Missed out on some nice stuff but it's worth posting. The R:R on this would have been a little large for me but the dynamics here are superb.
Managing risk is profitable
- Joined Mar 2009 | Status: Member | 5,030 Posts
I'm hungry for a trade and this one looks appetizing! Please make no mistake. These are not trade calls and I am not recommending that you trade this. If you do you'll likely lose. LOL! 
Managing risk is profitable
- Joined Mar 2009 | Status: Member | 5,030 Posts
I'm hungry for a trade and this one looks appetizing! Please make no mistake. These are not trade calls and I am not recommending that you trade this. If you do you'll likely lose. LOL!{image}
Managing risk is profitable
- Joined Mar 2009 | Status: Member | 5,030 Posts
What drives the market? Supply and Demand.
When price falls away from a level and creates the proverbial supply zone many believe that when price returns to that level that price should fall. Sometimes it does and sometimes it doesn't.
What traders should perhaps begin focusing on is not when price gets to the level but how it is getting there. Let me explain.
As price falls creating the level traders are in profit. Most prudent traders protect their stops. A protective stop to protect shorts is nothing more than a buy order. Thes ebuy orders accumulate on the way down. Eventually more buy orders will accumulate. Some will be the protective stops I mentioned and some will be new buyers wanting the market to rise and some will be traders exiting with their profit. As you can imagine the combination of orders at some point will cause the market to reverse.
As the market reverses the protective stop orders begin getting taken out driving the market up. At some points along the way new sellers may defend a certain level and a shelf is created as shown. Once these new sellers get taken out price continues to rise to the original supply level. At the original supply level we don't know which way price will go. If it descends as it did here it means sellers are defending the level. They may be sellers that have remained in the market and perhaps add new orders or their may be new sellers who perceive this is still a good level to sell.
Others believe that their were "unfilled" orders at this level that causes the market to fall. I reject this notion in favor of the explanation above. It's not "unfilled" orders but rather new orders. If price however blows through the level then it just means protective stops at that level are getting filled and their are just more buyers at the level than seller.
Hopefully the chart below also explains some of what I said above. Your comments are welcome.
When price falls away from a level and creates the proverbial supply zone many believe that when price returns to that level that price should fall. Sometimes it does and sometimes it doesn't.
What traders should perhaps begin focusing on is not when price gets to the level but how it is getting there. Let me explain.
As price falls creating the level traders are in profit. Most prudent traders protect their stops. A protective stop to protect shorts is nothing more than a buy order. Thes ebuy orders accumulate on the way down. Eventually more buy orders will accumulate. Some will be the protective stops I mentioned and some will be new buyers wanting the market to rise and some will be traders exiting with their profit. As you can imagine the combination of orders at some point will cause the market to reverse.
As the market reverses the protective stop orders begin getting taken out driving the market up. At some points along the way new sellers may defend a certain level and a shelf is created as shown. Once these new sellers get taken out price continues to rise to the original supply level. At the original supply level we don't know which way price will go. If it descends as it did here it means sellers are defending the level. They may be sellers that have remained in the market and perhaps add new orders or their may be new sellers who perceive this is still a good level to sell.
Others believe that their were "unfilled" orders at this level that causes the market to fall. I reject this notion in favor of the explanation above. It's not "unfilled" orders but rather new orders. If price however blows through the level then it just means protective stops at that level are getting filled and their are just more buyers at the level than seller.
Hopefully the chart below also explains some of what I said above. Your comments are welcome.
Managing risk is profitable
