Have some few question:
1.Can there be any underlying reasons only known to banks to want to change the direction of the trend? Or is it purely to make money from our long positcoms?
- Can the price reverse with a single candle?
- I need to fix in my head the meaning of single candle move,at times I seem to loss a concept of the power or the force behind the candle move. But am working on it. Any suggestions.?
I am still reading and studying the book, I am also reviewing charts to practice identifying reversala on the daily and 1hr charts.
Thanks
My Response:
First things first, you need to understand as a trend continues, more traders catch on to its existence… and place trades in the direction of the trend.
Now, this wouldn’t matter much, except for one crucial fact:
Forex is a zero-sum game…
To profit in the market… someone else has to lose.
The banks?
They want to make big bucks, right?
That means causing a lot of traders to lose money. So, as more traders ride the trend, the potential profit for the banks starts to shrink… Why? Because they need to reverse the market to get those trend traders to lose money.
Now, let’s talk about retracements and consolidations…
These moments in the market can fool traders into thinking the trend is about to reverse.
But, when the banks reposition and enter again, the retracement or consolidation ends, and the market swings back into the trend.
Boom!
Those tricked traders lose money… and guess who profits?
Yup, the banks.
Over time, trends wear on, and traders get savvy.
They stop placing trades during consolidation and retracement phases, only entering when price moves in the trend’s direction.
This is when we see trend reversals.
Without traders losing money during these phases, the banks lose their money-making strategy.
They need other traders to lose to make a profit, remember?
Here’s a fundamental fact: all reversals start with a single candle. That’s because this candle triggers traders who have trades in the opposite direction to close out at a loss.
Picture a market on the upswing…
A single big bearish candle pops up and could push the market down enough to scare those in long trades to close out at a loss. This sell-off drives price down even further, prompting more traders to close their long trades. Every trader has a limit to how much they can stomach losing, and when they hit that limit, they’re out.
Your third point’s a bit unclear.
Shoot me an example, and I’ll be happy to explain.
Keep learning, stay sharp!
PAN.