Swing trader takes a serious challenge, solving puzzles of market movements. While most of us recognize the inconsistency and its resolution within the price chart, we are sometimes unable to use this reliable mechanics in our trading strategies. Fortunately, the repetitive elements of the graphic landscape offer a powerful context to understand and manage the vital aspects of the development trend. After repeating the dynamics of crowd behavior, price action tends to follow the classic rules, which modern scholars have applied to our physical universe.
Apparently this is not random in nature. Emotion and mathematics continuously interact, if a Fibonacci levels, which every day we see on the graphs. These relationships provide an exciting opportunity to see a clear order in the usual price movement. Convergence Divergence between these two forces in his heart helps us to understand and trade market fluctuations. For example, we can look at the graph model of a reversal or break, making it possible, but we also observe the ticker tape to measure the emotional intensity of the crowd, and to predict when it will burn down or switch the speed.
Successful traders intuitively consider this bilateral market mechanics as they master the art of speculation. Their skill level corresponds to the specific logic required to integrate functions of left and right hemispheres of the brain, focusing on the methodology of trade. Perhaps future technical analysts to quantify these profound interaction between the behavior of the herd and physical laws, and even open a new section of the technical predict prices. In the meantime, let's examine some of the primary characteristics of the physics of the market.
1. Moving object is intended to remain IN MOTION
New trends are emerging in the low volatility of the market side and characterize the direction of pulse rates. In the early stages of new trends in volatility increases. but inertia tends to slow the rate of price change. This often generates a series of tests or minimodeley clusters, while price tries to escape from the influence of the old range. Finally, the momentum overcomes inertia, and the price movement takes on a more vertical direction. This freedom of movement actually reduces volatility, as the weakening friction, and management intercepts unilateral market.
The new trend may be very difficult to stop once it reaches a speed. As with other moving objects, trends, fueled by new energy (from cash and emotions of the game). This stimulates the price to move the barriers, such as the goals set by outside forces. But no trend can not continue indefinitely. Just as in the case of his physical copies, the market force will eventually stop the trend, or completely change the direction of price movement.
Simple friction slows the ball rolling. Active trends have friction in the form of market gravity. Classic trading wisdom says that consumers need to be lifted, but the falling market under their own weight. Unfortunately, the dynamics of this well-understood mechanism is very inconsistent with the laws of nature. If this were so, all markets would fall to zero at the depletion of trading activity. In fact, the markets remain valuable, forcing suggest that there is a hidden center of gravity, which will reach the price, if all participants simultaneously disengage the side. This "centripetal force" in the quiet time gently draws the market moves to a hidden middle, but can act with startling intensity, if the price razbalansiruetsya in extreme market conditions.
Distance from the current bar to that elusive value quantifies the level of market inefficiency in each moment. It also defines most of the opportunities for swing traders. Bollinger bands are in general use tool for measuring the tension of the hidden string. But other indicators, which rely on the deviation from the mean, also perform a similar job. And do not miss the simple model of schedule. Some formations may show osnovvnuyu inefficiency simple set of bars. For example, a candle "shooting star" after a strong recovery signal to the supervisory profiteer of the invisible wall.
Craving centripetal force Combine candle shapes and edges of Bollinger Bands to reveal hidden friction, which will stop or reverse a strong market trend. Notice how Immunex pierces the upper band of the 19th of July, but rose again within its borders a high candle "shooting star".
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2. FOR EVERY ACTION THERE equal and opposite ways of counteraction
Traders at all levels must take into volnopodobnym movement on the graphs of prices. They define the basic cycles, according to which strategies are built or planned risk. In essence, these waves reflect the constant battle between the bulls and bears. Price moves jerkily, making waves, but sometimes pauses to check the previous boundaries and scattering volatility. Price bars are compressed, the volume is significantly reduced, and the trend rolls back against its original direction. But, as the market returns to a stable state, the cycle of action-reaction and restores the waves of volatility. The new momentum is re-awakened by the trend to a new level of prices or expands it back to the original.
But why markets are not fixed between two horizontal extremes if trend and protivotrend have the same effect? The answer lies in how active markets dissipate directed force. Each buyer must eventually sell and every short seller must eventually buy back the position This stimulates the layers of cycles, which after some time people call action and reaction rates. Swing traders are watching this dynamic process in relation to the trend in the graphs of different lengths for one and the same instrument. In other words, taken individually the market can draw a strong rise in the daily chart, a bear market on the hourly chart, and a lateral cluster of 5-minute, all at the same time. While this process may seem chaotic, it actually reflects the polarity of action-reaction. Such three-dimensional axis range trend also has added benefit: Harmonization with it defines many signal installation swing trader.
Put these important opportunities for convergence of a certain imbalance of the-counter through several layers of price aktivnostinosti. This logical analysis also supports the inverse relationship, which leads to uspeshnoymu swing trading. For example, while the crowd sees the possibility of buying when the price of the waves on a heavy plot, a swing trader in the same market sees growing sales force due to the entrance of a new crowd of buyers. In this form protivointuitivnoy logic made the state received the knowledge of fundamental forces of physics market.
The discrepancy in the time scale Effects of prices at 3 different time scales generates different levels of support-resistance, while Qualcomm is trying to halt a sharp fall. Daily chart paints a hammer reversal near a 6-month minimum. Hourly chart shows bearish rollback to break down, while the 5-minute chart offers a short-term traders with an excellent opportunity to profit on the rebound at about noon on the level of 50.
