Trending and Countertrending Price Action in .NET framework

Drawer QR Code 2d barcode in .NET framework Trending and Countertrending Price Action

a market s future direction There are actually two types of impulsive or trending behavior to account for: one going with the longterm or primary trend and the second marking the beginning of an intermediate-term trend that also is known as a secondary move We will cover the subject of coordinating time frames in detail in 9 in the section on quantifying trends

The most important thing we need to know about an individual candle is that we do not make an analytic, or trading, decision until the candle is closed, which means that the time period is complete You will be hearing this again Another important aspect of individual candle analysis for forex intraday charts is the time of day In trading, even for the 24-hour-a-day market, all time periods are not equal If there is very little trading volume, as is generally the case from the close of the US nancial markets through the Tokyo open, we do not place importance on individual candles or patterns during this period In forex markets, it is widely known by experienced traders that volume generally trails off noticeably leading up to noon EST and stays very low until the Tokyo open Regardless of your own experience in trading, you do not want to initiate short-term trades that are based on individual candles or candle formations during those hours The exception to this would be US stock indexes such as the E-mini S&P future and the mini Dow futures contract, which still have high volume and good trader participation rates In 11 we will cover trading for different periods and de ne position trading, swing trading, and day trading

The rst two types of candles we want to point out to start are dojis, which are candles in which the opening price is very close to the closing price and there is a very small body; these candles indicate market indecision Change-of-direction candles tend to reverse the previous pattern or direction of the highs and lows If the preceding candles were moving higher, a change-of-direction candle would be a candle in which the close was lower than the low of the preceding candle or candles Similarly, if the previous candles had developed a pattern of lower lows, lower highs, or lower closes, a change-of-direction candle would be a candle that closed above the high of the previous candle or candles Figure 4-5 is a daily chart of the British pound from January 20, 2007 that exhibits its share of both dojis and change-of-direction candles You will learn in 9 that change-of-direction candles are used as trade signals It is important that as analysts and traders we understand that neither one of these candles means that a market will or will not perform as we expect Changeof-direction candles do not mean the market is going to change direction, just as a doji does not mean the market must take a breather or must reverse We never know what event could happen at any time to change the behavior of the market Over time, though, these candles have proved to be a good hint or heads-up that a particular market has shifted gears, and it s important that you le this information away as you will see how we use it to home in on speci c trade setups Notice in Figure 4-5 how twice we see a doji candle followed by the

Figure 4-5

change-of-direction candle to put in a market top This is indecision followed by action as the British pound completes an up move before swinging lower It s important to recognize what behavior the candles or multicandle formations are exhibiting in the context of the overall trends that already are in place Taken by themselves, dojis or any individual candle or candle formations may or may not be signi cant However, in the context of the current trends and relative to signi cant support and resistance, they are worth our attention as traders and, as you will see later, play a signi cant role in helping identify trade setups and signals