Basics of Price Action applies only on forex or currency market.

Trading the market, you want to see something beyond candlestick charts, and you want to see - guess what? You want to see people, traders with their interests, fears and desires. Like one wise man said, "discover what makes people tick, and you will know what makes market tick"

Where are you trading?

First of all, there is a significant difference between stock market and markets that trade with leverage. Forex is one on those markets (but not the only one - there are futures, options, OTC derivatives and so on).

Nature of retail Forex market is that real currency rarely trades here. We trade obligations (for example, we take responsibility to buy some currency after the trade, and deposite some money fot that. If we are mistaken, we give some money to the market, if we are right - we take some money from the market).

Numerous obligations (traders from retail traders) meet together and form a huge whole position, that liquidity provider must cover using other liquidity provider. That's how it works.

! The process of exchanging obligations is somewhat different from exchanging real goods.

Things are different in stock Market

Imagine you're trading a stock. Quantity of stocks is limited, and to go short you must borrow some stocks from its' owner. If you want to close your long position, you expect somebody to sell it (real stock). And that's why we have "short interest" on the stock market, it usually doesn't exceed 5% of the whole volume.

Things are different on Forex and futures.

You can sell almost unlimited number of contracts, so you don't need to borrow something from somebody. That circumstance makes analysis of supply and demand on Forex pretty different than on stock market.

We can see big supply, but suddenly market reverses and all those short sellers start covering. Why? Because they need to do it - they have small pockets and should exit quickly otherwise they can blow up their accounts.

The same is with long positions - there are lots of weak holders, that have very close "pain point" - they go long, place very close stop and if they have no defense from "strong holders", market will probaly go after their stops, because there is always strong counterparty that can hold the level and prevent price from further rising (remember - they can place as many "sell limit" orders as they want.

Trading on Forex market is really the Art of analysing underlying inventory.

To start successfully find good trades, we should answer these questions from small check-list:

1. Who is responsible for price action? Strong holders or weak holders? (price will go in the favor of strong holder)

2. Is market oversold or overbought on the way up? (in the first case we have weak short sellers, in the second - weak long bueyrs)

3. Is market oversold or overbought on the way down? (in the first case we have weak short sellers, in the second - weak long buyers)

As a trader, you should know how to read inventory and to play on the strong side.

Remember, there are not only situations when we have "win-lose" situation and "strong-weak" market configuration, we can also have "strong-strong" market configuration, when market is careless about retail traders and their positions (this is when we have elongated trends).

As a trader, you should know how to read inventory and to play on the strong side.

Australian dollar and Newzealand dollar Short Scalps in Range Bound Trading

new zealand dollar price action update

Little update on downtrend resumption as I was eager for that trade and emphasis a lot on this setup for the past two days. Take a look at the chart and decide what one could have done wrong when someone is aware of "distribution". Take a look at the update chart below !

scalp opportunity of kiwi dollar as imbalance disappears in strong trend

As I mentioned in my previous post about imbalance and difference between short term scalps and swing trading offer lot of opportunities as mentioned in Post. Check it my last post Here !!

Short term momentum does give us lot of opportunity as we are told from start that we should trade what we see. Here I go short with the trading range as price action in ranges are quite repitative and when we dont find enough buyers in short term picture then price keep looking to strong demand areas to find how crowd reacts there.

Here is I have mentioned that longs were trap with strong range breakouts with bullish engulfing and price test the area and immediate covering was found and lot of downside momentum as well.

Here is the another classic example of buyers finally give away in range-bound trading and price finally repeat the price action again and range breakouts again to the upside and then again after find strong short term buyers sellers again step in and move the price to the downside again to the support 0.9340
Check it here!!

When suppliers can't move the price immediately specially because of strong uptrend then they will liquidate their position with strong bullish engulfing bar to sell from better price and Australian dollar move today was a perfect example of today, although second trap was much more valid as first was overlapped but idea was too sell with a strong bulk orders.

Take a look at the chart below !!

Momentum give you another entry to enter again as I mentioned in my previous post that we need to cover but next candle break above that faded out candle.

Take a look at the chart I posted first on the blog, Here I mentioned that price has spend 90% of the range to the upside, yesterday and when it happens and market is moving down slowly and certainly it find strong momentum from the previous day "Minor development Area", then we get a good high risk reward oppotunity to enter on momentum as I did here and I had to cover with only 12 pips.

Take a look at the chart !

As I have mentioned in my previous chart we should cover over position with strong momentum candle which was faded out and another bar could let you enter again as there are best chances of momentum to carry throughout the day as it did.

Take a look at the chart Below !!

usd/chf intraday Update short term reversal could be here.

Are we seeing the short term reversal in dollar franc currency pair or it could totally reverse the trend ?

When we see such activity when price react the same way as thought and then suddenly we have seen some momentum candle then market won't go down immediately. It will try and create panic and will absorb buy orders at some place and Now i am eyeing if price absorb buy orders as it has already taken the stops of longs and now it will try and create panic with some upside momentum and then continue down to challenge 0.8750 support

It could not react the way I am looking for, But certainly a very good opportunity for short term trader to make some good profits and learn as well for the future reference.

Usd/jpy daily Technical update

This is know as 50-50% probability. and the outcome has logic behind this

When we trade currencies, there is lot of people and banks watching daily activity not for entry purpose, but in order to absorb supply and put in orders and that is known as natural behavior as no-one knows what price will do.! Price spent most of the time above accumulation breakout area and then holding higher prices in U.s session yesterday and that was one the cards that down movement will be bought if it happens immediately in the first session.

Little update from usd/jpy longs,momentum was here but Now we have to cover the position because momentum is really fading out and loosing steam. Have a look at the chart below. !!

Now price has got momentum and confirmation candle which is also strong, so I will prefer enter this type of scenarios which have logic and suits a trading style which tell you to cover quickly if momentum fades out, rather than setting predetermined stop levels.

Time to update usd/jpy daily activity after covering you can close the trade now with good 40 pips profit were risk was only 5 to 10 pips because you can't risk more than that when you decide to cover !!

Trading is much more than just buy and sell and it really is about logic

Truth behind trading is that it not a "science". When someone offering free services then it does not mean that we should not use our skill to know the fact and there has to be logic behind it . Interpreting charts can be not very complicated, and I would say – good setups look pretty simple, but in most cases this simplicity requires eagle's eye and some practice like the one below !!

For my style of trading I have no room for reversals which may or may not happen at all and I try to spot the reversal too early and if it does not happen and price respecting the line of defense also know as "Area of Protection or Minor Development Area" i.e when we saw a strong momentum breakouts and price build in some area where it spike few times or may be twice and then it could be rank as minor development area and it could be inside a bracket or rotation center and any test or strong demand would surely means strong holders win the last day in range bound trading and today again they are ready for ride .

Let me give you simple example by chart ! Its Usd/cad chart which tells you exactly what happen as it was decided earlier what was one the cards prior to BOC policy decision.