BumaSoft's Market Model - Free information on my core trading method

This thread is going to be about my understanding of how the markets work. It will be a discussion of principles that work on all markets and all timeframes, based on the application of ideas found in physics and buddhist philosophy. I know that might seem strange at first, but the same principles that apply to our inner and outer reality are the same ones that drive the markets. You don't have to believe anything I say here. Just filter everything through your own reason and come up with the conclusions. Also, I will never hold that the way I trade is the only way to trade successfuly. There are countless ways of making profits and countless ways of losing money. You just have to pick the ones that fit your personality and taste

I am hoping there will be a little interaction here. Initially, I wanted to open this thread in the non-commercial area, but, apparently, I'm not allowed to, because I'm a commercial member. Everything in this thread is free stuff, I am not advertising anything. Feel free to ask questions any time during the discussion. After we finish describing the model and I start posting some live trade examples, I am expecting at least a couple of traders posting their charts here. So, let's cut to the chase!

Why does price move up, down or sideways?

What you see on your charts is simply a picture of all the FILLED orders. The market is nothing else but the dynamic of buy versus sell orders, the flow of supply and demand. What is supply and demand?

Supply describes the total amount of a specific good or service that is available to consumers.
Demand describes a consumer’s desire and willingness to pay a price for a specific good or service.

At a specific price value, if there is more supply than demand, the price of the good or service will decline, until it meets an area of demand, where people are willing to buy.

At a specific price value, if there is more demand than supply, the price of the good or service will rise, until it meets an area of supply, where there are more willing sellers.

When price moves sideways or consolidates, supply and demand are in equilibrium, i.e. for each buyer, there is a seller willing to provide the good/service. Once there's no more supply in the consolidation area, price will shoot up. Or if demand runs dry first, price will break to the downside.

Example:

Now, how does that help us? FILLED ORDERS are what I call the causal factor. In Buddhism, as in modern science, everything is driven by causality, i.e. cause and effect. For every cause, there is an effect, for every effect, there is a cause. The effect itself is a cause and the cause is an effect. If it sounds confusing, it isn't. Let's say I hit a ball with my foot. The action of hitting is the cause that makes the ball move. The movement is the effect. But the action of hitting isn't just a cause. It is also an effect of my intention of hitting the ball. And the movement of the ball isn't just an effect. It also becomes a cause (of breaking someone's window, for instance). Similarly, on a price chart, the entire price history represents one of the main CAUSES of present and future market activity (i.e. UNFILLED ORDERS). Proper determination of CAUSE allows us to predict the magnitude of the EFFECT. We'll get deeper into this on the next posts. I hope I'm making at least some sense. If not, take me out of my misery and say so

The two energies

There are two factors, forces or energies (whatever you want to call them) driving prices in any given market. Let's talk about them, one by one:

A. Residual energy

If you play with a piece of iron and a few magnets frequently, eventually that piece of iron will store up magnetic energy. When you place it near other metals, it will act as a magnet. This is what I call residual energy (past actions leaving present tendencies).

In Buddhism also, there are two root factors driving our behaviour: habitual tendencies and consciousness. They are interdependent and condition each other. Every conscious action that you execute is influenced by your HABITS (the unconscious mind). When repeated, conscious actions in turn influence your HABITS and can replace old ones with new ones or create fresh habits. The residual energy of the market is similar to the habitual tendencies that influence us.

In the market, residual energy is simply the imprint of past imbalances between supply and demand. It is the aggregation of all FILLED ORDERS in the past, which make up your price chart. This whole price history will influence and affect the present and future trading activity. Let's look at this idea on a price chart:

B. Impulse energy

If we knew absolutely all the present causes and effects existing in the world, we could predict the future state of the world with 100% accuracy, simply because everything is an effect of already existing causes and conditions. Since we cannot know all the variables (we're not all-knowing), there will be unforseen/unexpected events happening, which we can conventionally call IMPULSE ENERGY. This refers to UNFILLED ORDERS and they are the force that keeps the markets moving. Without these, all supply and demand would dry out and the markets would die. These unfilled orders are influenced by the filled orders (residual energy) greatly, just like we are influenced by our habits and find it hard to fight them. However, these fresh orders gradually absorb those residual energies, until they are wiped out and the scene is changed, just as we are constantly changed by new events occuring in our lives, which alter our patterns of habit. Let's look at this example:

It is the same example as before, but showing what happened just recently. The first time price met with that residual buying energy, it bounced up for almost 40 pips on this 15 minute chart. Eventually, some fresh supply (impulse energy) entered the market, making price revisit that residual energy. On the first visit, most of that energy was absorbed, so most of the buying pressure there was gone. That made it easy for price to break below that price area on the second visit.

