The importance of understanding context
Page 1 of 142 123451151101 ... LastLast
Results 1 to 10 of 1417

Thread: The importance of understanding context

  1. #1
    Educator
    Join Date
    Jun 2013
    Posts
    1,105
    Promo (¢)
    15
    Thumbs Up
    Received: 571
    Given: 191

    The importance of understanding context

    Hi traders.

    Many traders out there want to have reliable trading setups and spend much time in searching for good ones. They are numerous - for example, engulfing pattern, pin bar, inside bar located near moving average and so on and so forth. Traders want to have clear and unambiguous method to enter the position.
    But there is a thing that is much more important than setup. I call it context.
    Let's take most popular pattern for entry among price action traders - breakout of small trading range. It can be very profitable pattern in corresponding market conditions - value of volatiliy tends to change from low to high and it can be quite a good.

    Look at the pattern below:

    2014-03-31_1021.png

    Very nice consolidation area that leads to massive breakout to the upside and for price action daytrader it can be profitable trade accompained by very small risk. But if I tell you - all you have to do is to search for such patterns. How do you think - is it possible to trade with patten alone, without undestanding market context?

    If you do so, you can accept once pattern like this:

    break2.png

    As you can see, in this case price probes upper side of the trading range and then sqeezes to the downside. You should be rather selling in this case than buying.

    What's the difference between those two patterns? It's context.

    In the first situation overall trade location was nead possible low of correction - though it does not mean that market will necessarily achieve previous highs, but at least it will tend to gravitate toward higher levels:

    context1.png

    In the second situation context is different - market had already established lower lows and was ready to sqeeze to the downside (say, downtrend is confirmed):

    context2.png

    Ability to read the context is essential skill for trader, especially for day trader. In other words, we shoud be aware of market conditions. Does trend have more odds of going higher or lower? Price action pattern itself will not give us answer to this question. Price action patterns only provide timing for exact entries and help us to reduce risk.

    How to learn to read the context?

    First of all, it's not something rigid - it's more art than science. For example, if price breaks out to the upside from 2-weeks trading range with good volume and aggressiveness, it can be considered as good trending market condition (say, long trades will be more preferrable). If market goes back and forth between area of support and resistance, you may decide to work counter trend when price achieves one of the areas.

    So, it's more art than science. But ability to read market context will help you to deal with ambiguity of price action patterns.

    Not allowed!

  2. #2
    Registered user
    Join Date
    Nov 2013
    Posts
    1,482
    Promo (¢)
    100
    Thumbs Up
    Received: 6
    Given: 7
    Quote Originally Posted by Value trader View Post
    Look at the pattern below:

    2014-03-31_1021.png
    I understand of this pattern after price break some area and make a higher high then price goes upside and this is no problem

    Quote Originally Posted by Value trader View Post
    If you do so, you can accept once pattern like this:

    break2.png
    but this pattern I don't understand why, how do we know will make some pattern like this do we have to know fundamental or what ? or is this just art ?

    Not allowed!

  3. #3
    Educator
    Join Date
    Jun 2013
    Posts
    1,105
    Promo (¢)
    15
    Thumbs Up
    Received: 571
    Given: 191
    Quote Originally Posted by jull View Post
    but this pattern I don't understand why, how do we know will make some pattern like this do we have to know fundamental or what ? or is this just art ?
    You see, the same patterns have absouletly opposite meaning in different market structure. When market is weak and you have correctional move, breakout of such consolidation can be signal to fade the price action, because this consolidation has different meaning in such market. In the first case it was formed by strong buyer who was accumulating position, in the second - by weak buyers who were just creating overbought condition of the market.

    Not allowed!

  4. #4
    Registered user
    Join Date
    Apr 2014
    Posts
    34
    Promo (¢)
    555
    Thumbs Up
    Received: 0
    Given: 0
    The most popular for the entry price movement between merchants - small outbreak trading range. Style can be very profitable in light of market conditions, the interview - volatiliy value tends to change from low to high and can be very good and I think that this is very true

    Not allowed!

