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Chapter 8, Part I. Support and Resistance Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Big players (we call them elephants or whales) see this support level also and they also want to buy here. But also they see stop orders just below the level of support, and how big value they are.

    Pipruit: So what?​

    Commander in Pips: If the value of these stop orders is significant – they may use it in their own favor. Here is how they do that – say the market is flirting with a support area and has already shown some shallow penetrations of it but no single close below. This support level is well recognizable (say, obvious), so more and more traders see it and enter long with stop-loss orders just below this level. Suddenly “whales” are starting to sell (open shorts) positions and they sell until public’s stops will be triggered. What will happen if your stop loss on your Long position will be triggered?

    Pipruit: Well, if I initially bought, hence, stop order should be “Sell EUR/USD” and will close my position.​

    Commander in Pips: That’s right, when price will reach your stop-loss order – you will sell EUR/USD. So, “Whales” will have a possibility to buy your position from you (your stop order) as well as other public stop loss orders. As “Whales” initially sold (have opened short position) they need to fix profits – in other words close these positions – they need to buy. So they do this with the poor public. When this transaction is over – and there is no one who wants to sell any more – then the market turns to the upside. That is what you definitely see on chart #3 during the short-term breakout below the support area.

    Pipruit: But that is terrible! How they could do that and why?​

    Commander in Pips: Huh, my boy – don’t be naive. They want your money, everybody wants your money. This is why FOREX is a battlefield – if you do not make profit, then profit is made by someone else…
     
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