Relative Strength Index (RSI) RSI is another momentum indicator that is useful for confirming reversal breakouts. Basically, this indicator tells us the changes between higher and lower closing prices for a given period of time. We won’t go into too much detail about it but if Estimated Reading Time: 3 mins The use of cross currencies to see which currency is stronger overall, which can be applied by creating a currency profile that will show the strength of the currency. The use of moving averages can be applied to currency profiles, to show the strength or weakness of the base blogger.comted Reading Time: 10 mins 22/08/ · The best thing any trader can do for themselves whether they are attempting to decipher trend strength or identify key levels is to get back to basics. Every market has its story to tell, and every story can be translated using swing highs and lows. Trading in forex and stock market is Estimated Reading Time: 8 mins
How To Determine The Strength Of A Supply Or Demand Zone - Forex Mentor Online
Using Order Flow To Understand Where The Banks Have Got Forex to know strength Trades Placed. Understanding How Large Groups Of Traders Trade. How To Determine When The Trend Has Changed. Before I show you the actual method I use to determine the strength of a supply or demand zone, I want to give you a little bit of an explanation as to how the method works so you understand the basis as to why it works the way it does.
The bigger the size of the orders, the bigger the size of the trades they can get placed. What this means, forex to know strength, is we can gauge how strong a supply or demand zone is, simply by understanding the strength of the traders beliefs about which direction the market was going to move in, right before the bank traders came into the market and got their trades placed to cause a supply forex to know strength demand zone to form.
We know that most of the traders in the market will trade in the direction of the trend, and we know that by believing in the concept of trend, they also believe the longer the amount of time the market has spent moving in one direction, the higher the probability it has of continuing to move in the same direction in the future.
This means that all we need to do to figure out the strength of a supply or demand zone, is look at how long the market was trending prior to the supply or demand zone forming, as that will give us an idea about how forex to know strength traders were placing trades before the zone formed, which will in turn give us an indication as to how forex to know strength the supply or demand zone actually is.
If you placed a 1 lot trade at 0. If we know where the banks have got a large trade placed into the market, we know they are likely to want that trade to remain open if the market returns.
So a supply or demand zone we know has been created by the bank traders placing a large number of their trades, is more likely to cause a reversal to take place than a zone which has formed as result of them placing a small amount of trades.
Just before I get in to showing you the method I use to determine the strength of a supply or demand zone, I want to give you a quick little lesson in drawing the zones properly to make sure that you include all the points forex to know strength the banks could have got their trades placed to cause a zone to form.
e you draw the zone from the last bearish candle that formed before the move up occurred and down to the most recent low that formed.
The reason they were placed here is because the number of sell orders entering the market at this point is much greater than at the point where the demand zone low formed, which means the size of the buy trades they banks were able to get placed here, were much greater than the size of the buy trades they were able to place at the demand zone low. You need to draw your demand zone from the lowest of these lows marked with a tick as this is the low created by the banks placing their largest set of buy trades.
If it was a supply zone you need to draw it from the highest high as that would be the one created by the banks placing the largest number of sell trades. Instead, we have to took at the zone in comparison to other zones that have formed during the same up or down swing and work out an order of which zones are stronger or weaker than others. I know from looking at this image that out of these two supply zones, supply zone 1 is stronger the supply zone 2, forex to know strength.
To find out how big the sell trades were, you have to move the chart back to the point where the banks got their largest set of sell trades placed, as that will give you an idea of how many buy orders were coming into the market at the time the banks got their sell trades placed. In the article I said how all movements in the market are trends, only not to every trader at the same time. The downswing marked above, although not looking like a downtrend on the 1 hour chart, is a downtrend to the traders on the time-frames below, which means most of the traders on these lower time-frames will have been entering short trades when the swing low marked with a red vertical line was forming.
When the market moves up after making the swing low, a lower high is made and another drop soon takes place. Now instead of this drop causing the market to make another lower low, like it has done after every other time the market has made a lower high during this swing down, it moves back up back up again and creates a higher low. Shortly after the higher low has been made the market moves up again, and this time breaks through the lower high that formed before the higher low had been created.
The break of the high would have caused a large number of people to enter long trades because it looked as though the market was about to start a big move higher. Before the banks came into the market and got their sell trades placed, the candle for that hour was looking very bullish, which meant lots of traders will have been placing buy trades, by the time the hour had come to a close, the banks trades had got their sell trades placed which caused the candlestick to become a pin bar.
So all in all, we know there were quite a few traders in the market going long at the point where the banks got their sell trades placed to cause supply zone 1 to form. The point where the banks got their largest set of sell trades placed to cause this supply zone to form has been marked with an X to the far right of the image.
You can forex to know strength that before supply zone 2 formed, forex to know strength, the drop from supply zone 1 had caused the market to make a new lower low. The lower low we see form before the creation of supply zone 2 does the opposite, it makes people believe further downside is going take place, which means after the low has been made and the market is moving back up again, less traders are placing long trades during forex to know strength move up because they think the market is inevitably going to continue falling due to the new lower low.
This means the amount of buy orders entering the market at the time the banks got their sell trades placed to cause supply zone 2 to from, were considerably less than the number of orders coming into the market at the time they placed their sell trades to cause supply zone 1 to form. So when the market comes back up and forex to know strength to supply zone 1, the bank traders will be more inclined to forex to know strength sell trades due to the fact a larger set of their trades have already been placed here.
