For me the following posts highlight the importance of being aware of Bull and Bear Consensus: At true reversal points there will be little fight as the balance of S+D are so out of whack that you basically get a consensus between the bulls and bears This is what I call on my blog a "bull and bear sweet spot". Bulls taking profit where bears are shorting and Bears covering where bulls are buying. It could be said that...
His favourite candle patterns are...
"Most people suggest you should focus on price levels where there was a turn in the past and to watch for heavy volume, above average volume. This is where the focus gets off track in my opinion. Think about it, at price levels where supply and demand are most out of balance which creates the highest probability turn, is there going to be lots of trading activity or very little? Like anything in life, the more unbalanced an equation or two competing forces are, the quicker and more predictable the outcome is. In a market, the more out of balance supply and demand is at a price level, the less the trading activity will be (because there's less "fighting" over direction). What this picture will look like on a price chart is not heavy trading activity and above average volume like all the trading education promotes, it’s actually the opposite (again because there's less "fighting" over direction).
Now the next bit blew my little mind...
"Conventional Technical Analysis would suggest you should not sell short at “B” because there is so much trading activity below which will make a price decline challenging. Many traders would look at all that trading activity in the circled area and not sell short at “B” because they would not think price could fall through that area. Again, to me, the focus and understanding is way off. The fact that there was/is so much trading activity in that circled area/congestion areas tells me price is very likely to fall through that level and should do so with ease. (because supply and demand were at an equilibrium If supply and demand were really that much out of balance in that area, you would not have so much trading activity. Price proceeded to fall through that area after “B” which was expected if your focused on the right logic. In summary, the major price turns in a market don’t typically happen at price levels where there is lots of trading activity, it’s the opposite. When looking for this on a price chart, don’t focus on levels surrounded by lots of pretty candles. The focus should be on price action mainly surrounded by white space".
The bolded bit are the important bits for me, the bracketed bits are explanations I've added for myself because for some reason I was struggling with the definition a little.
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- Little trading activity = Consensus/Bull and Bear Sweet Spot... Therefore a reversal is very likely.
- Heavy trading activity = complete indecision so therefore when past areas of it are approached by a trend in the future... Price will likely fall through it as neither the Bulls or Bears have nor ever had conviction in that area in the past.
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1. Keith Harrington II's PDF's: the following are a few short notes for my records... You can download them off his wordpress blog thefxbrickroad.wordpress.com from this post. He can also be followed on twitter: @elgitano5720... To anyone getting into S&R trading with candles this is a great place to start as not only is it explained he has created Q's and lessons along the way.His favourite candle patterns are...
- Hammers
- Shooting Stars
- Bullish Engulfing Patterns
- Bearish Engulfing Patterns
- Haramis (three inside up/down)
Below is page 25 of his PDF... All rights: Keith Harrington
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2. JMF3 put me onto Sam Seiden some time ago and I am on the mailing list of the Online Trading Academy whom he contributes for. He puts out about one article a week but I don't always keep up with them. Anyway most of them I get however this one made me think a couple of times because it challenged my status quo. You can find it here in its entirety. Below are the bits that made me think...
Now the next bit blew my little mind...
"Conventional Technical Analysis would suggest you should not sell short at “B” because there is so much trading activity below which will make a price decline challenging. Many traders would look at all that trading activity in the circled area and not sell short at “B” because they would not think price could fall through that area. Again, to me, the focus and understanding is way off. The fact that there was/is so much trading activity in that circled area/congestion areas tells me price is very likely to fall through that level and should do so with ease. (because supply and demand were at an equilibrium If supply and demand were really that much out of balance in that area, you would not have so much trading activity. Price proceeded to fall through that area after “B” which was expected if your focused on the right logic. In summary, the major price turns in a market don’t typically happen at price levels where there is lots of trading activity, it’s the opposite. When looking for this on a price chart, don’t focus on levels surrounded by lots of pretty candles. The focus should be on price action mainly surrounded by white space".
The bolded bit are the important bits for me, the bracketed bits are explanations I've added for myself because for some reason I was struggling with the definition a little.
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