So, what we see on the charts is a continuous "fight" between the forces of habit and freshness, a struggle between past and present. Isn't that what your own life is?

Anyway, this might be a little hard to understand at first, but take your time to reflect on it...

Order flow 101

Let's look at the behaviour of traders and how the order flow shapes the markets.

Let's say the iPhone 5 is perceived as being expensive above the price of 500$ and cheap below 300$. The current price is 450$. The people perceiving the price of 500$ to be too much and the price of 300$ to be very good, will be hesitant to buy the iPhone at this time and demand will start to decrease drastically above the 450$ mark. This will drive prices lower. Once price is say at 350$, more and more of these people will start buying the iPhone, afraid of missing the opportunity. If price eventually reaches 300$, there will be a buying frenzy. The competition to buy will be huge, because everyone is viewing the product as CHEAP and VALUABLE. This will absorb the supply and drive the price back up quickly, unless there's enough supply there to provide the iPhone to all willing buyers. In that case, after all of them buy at or close to 300$, price will collapse until it finds new buyers.

This is just an imagined scenario of what actually happens in the real world, with normal products we're buying.

(what if we traded iPhone 5 instead of EURUSD?)

The key elements here are these:

1. There is a certain supply and demand curve in any market. Meaning, relative to current price, you will be able to find a zone above price where the product is viewed as EXPENSIVE (supply) and a zone below price where the product is viewed as CHEAP (demand). The closer price gets to that demand zone (low on the curve), the more buying pressure is increasing (there is competition to buy). The closer price gets to the supply zone (high on the curve), the more selling pressure is increasing (there is competition to sell). This is one of the reason why 50% fibs work so well. In the middle of the supply and demand curve, price is seen as neither EXPENSIVE, nor CHEAP, thus there will more than often be a temporary balance between supply and demand and therefore, a consolidation. Depending on the trend of the market and the strength of supply versus demand, price will break to one direction or the other (up or down), to test the top or bottom of the curve.

2. Human psychology plays a huge role in the markets, which are actually a reflection of mass/herd psychology. Learn how the herd thinks and you will be able to profit from that knowledge.

3. We should be interested in buying cheap and selling expensive, so we should BUY as price declines and SELL as price rallies (in spite of all the textbooks saying not to buy a falling knife)! This is the opposite to how most traders behave, but if you were trading iPhones instead of EURUSD, you would definately understand this simple thing. You wouldn't buy the iPhone after a rise in price, would you? You always look for cheap prices when buying goods and always try to sell as expensive as possible when you sell your goods. If you think the financial markets are any different, consider the possibility that you might have been brainwashed

4. In the electronic markets, we can use limit and stop orders, so if a group of traders wants to buy EURUSD in a certain area that spans say 20 pips, some of them will place a pending limit order at a price level inside that area. Not all of these limit orders will be triggered, because price might not reach all of them before it bounces up. Some of these orders will remain there, creating the residual energy we talked about. On the next visit of price in that area, it will trigger the orders and thus find demand. If there isn't enough supply to absorb all that demand, price will bounce again.

Slowly read and digest all this information. There is much more to cover and then we can go on to discuss charts.

Cheers!

A simple shift in perspective

If you take a long position, you're a bull. If you take a short position, you're a bear. That's common knowledge for traders. And it's kinda' wrong! Let me explain.

If Trader A is LONG the EURUSD, what is he now looking for? Does he have an objective or is he just fooling around? Why is he LONG in the first place? The answer is that he entered his position in order to exit and take his profits somewhere higher. Whenever he exits, that means he SELLS. Your take profit order for a BUY position is a SELL order. This makes Trader A an active bear, because he is constantly hunting for a place to SELL. Remember this: a bull in an open position is an active bear; a bear in an open position is an active bull!

So, as price rallies up, always know that there were buyers all the way from the bottom up to current price and all those buyers that are still in the position are active bears. They want to take profits. The higher price rallies, the bearish it becomes. Hence, it's always a bad idea to chase price and buy high. I am not saying you should fight the trend. What I am saying is that if you want to join an uptrend, you first wait for a retracement/correction/decline in price and you buy into the trend as price declines. This will ensure that the odds are on your side, not against you.