In order to figure out which of these two demand zones is the strongest, we have to move the chart back to the point where the banks got their largest set of buy trades placed to cause the each demand zone to form, forex to know strength.
To find the point where the banks got their largest set of buy trades placed, you have to locate the lowest low which could have formed as a result of them placing buy trades into the market before the move up creating the demand zone began. With demand zone 1 the lowest low is the one seen to the far left of the image.
For demand zone 2, there was only one low that could have been created by the bank traders placing buy trades. In the image above you can see the drop which caused this supply zone to form took place after the market had made two swing highs. Marked with an X in forex to know strength far forex to know strength corner of the chart.
This move down was not only significant to the traders on the 1 hour chart, but also to the traders active on all of the other time-frames in the market, all apart from the monthly chart. Marked with an arrow. The market arguably looks even more bearish on here than it does on the 1 hour chart, forex to know strength. Because it looks forex to know strength bearish, forex to know strength, it means whatever traders use the daily chart to determine the direction of the trend, will have been forex to know strength short trades at the time the banks came into the market and placed their buy trades, due to the fact forex to know strength market looks like it is in a long downtrend, and they believe the longer a trend has been in place, the higher the probability it has of continuing, forex to know strength.
Because the market looked so bearish on virtually all the time-frames in the market, it tells us that a massive number of traders were placing sell trades at the time the banks decided to get their buy trades placed. These buy trades had to have been huge, as the only way the market could have moved up out of the demand zone is if all the sell orders from the traders selling were consumed by buy orders, forex to know strength.
Lets take a look at the other demand zone to see if there were a lot of traders going short at the time the banks decided to get their buy trades placed. Marked with an up arrow. We saw in the previous image how before forex to know strength banks got their largest set of buy trades placed, the market had been trending lower on almost every time-frame in the market.
In the image above demand zone 2 forms after a sharp move higher had taken place, which means most of the traders in the market will now not be interested in placing short trades on any moves down they see, due to the fact the sharp move higher has made them think the market is going to continue rising.
So in comparing the two zones, we know that demand zone 1 is stronger than demand zone 2 because the size of the buy trades the bank traders placed to cause demand zone 1 to form, forex to know strength, were much much bigger than the buy trades they placed to create demand zone 2, due to the outlook of the market being much more bearish before demand zone 1 formed than before demand zone 2 formed. We first figure out the length of time each consolidation has taken place, and then whichever one is the longest is the one considered to be the strongest.
If you look you can see consolidation 1 lasted longer than consolidation 2. In total, consolidation 1 lasted for 63 hours whilst consolidation 2 only lasted for 28 hours. Because consolidation 1 lasted for a longer length for time it means the supply zone which formed when it came to an end is stronger than the supply zone that formed when consolidation 2 terminated.
The longer the amount of time the market spends consolidating, forex to know strength, the higher the number of traders there will be trading the consolidation itself, instead of trading in the direction of the movement seen prior to the consolidation. Originally this was just going to be one article but when I started writing it, I realized that in order for people to actually understand the method, they have to be taught about how the banks get their trades placed and how other traders in the market trade, which in themselves are not easy concepts to explain to people, hence the reason for me creating the two articles seen at the beginning.
I was trying to contact you by email but it seems the form do not work. Any way I can email you directly? Good article, thank you. I ordered the book on pin bars on jan 19 but have not received it.
Save my name, email, and website in this browser for the next time I comment. How To Determine When The Trend Has Changed The Theory Behind The Method Before I show you the actual method I use to determine the strength of a supply or demand zone, forex to know strength, I want to give you a little bit of an explanation as to how the method works so you understand the basis as to why it works the way it does.
Think about it like this……. This is the main premise my method is based on. Drawing The Zones Properly Just before I get in to showing you the method I use to determine the strength of a supply or demand zone, I want to give you a quick little lesson in drawing the zones properly to make sure that you include all the points where the banks could have got their trades placed to cause a zone to form, forex to know strength.
Note: To find the point where the banks got their largest set of buy trades placed, you have to forex to know strength the lowest low which could have formed as a result of them placing buy trades into the market before the move up creating the demand zone began, forex to know strength. Marked with an arrow The market arguably looks even more bearish on here than it does on the 1 hour chart.
Thanks for reading, please leave any questions in the comments section below. Comments I was trying to contact you by email but it seems the form do not work. Which Candlestick Patterns apart from the engulfing candle whould you consider a reversal sign?
This is a complete treaties on how to trade profitably. Leave a Reply Cancel reply Your email address will not be published. Comment Name Email Save my name, email, and website in this browser for the next time I comment.
why I STOPPED USING THE CURRENCY strength meter - DO this instead
, time: 9:58Currency Strength Indicator – The Traders Secret Weapon
22/08/ · The best thing any trader can do for themselves whether they are attempting to decipher trend strength or identify key levels is to get back to basics. Every market has its story to tell, and every story can be translated using swing highs and lows. Trading in forex and stock market is Estimated Reading Time: 8 mins 23/03/ · Our free currency strength meter is designed to give you a quick overview of the underlying movement of each individual currency in the Forex market. If we know that the US Dollar is strong and the Japanese Yen is weak then it's obvious that going long on the USD/JPY Forex pair offers us the a low risk trading opportunity Relative Strength Index (RSI) RSI is another momentum indicator that is useful for confirming reversal breakouts. Basically, this indicator tells us the changes between higher and lower closing prices for a given period of time. We won’t go into too much detail about it but if Estimated Reading Time: 3 mins
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