The importance of understanding context. Part 2 - Page 2
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Thread: The importance of understanding context. Part 2

  1. #1
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    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:

    Attachment 9337

    Now look at the setup below:

    Attachment 9338

    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:

    Attachment 9339

    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:

    Attachment 9340

    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.

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  2. #11
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    [lang=ar]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.[/lang]

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  3. #12
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    I think it can be a good thing and it can be a bad thing but if you know the real contorling or have the enough experience to trade with the news you will be the best trader in this market without doubt so it depends but you must know everything about this market or even try to do that .

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  4. #13
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    in this post there are many things that are need to clear that are need to learn if you want that goes in the minds then you have to working hard and make the things well and get the things so many things that are need to be the are some well thinks i am seen the forex as my life that changes all the things .

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  5. #14
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    Quote Originally Posted by forex killer View Post
    I think it can be a good thing and it can be a bad thing but if you know the real contorling or have the enough experience to trade with the news you will be the best trader in this market without doubt so it depends but you must know everything about this market or even try to do that .
    indeed trade with news of course there are more profitable because sometimes the news has such great impact on the market so the impact of this great news that utilized by the market how do we benefit by it so that the market could see a big movement I am sure this will much can make you will be able to analyze the market and will be able to make this trade will be profitable but should also be aware of news analysis

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  6. #15
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    i pay attention for all time frames, and especially for the higher one, it can make me know the market situation where the true trend goes, and it is necessary to determine my order, i use smaller time frames to get entry point and also exit point, but there are some points which we need to take before make a decision, news will make the changes at the market, high impact or low will affect our trading forex. so some will avoid trading several minute or after the news is released

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  7. #16
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    Quote Originally Posted by silverlady View Post
    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.
    You have said it well ma, it is a strategy edifying business, the trading context is the one that will make the trader to understand the way of what the market is saying, without knowing this, the actually understanding of the market may cause the trader to react to the market in an opposite way, this can affect.

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  8. #17
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    some times the trading is become so easy but the some times become so diffcuilt that is not well so make the things best for you so many traders are doing the well jobs and making there life if you are learning the forex well then you are able to make the well money that is good for you .

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  9. #18
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    It�s this that I will point out many professionals lack with this current market, what exactly we should fully grasp are usually generally pull. You are what sort of current market function and also practices the market industry using the ailment the market industry is usually at present putting up. The second is this strategy to use the market industry during those times, it�s this that I think would be the option about this.

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  10. #19
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    Quote Originally Posted by shosho View Post
    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
    Yeah,there is a lot of importance of understanding of context.Forex is a highly complex market but it is possible to earn a lot of profit from here by trading properly.But for this reason every trader must have a strong knowledge and experience about forex.To get a alot os experience and knowledge understanding of context is very much essential.In forex market every decision is related with worlds economy whose information is available on different sites.By reading those every trader have to take a decision which is fully dependent on his context learning.

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  11. #20
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    knowledge is the most important thing to earn from forex market.if you want to be successful in forex market then you must have to know everything about forex.you should know about the situation of forex market.because you have to be ready for any situation.

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