Impermanence is the primary principle of Buddhism. Everything changes. This also holds true in the markets. Just because price is rallying, do not assume that it will rally forever. Same thing if it's moving sideways or dropping. While price is moving sideways, you should be planning your longs and/or shorts. While price is moving up, you should plan your SHORT. While price is dropping, you should plan your LONG. Markets continually shift between moves up, down and sideways. We are wired to EXPECT things to be permanent. You need to rewire your brain to EXPECT CHANGE and be prepared for it.

Residual energy forecast

Let's dive deeper into the concept of residual energy with an EURUSD chart example:

Attachment

In the chart above, I am looking at the latest rally, where I marked the areas of consolidation which will leave behind residual energy that will influence future prices. Now, I won't go into the details of identifying the areas and measuring the energy in them yet (I will do so soon), for now just think about it as small consolidation areas, which show a balance between supply and demand and are the origin of a decent break outside of them. Now, let's assume that we are expecting price to drop from here (it doesn't really matter if it does or not, we are just prepared in case it will drop). We want to know where it might stall or bounce on the way down. If no fresh energy would enter the market, then it would all be a play of residual energy and we can just mirror the rally in the future and know what will happen. Price would react at the exact same areas and the magnitude of the bounces would be close to the magnitude of the first rally out of a past consolidation area (until it consolidates again). We would almost have a mirror of what happened in the past. I say "almost", because the current moves lack the fresh energy that the past moves had (remember: here, we are just pretending that the market is only moving based on residual energy, for the sake of exercise):

Attachment

In the screenshot, I also marked with a green up arrow our highest probability LONG in this area. I will explain later why this and not the other consolidation areas had the most residual energy attached to it. Now, let's see what actually happened in the real market:

Attachment

Due to fresh energy entering the market, even though price DOES react in the same places as in our pure residual energy model, it isn't quite the same, especially time-wise. Our highest probability LONG, however, would still travel nicely from entry to target. As you might suspect, this isn't always the case, for if it was, we'd have ourselves a Holy Grail right here! The reason why it doesn't happen based on our pretended residual energy model is because of fresh energy. What we will learn to do here is to monitor the flow of fresh energy as close as possible to the time when our preplanned orders get triggered. By doing this, we can assess if our pending order is still high probability or not. This also will not ensure 100% win rate, because we don't have any control over what happens after the point of no return (after an order is triggered). Our job is to make sure the probabilities are on our side upto the moment when we enter trades, then wait for our plan to unfold. Long time before our trade is entered, we will have a detailed plan, describing where we should exit for a loss and what our targets are.

Sorry if it's too overwhelming so far. If you want me to clarify anything, just let me know.

PS: Don't jump on me for using historical charts. We will get into live charts very soon. Right now, we are just going through the concepts and logic of the model.

Disecting residual energy on a price chart

Now it's time for the dirty business!

The first step to making use of the principles we just discussed is to figure out how to spot residual energy on a price chart. Here are a few ideas:

1. High residual energy must originate from price zones in the past that generated energic/powerful/strong moves. The greater the energy, the greater the movement, right? That's also true in physics. The greater force/energy you apply when hitting a ball with your foot, the greater the movement of the ball will be. If you use little energy, there will be little movement. In the nature of the cause lies the nature of the effect.

2. Kynetic energy (actual energy, energy of movement) is an actualization of potential energy (unmanifest energy). In other words, strong moves up or down in any market always originate from areas of seeming equilibrium, i.e. areas of consolidation (price steadily moving up and down in a tight sideways channel).

Now, it's pretty easy to identify such areas on a price chart. In the chart below, I marked all residual energy areas. In the next posts, we will look into measuring the actual amount of energy inside any given area, so that we only make use of the strongest. We will also look into proper identification of the CORE energy area inside a consolidation.

How to identify core residual energy (potential supply/demand) on a price chart

Sometimes, these consolidation areas will be too wide, making the risk too big for us if we entered a trade while placing our stop on the other side of the area. This being the case, we have to see if there is a way to tighten that zone and find the "meat" of it, the core, the part with the most residual energy stored into it.

