Is it right or not? In previous post I've shown moving average indicator as an example of how one can use price-value approach in trading. But this is just example, in reality, simple MA can't show you where value is. Let's say, MA calculates 35 closing prices (35 parameter). Do you think that every price is equal here? Area located at higher prices is more significant for the market because it attracts more volumes (aggressiveness).
So in fact weight of higher prices in calculation formula should be increased if we want to know where value is.
What am I trying to say?
Price can't reflect everything because not every price level is equally important for the market and that is why I firmly believe that support and resistance are temporary profit taking areas and does not reflect a trade location everytime.
The missing piece is time and volume
(we don't have volumes on Forex - tick volumes is not what we need, so we can make conclusions about volumes from price action - was it aggressive or not?)
If you will refer to price as to advertising mechanism, it would be much easier to understand what's going on on the market.
I will quote great trader and coach, Jim Dalton, that teaches his students in approach of auction market principles:
Price advertises opportunity
Time regulates this opportunity
Volume measures success or failure of this opportunity.
No comments:
Post a Comment