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Chapter 8, Part I. Support and Resistance Page 5

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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    Commander in Pips:Again, FOREX is a battlefield – if you do not make profit, then profit is made by someone else…

    “Why?” - The answer is obvious. First, “Whales” get profit from this short-term trade – they Sell just above the support and Buy (i.e. close their positions) just below it at lower price. Here is a profit from the “Short” trade. Second, they also can not just close their short positions, but can also create their own “long” positions by buying out your stops. And their new inventory of long positions will be made at an excellent price – just below the support area due to your stops. In fact they buy at lows. They can satisfy their greed. See – many advantages…

    Pipruit: Trading is a really cruel business. But with such information I will prepare more…​

    Commander in Pips: That’s right son, here we are for that purpose.

    So, traders call this price behavior differently – some call it “Stop licking”, Joe DiNapoli calls it “Wash and Rinse.” Anyway, the name does not change the core idea.

    And now, let’s make some rules that will help you to act more successfully around support and resistance levels:

    First rule remains intact – If the market holds above/below the support/resistance level and has not closed below/above it but only just insignificantly pierced it (with candle shadows), the more probable that it still valid. So, Close price is your first assistant.

    Second rule - the longer time support/resistance is forming the more obvious it becomes – then the more probable is the appearance of a stop licking pattern.

    Third rule - to not been trapped with stop licking (a.k.a. Wash and Rinse) you may act twofold – place your stop-loss order a bit deeper or wait until after you see a stop licking pattern as a confirmation of support/resistance strength and further upward/downward market move. After you will see, that Stop licking pattern completed – you may enter in the corresponding direction.

    Fourth ruleStop Licking is a fast pattern, so if market has broken support/resistance level (i.e. closed below/above it) and holds there for 3 periods (i.e. 3 bars/candles) or more, then probably this level has been erased by market action and not valid any more.
     
    #1 Sive Morten, Dec 15, 2013
    Lasted edited by : Feb 11, 2016
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