Let's look at a chart:

Here, we've identified an area of residual demand energy. It is merely an area of 9 consolidating candles, out of which price then breaks to the upside. It's 35 pips wide, so if we enter LONG on the first test of the area, we would enter a limit order at the top of the area with a stop loss a couple pips below it. Depending on the broker spread, we would probably risk 40 pips on this one. Our first target will be the next decent consolidation area that manifested on the way up after the initial imbalance move. It's 45 pips, so our risk:reward is just a tad over 1:1, which isn't quite good. We like to enter trades with at least 1:2 risk/reward. The final target would be the next consolidation, which is way up at +100 pips in profit. Is there a way to decrease our risk on such trades and increase rewards? Yes, we can tighten the area so as to match MOST of the trading activity inside it. Here is the result:

What we have done here is modified the upper line. We ALWAYS play around with the line that is closest to price (this is very important). The line most distant from price is used as a stop loss. If we alter that, we will get stopped too often! The extremity of the area which represents our entry point can be altered for the purpose of tightening risk per trade and maximizing profits. We do this by either going to smaller timeframes or eyeballing the current timeframe carefully, to find the area that holds the majority of trading activity. In this case, we reduced the stop loss by half, have a first target of 1:3 and a second target of 1:6! This would be an excellent trade.

By the way, right now we haven't gotten into measuring energy, so for now, just take my word on it that this would have been a good trade. We will later see why. For now, practice identifying these consolidation areas from which sharp moves in price originate and try to tighten them. The "meat" of an area usually includes just the bodies of the candles and can ignore the wicks. In this example here, I actually cut through two of the bodies, because those two candles added together actually form what you call an in inverted hammer . The part that was excluded can be considered a wick. This isn't 100% science, so it requires a lot of screen time and practice before you really master it. Just look for multiple candle opens and closes in the same area and try to include all the bodies.

In the following days, we will get to measuring residual energy. Step by step, we will learn to build a proper CORE trading plan together, using these fundamental principles of all markets and timeframes. Just be patient and take your time with learning these concepts. Any questions are always welcome.

Measuring residual energy on a price chart

Measuring the amount of "potential energy" inside an area of supply/demand balance is a crucial aspect of trading using this model. There are 8 main factors I look at to achieve this measurement, plus one extra factor.

Main factors are:

1. Angle of original imbalance
2. Profit potential
3. Price-wise Absorption
4. Time-wise Absorption
5. Fractality
6. Fresh obstacles
7. Bricks upon bricks
8. Freshness

The extra factor is corelation. Each of these will be scored according to importance and by summing up the scores, we get the energy measurement. I will discuss each factor in detail starting with the next post. Is anyone still reading this thread? Shall I continue? Do you think it's helpful? Are you alive and kicking?

I'm interested and engaged, Bumasoft. Without having a name for it I have been trying to work out some ways to define your concept of residual energy for myself. This is good stuff!

Thanks for the feedback, ImagineFX. I wasn't sure if the thread would get any attention, since people usually prefer the easy way out: buy when blue, sell when red black box systems . I will continue the discussion very soon.

Good luck!

Hi Bumasoft,

Something new.... trying to understand. But yes very interesting. I am a day trader still on Demo. would like to learn from you. anyway thank you for the information. I will follow you...

Bomi

Appreciate that, Bomi. Thanks. I will continue in a few minutes with how to actually measure the strength of an area. Good luck with your trading and don't hesitate to post questions here.

Marian

Angle of imbalance

The first and probably most important factor. It is actually the strength of the original imbalance coming out of a consolidation area. This can be measured either from the angle of the move or from the range of the candles in the move or from the speed of the move (pips / time). We'll keep it simple and look at the angle. There are 4 categories:

A. 90 degrees/vertical - GAP - strongest type of imbalance

http://toplessons.in/sites/default/f...p_90_angle.gif

B. 80 degrees - Very strong move

These are actually close to 90 degrees, but just for convenience, I consider them in the 80 category (if the move is composed of multiple bars, it isn't really 90 degrees, just very close), mostly because they aren't gaps, just high range candles, small or no wicks, no ranging:

http://toplessons.in/sites/default/f...p/80_angle.gif

Like before, the first bounce usually takes place at the consolidation boundary that is closest to current price. However, you can more often than not successfully trade the tight core energy area also:

http://toplessons.in/sites/default/f...ngle_tight.gif

C. 45 to 80 degrees - Gradual move, medium strength

http://toplessons.in/sites/default/f...5_80_angle.gif

D. Less than 45 - slow move, weak energy

I don't look for trades based on such levels. Sometimes they work, sometimes they don't, but most often than not, even if there is a bounce, price will first spike beyond the level and stop you out first. This often happens because price needs to reach a stronger residual energy area to make it turn, like in this example (just look to the left, just a tad below the failed area):

http://toplessons.in/sites/default/f...eak_angle2.gif

So, there are 4 categories here: gap, series of high range candles, gradual moves and weak moves.