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3. STAR THAT BRIGHT Lights burn away faster than the TA, which emit colder and night light.
We measure the strength or weakness trend angle of its rise or fall. Common sense dictates that a more vertical price bars reflect the more powerful price moves. But as the intensity of price changes, interacts directly with the constancy of the trend? To answer this question, we can turn to the characteristics of centripetal force, previously discussed. If each market carries a real value at a time, a dynamic move should reach this price possible (for a smaller number of bars) than the slow drift in the same direction. In other words, the vertical bars trend must end its movement is much more than bars slower trend.
Unfortunately, these angles are relative. Low price distorts movement on arithmetic charts. Soaring distorts movement on the logarithmic plots. So, before we can objectively assess how brightly lit our market star, we must adopt a common system for the consideration of price changes. Unfortunately, this is harder than it seems at first glance. The diversity of types of graphs and methods of forcing us to apply the measure, which often depend on software or services that we use. The most fruitful analysis examines the entire database, so that visual comparison of the intensity trend was the starting point. Then we can use our eyes and simple standard deviation, to investigate the duration and stability of price changes.
Apply this graphical method to position the parabola, ripe for a strong reversal. In the opposite view swing trader, vertical price movement is noted as a prelude to counteract the same intensity in the opposite direction. As well as supernova signals the inevitable decline of an aging star, the parabola will inform the market that it fuels the trend on the wane, and soon will begin a strong reaction. First, set a fixed percentage of the logarithmic plot between 15% and 20%. Then scan the entire database to find securities with the steep angles of short-term price changes. Select the markets with the highest price bars and visible trends over 45 degrees. Now reinstall the logarithmic scale in automatic for these filtered shares so that the recent price action fill the screen. Apply the standard Bollinger Bands, and look for bars that are clearly drawn out of the upper or lower band. Find your level of input by going to a finer time scale and recognized there reversal pattern, which corresponds to the characteristics of the wider landscape.
Trend, which is moving at a very low angle, can also predict the decline of its own, but for other reasons. This reversal follows the mechanics of models increase or decrease of the wedge, visible at many price charts. And traders and investors want sharpness in their lives. They buy or sell, so you can see the price jumps to new levels. Minor trends will never satisfy this need. For example, participants watched as the price uptrend, rising to new highs again and again, but never gained enough momentum to speed up recovery. Shareholders will eventually lose interest in this type of price behavior and leave the ship in search of a more exciting vehicle for trade. Market loses patronage and, eventually, collapsing.
Detection An experienced eye detects the most dynamic parabolic trends and then executes strategies for the natural levels of reversal. Let's start with a fixed set of logarithmic graph, such as 15% on the figure of A. Scan your database and select the most vertical price movement up or down. Go back to a more convenient scale graph (figure B) and apply three-dimensional graphics techniques to identify low-risk entry.
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4. ENERGY SOURCES leave traces FORM exhaust or emission
This classic principle of physics requires a little translation for the financial markets. Real opportunities for trade like any, because they emit characteristic impending directional price movement. This is manifested in the participation of the crowd, the behavior of prices in certain boundaries, creating recurring pricing models and the convergence of technical indicators. Correctly interpret these diverse market footprints and get consistent profits as a swing trader.
Engineers design the mechanisms for investigation of exhaust and measure its internal characteristics. For example, a sleeve attached to the exhaust pipe, said mechanics of the current state of the internal car. Swing traders build such measuring tools to assess the state of internal market activity. But also, as an engineer designing the tools to explore a very narrow range of physical information, swing traders should limit the data obtained by certain market characteristics and filter out a lot of noise levels that could harm profits.
Models of schedule with true predictive power emit signs that market, engineers can detect and measure. The emission capacity of looks like the convergence of diverse elements in the narrow ranges of price and time. Every independent signal that appears in this small space, increases the likelihood that trade will lead to setting a decent result. Heat on these important levels and require a swing trader quick landing. Reading the landscape graph Good predictable schedules showing yasnoorganizovannye model on the expected price levels. AMCC showed island reversal (1), which completes elliotovsky clear 5-wave (2) rise. Price has fallen under the intermediate maximum of 48 and 62% retracement level (3) of the preceding course. Under the level of recovery to form a small cluster (4). Lower Bollinger Bands (5) extended downward, opening the door to a drop in prices. All signs point to an impending collapse (6), which rolled away at the price of 100% or more of the preceding trend. Swing traders will measure these symptoms, sell short on congestion, and wait for the expected result.
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CONCLUSION
Modern traders have great difficulty with the organization of the market movement to a managed executable system. Too often they ignore important data graphs, because they do not fit into a convenient system of horizontal boundaries of prices. This obsession with artless models reveals trader's inability to grasp the mechanics of a more powerful prediction rates. Unfortunately, the concentration on the performance of a narrow, single strategy is like trying to play a tune on one note.
Broaden your horizons of knowledge of trading, using the physics of the market. Every aspect increases your ability to profit from the subtle nuances of behavior of the crowd. Keep in mind that these natural forces to rely on mechanics, which ignore many of the speculators. This allows you to get an edge on the path to successful trading. You may need the whole of life, to explore these complex interactions between the development rates and emotions of the crowd. But each part of this attractive puzzle adds new levels of excellence to impact trading.
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