We should be able to learn the context of Price Action

In this study of price we will consider few steps that let us understand the activity behind the candlesticks and what they tell you combined with price action.

Trading is difficult because we tend to analyse objective outcomes (that have already happened), but when we analyse something that has already 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.

Every pattern on the market is context dependent - sometimes 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.

This chart tells you all the history the reason behind most of the "candlestick Pattern" does not comply with Overall price action as knowledge of context is very Important and that is where we need to be one step ahead of market to make consistent money and that is what trading is all about

In next Article, We will cover how market react to strong trends to resume and how to react to different context occuring with correlated pairs as the same time.