A weak move will mean a score of ZERO for this factor.
A gradual move will be a score of 1.
A strong move (high range candles) is a score of 2.
And a gap is a score of 3.

This doesn't have to be taken as law. What I hope you will take from these posts are principles. The principle here is that the greater the move coming out of a residual energy area, the greater the energy stacked in there. You can then grade this strength of initial move however you like. You can look at the angle of the move, the speed (pips/time) and the wicks (we'll go into the wicks part later, when we talk about absorption).

Profit potential

Description

This is another thing I look at. Basically, profit potential refers to distance travelled from the origin of the imbalance to the next area of balance, compared to the size of the balance area (risk:reward ratio). It couples well with the angle of the move, because it also hints at the "strength" of the imbalance. The bigger the energy at the origin, the farther price should shoot before consolidating again.

Scoring

If this distance is twice the size of the original consolidation, I will give it a score of 1. If it is any less than that, it gets a score of ZERO. If it's three times bigger, it gets a score of 2 and if it's even greater than that, I will give it 3 points.

Examples

Let's look at a couple of areas from the previous posts and measure the profit potential.

http://toplessons.in/sites/default/f.../prof_pot1.gif

http://toplessons.in/sites/default/f.../prof_pot2.gif

You can see that we have more profit potential in the second example, even though, strength-wise, the gap should be much stronger (and it is). This is because the consolidation at the origin of the gap is much larger than the one in the second example, where there wasn't any gap. This made the risk much bigger and since profit potential is measured in comparison to risk, that's why it gets a smaller score. We aren't just interested in how strong a level is, but also: is the risk worth it for the reward available? Purely speaking of energy, the GAP has more residual energy inside it, because price moved over 80 pips until it stalled, compared to just 30 pips in our second example. This is also important to take note of, because we could jump into a second retracement, more deeper into the gap, with smaller risk.

I do not take trades if the profit potential gets zero points!

Price-wise absorption

Description

After residual energy is left behind (consolidation followed by strong move outside the area), price will eventually come back and test that area. Each time it does, part of that residual energy is absorbed (i.e. supply or demand gets consumed). We can measure the level of energy absorption by looking at the number of tests and how deep price went into the level each time it tested it.

Scoring

If a residual energy area has not yet been tested, it gets a score of 3. After one test, it receives a score of 2. After two tests it scores 1 point. After that, the level cannot be traded anymore and we assume that all the energy has been absorbed (this doesn't necessarily have to be the case, but statistically, this is what happens most of the time and we need the odds on our side).

VERY IMPORTANT: Whenever price goes more than 50% into the residual energy area, we consider it absorbed!

Examples

http://toplessons.in/sites/default/f...ice_absorp.gif

Take a careful look at the chart above. I marked with red X each test and the score before and after the test. I also marked the middle of the original consolidation area with a red line and you can see that it was never breached. However, after 3 tests, we leave the level alone and stop trading it. Also, if you want to be very strict, you can look at the time spent at each test. For example, on the first test of the area, there were actually 3 wicks touching the area. Each of those wicks absorbs part of the residual demand. If you're a conservative trader, you would thus stop trading that level after the first test because of the spikes. Generally, on strong areas, price will barely touch them and make a V-shaped sharp reversal. I am more aggressive, though, and usually keep the level as long as price hasn't spiked more than 50% into it.

Time-wise absorption

Description

The main force behind residual energy are limit orders, i.e. orders in a tight area that didn't get filled because of too much competition (and, thus, a move that was too quick, too sharp). The more time price spends consolidating, the more traders will get filled on their orders and the less energy is left behind. So, the less bars in an original consolidation, the greater the force inside it, the greater the imbalance ensuing. This is contrary to the textbook teachings, which say the complete opposite (the more a level is tested, the stronger it is; the more time inside a range, the stronger the support/resistance there... that is false!)

Scoring

1 to 3 bars = score of 2
3 to 6 bars = score of 1
more than 6 bars = ZERO score

You can still take the trade if the total scoring is ok, so this is not the most important factor. Even though less limit orders might be there, traders, including banks and institutions will still notice the area and the strong move originating from it and place fresh limit orders in there, so if the other factors (like angle of imbalance, price-wise absorption etc.) are very good, we can still take trades that score a ZERO on this factor.

