Price action behavior and Market Fundamentals

Market fundamentals

Let's talk a bit about market fundamentals. If you want to survive and obtain ongoing success in trading, you'd better rely on fundamental principles that don't change not setups. There are bunch of setups over there, candlestick configurations and other stuff.

But if you know principles, you will be more flexible and your success will be more solid

What you can rely on trading markets?

1. Imbalance creates trends, balance creates trading ranges

Yes, exactly this sequence. Not "trend is your friend", but imbalance is your friend, because trend is an outcome, imbalance is a market condition that creates this outcome.

"Trend-oriented" mindset often pushes traders seek for bad trade locations, when opportunity no longer exists. Imbalance is what you really need.

Though trading is not a science, it has some unwritten laws beyond price action:

First - big market participants create trends and rely on fundamental analysis. Biggest players don't rely on charts in decision making process.

They have charts for just one thing - to know how crowd thinks and where majority will step in the markets. Big players need "hot spots" on the market (when many traders are in) to have liquidity. Their positions require liquidity and without liquidity they will be unable to accumulate enough volume for their positions.

Imagine player with pip size equal to 100.000 USD or higher. Of course, he will need liquidity and will build his position long enough.

That's why they monitor charts to know when traders will step in. But the reason they need to build a position is not techical analysis. Reason is fundamental analysis and analysis of real supply and demand.

It's hard to spot "big playesr"

One thing will help you. Address yourself a question - who loses on the market? Who is caught in short or long positions? If you understand that long players are losing, you automatically know that bigger timeframe short player opposes them. Smart money players create imbalance and absorb volumes.

Who provides liquidity, who consumes it? Like Warren Buffet said - if you find yourself near the poker table and don't know who loses money - it's you who loses it.

2. Keep an eye on hot spots in the market

What is a hot spot? They are: important extremums, round numbers, option barriers, in a nutshell - spots that traders are watching. If you know that volumes are there, big guys are also there.

Every trend can be divided into several parts - young trend, mature trend and culmination.

Young trend and culminational phase represent great imbalance but with one nuance - big players are building positions in young trend, and covering their positions during culmination.

If you see "obvious" trend and see very hot market, be aware - avoid being a laggard.

Best technicals available for this week.

"I do it for a while and that should be the last update of trade setup for this month. Because feeling very stress and tired after back to back day night updates of the charts".

All the updates of the charts I posted during last week.

Let's take it one by one with the charts I posted last Week !!

First of all take a look at the chart Eur/usd

The chart of euro I posted last week and I told you when price fall of a strong trend, and the follow through does not seems encouraging then price use to find a first bottom and reaction from that bottom is quick enough to give you Idea of the "context" and that time it was correctional bottom and break out "Area of Protection" and finally It become a rotation center and that rally today had a good strong solid breakout to test at-least 1.3890 area.

Reaction time was minimal so we should have been ready with limit buy orders to pick such strong strengths and get out quickly if momentum fades out.

Secondly, take look at the chart Eur/CAD !!

I post that chart as My favourable chart of the week last week as I fetch good pips with a trade and that rally from the balance area was bouncing so strongly and finally it give another entry today at 1.5270 and ready to cover quickly or book some profits or take that momentum till the end of the day.

Next one of real interest is Eur/Nzd

Eur/nzd set up was strong and that setup had strong accumulation area and then breakout which did not had a follow through but downside rally was very slow and keep bouncing out of a new low on hourly and create another opportunity for balance market to get through that protection area strongly and If that type of momentum had to fade out then they should have reason of failure, otherwise you should keep buying on shorter-time frames.

Here is the update gbp/chf

Suddenly, a strong pair to watch as It is still not confirmed that trend is matured trend and ready to reverse on medium term. "Strong" rally after the top is seen, but that protection area giving support to the pair regularly, and Now it would interesting to watch how shorts follows up. I would remain short with small stops and if I am stop out then I would look at the bullish bar that reverse from here, And If it was another liquidate trap then it give us better opportunity to short at higher prices.

Eur/jpy trade update

The setup I mentioned, last Friday worked very nicely although there was a new low found but it was for a very short period but reading the context and taking low risk reward opportunity, should be the plan and when You read the complete chart and logic then you would found it useful to enter as I have found price "breaking the floor" and all the liquidate bullish engulfing trap succeed and Place a new low.

Price rebound, but rally from that low was fading so I expected a new low and that what it did. Though, I had to cover quickly as bullish engulfing from low was about to test the area again, though book the profit at 141.16