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Chapter 9, Part III. Simple but fundamental and important patterns. Page 8

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

    Aug 28, 2009
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    First, we see, that initial move to our candle was down – so, bears controlled the market. Then, the market has reached a support area. Bears continue to sell with hope to break this level, while more and more buyers entered the market with hope that support will hold. The large trading volume suggests that the struggle between bulls and bears was very hard – much harder than usual. And now imagine that all these happen in a very tight range. So, the dual pressure as from bears as from bulls does not allow price to move much higher or lower. This is the same as fill the small room with big amount of sumo wrestlers and then drop a svelte girl in there. What do you think, how much chance does she have to save her hairstyle?

    Pipruit: I guess not much… I understand why such a combination calls “Churning” because huge amount of money is changing the owners but market just stands in tight range.​

    Commander in Pips: That’s right. And now pay attention to the last important condition – the market stands at support! It means that bears are very strong – and do no allow bulls to move higher, but bulls are even stronger – because they do not allow bears to break the level, although the bears control the market (initial move was down).

    Pipruit: And what is the conclusion?​

    Commander in Pips: Very simple. Appearing of such candle or bar (it doesn’t matter) gives you a confirmation or, at least, more confidence, that this support will hold. The same is true for resistance levels.

    Pipruit: Well this is really advanced tool. Thank you.​

    Commander in Pips: You’re welcome. In later chapters we will take a look at more complicated candlestick formations and how to interpret them. Our task here is to teach you to find these patterns in the real market by yourself, so that you will able to apply them in your trading plan.

    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.

    Note: FPA ranks are earned in the battles against scam, not in the classroom.
    mich35, fran alvarez and Shirl like this.
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