Examples

http://toplessons.in/sites/default/files/bp/score1.gif

http://toplessons.in/sites/default/files/bp/score2.gif

Fractality

Description

Regardless of timeframe, the same energy patterns occur. This is called fractal nature of the markets or fractality. This factor looks at a higher timeframe to determine where we are on the highter timeframe supply/demand curve.

Scoring

If on a higher timeframe, price is moving from DEMAND to SUPPLY and it is closer to the DEMAND than to SUPPLY, then smaller timeframe DEMAND areas receive a score of 3. If, though moving from DEMAND to SUPPLY, price is closer to the SUPPLY, the smaller TF DEMAND areas will have a score of 2. If price on the higher timeframe is moving the other way (from supply to demand), but price is closer to demand, the lower timeframe demand areas get a score of 1. They score 0 when price moves from higher TF supply to higher TF demand and are closer to supply.

Similar logic goes for scoring supply areas.

Example

http://toplessons.in/sites/default/f...ractality1.gif

That was a picture of a daily chart, where I marked the areas of supply and demand closest to current price. Clearly, we are moving from DEMAND into SUPPLY and we are now inside a daily supply area, so closer to SUPPLY than DEMAND. Now, let's score the fractality of a recent H1 demand area:

http://toplessons.in/sites/default/f...ractality2.gif

Since we are moving from Daily DEMAND towards SUPPLY, but closer to the supply, the score for that hourly demand will be 2. But we are interested in what the score will be once price visits the area, because that's where we will be thinking of possibly going long. In this case, once price gets to that point, the DAILY candle will be bearish (price will be below the open of the day), which will mean that price is travelling from SUPPLY to DEMAND and is also closer to Daily Supply. This gives the H1 demand area a score of NIL/SQUAT/ZERO/NADA/NULL . Take your time with this example and make sure it sinks in. It's a very important factor.

Optionally, you can also factor in what we generically call higher timeframe trend (determined either by using a moving average, some other trend indicator or pure price action, i.e. distribution of recent highs and lows). It is something I also look at.

Bricks upon bricks

Description

Bricks upon bricks refers to pockets of residual energy stacked like bricks, one on top of each other. This makes the entire area even stronger (because if the first area doesn't absorb all the counter force, the second one will have even higher chances of doing so).

Scoring

The area closest to price gets a score of 1, the next gets a 2 and the third (or higher) get a score of 3. If there aren't any bricks, it gets zero points.

Examples

http://toplessons.in/sites/default/f...on_bricks1.gif

In the above image, I have identified an area of bricks upon bricks. There are three supply levels, stacked one on top of each other. Basically, these are pockets of supply building up as price moves down. Price will have a tough time absorbing them on the next visit. Let's see what happened (and don't focus on targets for now, we will have some detailed posts on that after we're done describing all factors):

http://toplessons.in/sites/default/f...on_bricks2.gif

I marked the first touch of each "brick" area with a red X. You can see that each of these rejected price and the first level had the smallest rejection. Level 2 had just a tad bigger rejection, but level 3 yielded the most pips and was the highest probability. It reached our projected first target, with a risk/reward above 1:2. And all this happened in the context of huge bullish momentum and against fractality (price was moving from demand towards supply on the daily). Here is the context of the rejection:

http://toplessons.in/sites/default/f...on_bricks3.gif

So, to sum it up, a level scoring 2 or 3 on the "bricks upon bricks" factor will have a much higher probability of success compared to levels scoring a zero or 1, simply because by the time price gets to such areas, it is already weakened by the preliminary areas/bricks. Pretty neat, huh?

Fresh obstacles

Description

Due to the nature of supply/demand , we can set our profit targets based on the original imbalance (it is the first consolidation occuring after the imbalance/break from the original consolidation). If you aren't quite sure as to why this is so, just ask and I'll clear you up on this issue. Though we do this, we still have to pay attention to price activity near the time of our entry. Fresh obstacles refer to new supply/demand zones formed near the time of the entry, that can act as barriers between price and our initial profit target.

Scoring

Clean, sharp moves into our entry will get a score of 2. If price consolidates one or more times in our "profit margin" area, before reaching our entry point, then the area scores zero points.

Examples

http://toplessons.in/sites/default/f...obstacles1.gif

http://toplessons.in/sites/default/f...obstacles2.gif

Next and last on the list: freshness