The importance of understanding context. Part 2
Page 1 of 121 123451151101 ... LastLast
Results 1 to 10 of 1208

Thread: The importance of understanding context. Part 2

  1. #1

    The importance of understanding context. Part 2

    Hi traders.

    Beginning of this article is here.

    Trading is difficult because we tend to analyse objective outcomes (that have already happened), but when we analyse something that has alerady happened, we tend to look at the past. When we analyse market conditions, we look to the future. To be successful in trading, we have to be ahead of the crowd and we definitely need to look at the future than to the past.

    As I have said in previous article, every pattern on the market is context dependent - somethimes it will work, sometimes it will work with the opposite result, sometimes it will have no impact on further price action.

    Let's look at the popular "engulfing pattern". In classic literature dedicated to candlestick analysis, it is considered as pattern showing strong buyer (seller - for the opposite setup) stepping in the market.

    And in some cases it looks nice:


    Now look at the setup below:


    As you see, nothing really happens after the second setup. Beginner trader would think, that may be length of candlesticks was not enough or he would need to combine it with violation of trend line.

    But let's look at the context. In the first case pattern was preceeded by mature trend that was ready to reverse:


    What do I mean mature trend? It's a trend that already has some history, this trend will attract a lot of weak holders - uninformed players, who are willing to get in the position and to take a risk, but they have relatively close stops that will be located in the same location. Big market players use this liquidity (orders from these weak holders) to build their positions. So, engulfing patter occurs in conditions prepared for falling.

    Now let's look at the context of the second pattern and analyse market conditions associated with this pattern:


    Here we also see mature trend that also was combined with elongated candlestick. Such candlesticks often form vacuum in the market - and market "repairs the structure", statistically such empty levels will not hold for long - possible scenario is rotation inside of this bar (candlestick).

    So, pattern is the lower level in decision making process, the higher level is understanding context. We can't really evaluate our decision if we always operate from lower level of this process. It is only possible to evaluate it when we look at the picture with "eagle's eye"

    Of course, the more level of perception we will have, the more ambiguity we will add to decision making process, and therefore - the more errors we will tend to make. According to my view, every trader should develop some balance between lower (patterns, setups) and higher (context, big picture) levels of perception in decision making process.

  2. #2
    Join Date
    Nov 2013
    This is what I can say that many traders are lacking in this market, what we need to understand are basically tow. One is the way the market work and follows the market based on the condition the market is presently posting. The second is the strategy to work with the market at that time, this is what I think will be the solution on this.

  3. #3
    This trend attracting a lot of weak holders - ignorance of the players, who are willing to get the position and take the risk and the pattern is a lower level in the decision-making process, and a higher level and understand the context. We can not really evaluate our decision if we are always of the lower level of this process

  4. #4
    Already must understand context so well in success in making profits in the forex market Thanks brother and dear to most of the information that wonderful useful and hope that you have many of the other information that you provide to us and explain to us how to implement what you say

  5. #5
    Important to understand the market well and that is to understand the terms and rules of trading is important that traders learn well and know how to work well on a real account after training at the expense of Demo After acquiring sufficient experience

  6. #6
    Join Date
    Aug 2013
    Through this education tools able to learn new things. I also strongly agreed that we need to enhance of our level of understanding to become a good trader. I am also trying to enhance my trading skill and level of understanding and this topics will help me in doing it - I believe.

  7. #7
    Join Date
    Sep 2013
    Sab ke dilo mein
    Is it necessary to understand the context on higher time frames specially when we have enough figures that this is a mature trend, means to say we can analyse that there was culmination phase follow by mature trend and then we have possible perception afterwards which is ofcourse market do before reversing take the stops and are there enough examples that can help us understanding the context. Examples you provide is ofcourse are perfect but bit more work can really prove helpful for everybody following the thread.


  8. #8
    Diving deep into the market for analysis may be not every traders caliber and this may be the main reason that they abstain themselves from contexting the forex market. But if one starts trying to assess the potential of analyzing the forex market it is very much added advantage for the traders that they can be able to take up the best and high probability trades with confidence. Thus, traders should always understand and then proceed.

  9. #9
    Registered user
    Join Date
    Mar 2014
    If you want to succeed in the forex market must understand everything that goes on in this market and we must pursue all that is new in the forex market and must be trained him well and must possess trading strategy successful to help you succeed in the forex market and must possess account Demo and practice it well

  10. #10
    The analysis of economic data on the FX effects,I generally,first look at the importance of data,then the data to see the result of the.In the economic data released in 5 minutes before and after the ban on trading.Then,see the data published before a period of time,the market is it right?Have corresponding fluctuations,which is most prices according to expected values development.

Page 1 of 121 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