. Dave
No comments:
Post a Comment