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Thread: The importance of understanding context

  1. #1
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    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:

    Attachment 9070

    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:

    Attachment 9071

    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:

    Attachment 9073

    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):

    Attachment 9074

    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.

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  2. #21
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    Quote Originally Posted by mony View Post
    [lang=ar]Forex is the only market in the world in which it is trading around the clock. 24 consecutive hours. Speed ​​in completing the transaction, the cost of a very few, highly liquid. All of these factors make the foreign exchange market (or the foreign exchange market), more markets for its clients. The forex market this can not be likened markets traded stocks in terms of shape, as there is no exchange here is known in the traditional sense of the word. It is composed of a global network linking tremendous simply a huge number of currency traders in the world.[/lang]
    [lang=ar]If you want to succeed in the forex market should learn everything about the forex market and must be trained and learn well and must possess a successful trading strategy helps you to configure the high profits of action in the forex market and must understand this strategy well[/lang]

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  3. #22
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    understanding what we are doing help us to become more professional in this domain and understand ho the trading work will give you more opportunity to make more money . In fact trading is like any other project in life , you must know what you are doing in order to get good results and achieve your goal so fast .

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  4. #23
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    it very important for trader to understand the market conditions we have in this business of trading,if a trader can understand the market condition and understand when to stay way from the market and when to trade the market,making profit from the market when trading will be easy.this is why the most important thing a trader can do is to make sure there understand the market condition.

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  5. #24
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    If you can hear what is happening to too many forex traders, you will certainly be sorry for them, this is not mainly in the inability that they can not know the trading itself, but in the inability that they can not understand the condition before they are always hasty to place the order all the time.

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  6. #25
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    I do believe which a proper perception of the market industry in addition to right perception of different exchanging strategies however you are able to flourish in achieving large revenue inside currencies in addition to I'm sure that will the simplest way to realize currencies is which the great coaching in addition to education, and possesses an effective exchanging method.

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  7. #26
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    [lang=ar]If you want to succeed in the forex market should be understood everything in the forex market and must possess trading strategy successful to help you succeed in making a profit in the forex market and must follow all that is new in the forex market and train him well and must possess a demo account you practice it well[/lang]

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  8. #27
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    Quote Originally Posted by crazy girl View Post
    [lang=ar]If you want to succeed in the forex market should be understood everything in the forex market and must possess trading strategy successful to help you succeed in making a profit in the forex market and must follow all that is new in the forex market and train him well and must possess a demo account you practice it well[/lang]
    Yes I agree with you that we have to have make some success on market so we have to learn anything that related with forex market and forex trade, if can pass all the process we can easily define where and when to enter a good trade and get some profit easily.

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  9. #28
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    Quote Originally Posted by jull View Post
    Yes I agree with you that we have to have make some success on market so we have to learn anything that related with forex market and forex trade, if can pass all the process we can easily define where and when to enter a good trade and get some profit easily.
    I think trading knowledge, experience and skill are key of success of Forex business. We need more and more knowledge and experience for success in Forex trading market. there are lot of ways to succeed in forex trading market and i can advice you to this:strickt to a strategy or philosophy in forex and test it,but if you fail,do not afraid to drop the strategy to the trash,and look for another one.

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  10. #29
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    In my opinion that your right idea of the market along with proper idea of different trading techniques in cases like this you'll be able to achieve obtaining high profits within the forex market along with I'm sure that the easiest method to understand the forex market can be the great coaching along with a good education, and has an effective trading approach.

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  11. #30
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    The most popular for that accessibility cost movement between merchants - small episode dealing variety. Style can be be extremely worthwhile with light-weight involving current market disorders, your meeting - volatility value does alter from minimal for you to substantial along with can be be extremely very good along with I do think that this is very legitimate.

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