  5. #5
    Registered user
    Join Date
    Feb 2014
    Posts
    591
    Promo (¢)
    0
    Thumbs Up
    Received: 1
    Given: 0
    [lang=ar]I believe that a proper understanding of the market and correct understanding of the different trading strategies in this case it is possible to succeed in achieving high profits in the forex market and I think that the best way to understand the forex market is that the good training and a good education, and has a successful trading strategy[/lang]

    Not allowed!

  6. #6
    Registered user startlife's Avatar
    Join Date
    Mar 2014
    Posts
    207
    Promo (¢)
    60
    Thumbs Up
    Received: 6
    Given: 3
    your rignt
    and I add to your subject that it is verry important to know the safe areas for trading, and whene we know this areas we open orders Undaunted and without worry and I will add below some famuse exemple of movement of shart to minimiz risk and impove our trads

    Models triangles:

    whene Leaning Triangle and Bearish trend
    If the previous general trend is bearish so after correction the price will continue to go down

    1.JPG

    and whene Leaning Triangle and bullish trend
    If the previous general trend was bullish so after correction the price will continue to go up

    2.JPG


    3.JPG


    exemples.JPG

    Not allowed!

  7. #7
    Registered user
    Join Date
    Feb 2014
    Posts
    207
    Promo (¢)
    1,005
    Thumbs Up
    Received: 0
    Given: 0
    [lang=ar]Important to know some important things in the Forex and we know it well so that we can work on Forex Forex well because I do not see that it is easy and needs a lot of learning and experience and can not be easily learned because he needs to work long experience[/lang]

    Not allowed!

  8. #8
    Registered user
    Join Date
    Aug 2013
    Posts
    769
    Promo (¢)
    355
    Thumbs Up
    Received: 7
    Given: 4
    Quote Originally Posted by startlife View Post
    Models triangles:

    whene Leaning Triangle and Bearish trend
    If the previous general trend is bearish so after correction the price will continue to go down

    1.JPG

    and whene Leaning Triangle and bullish trend
    If the previous general trend was bullish so after correction the price will continue to go up

    2.JPG


    3.JPG


    exemples.JPG
    I also know the theory about this triangle pattern however sometime market are very tricky so we will need to be careful too. Market is not always moving like in the theory. It means we must also compare the market with using a few of different time frames too. Also don't forget to use stop loss just to make sure the market will not make a spike movement.

    Not allowed!

  9. #9
    Registered user
    Join Date
    Feb 2014
    Posts
    591
    Promo (¢)
    0
    Thumbs Up
    Received: 1
    Given: 0
    Quote Originally Posted by yara View Post
    The most popular for the entry price movement between merchants - small outbreak trading range. Style can be very profitable in light of market conditions, the interview - volatiliy value tends to change from low to high and can be very good and I think that this is very true
    [lang=ar]I think actually that a good understanding of this matter will help us a lot of success in the forex market and help us also to make a reasonable profit in enough time and help us also to achieve high profits in quick time if you want to succeed in the forex market must succeed in training, education and a good understanding of all that respect to the forex market[/lang]

    - - - Updated - - -

    Quote Originally Posted by mony View Post
    [lang=ar]Important to know some important things in the Forex and we know it well so that we can work on Forex Forex well because I do not see that it is easy and needs a lot of learning and experience and can not be easily learned because he needs to work long experience[/lang]
    Already the subject is not easy simple and must if you want to succeed in the forex market to learn and understand all that exists in the forex market and must also be trained well on everything that exists in this market and pursue all that is new in the forex market in this case it is possible that succeed in making a profit in the forex market

    - - - Updated - - -

    Already the subject is not easy simple and must if you want to succeed in the forex market to learn and understand all that exists in the forex market and must also be trained well on everything that exists in this market and pursue all that is new in the forex market in this case it is possible that succeed in making a profit in the forex market

    Not allowed!

  10. #10
    Banned
    Join Date
    Nov 2013
    Posts
    14,851
    Promo (¢)
    0
    Thumbs Up
    Received: 105
    Given: 14
    I believe that it from the beginning the trader would have understood what the chart market will do in the long time duration context. This thread is likened to the ways of the trader in the term of pattern trading. This exposes indepth clue of the market.

    Not allowed!

Page 1 of 142 123451151101 ... LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •