There was a question posted on my thread at FF today by one of the readers. Early in the day, there was a breakout of more than 100 pips in GJ and GU for no apparent reason. Why did this happen and how do you trade this ?
In technical terms, this is called consolidation and breakout while in volume terms, it is called accumulation and the result of the accumulation which is an upmove.....in technical terms, a ranging period or a consolidation period is followed by a breakout. the size of the breakout is always directly proportional to the time of consolidation and inversely proportional to the price range during consolidation....in other words, the smaller the price range and the more time the price spends within the price range, the bigger the breakout....how do u trade this ? when the price is ranging, just draw lines between the high and low of the range and wait for the breakout....when it happens, take a trade in the direction of breakout....
why does this breakout happen when there is no news or anything special?? for this, u need to understand volume and vsa....during consolidation, the big boys keep buying the pair....as the keep buying , the price goes to top of range, then they push it down and small traders get scared and sell and the big boys buy it...they keep buying and again price goes to top of range and they again push it down to scare the small guys into selling it to them...they keep doing this till there are no more sellers and once they r happy that it is true, they start pushing the price up and start buying everything in sight...seeing this breakout, others join in...big and small and the price starts to accelerate in the direction of breakout....this is what happens....
Thursday, April 23, 2009
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Hi Karthik,
ReplyDelete"....as the keep buying , the price goes to top of range, then they push it down"
How they push it down to scare the retailer after the they bought?
Thanks
pushing it down takes much less volume of selling and then buy lots...sell little, buy a lot...thats what they do...
ReplyDeleteDear Karthik,
ReplyDeleteOh My GOD. Now I knew already why. No wonder why I'm always victimized by those big fish. Fear & Greed.
many thanks