by _strange_ » Wed Sep 20, 2023 2:12 am
Ive been looking at trending markets trying to workout why we can consistently and repeatably expect a close outside and an attempt at a new high/low. Clearly there is some phenomenon happening. Going through the lectures and my notes I cant really find a clear explanation, although this may be entirely my fault and completely missed it - theres alot in there to be fair.
The conclusion I have come to, and this is a shaky conclusion, is something like this:
When the market is trending down, its following a trendline. Most people are in agreement that this trendline is valid and are trading it. Market will sell off and retest itself, coming back to and testing previous lows and horizontal aspects of the chart. Sort of "breakout, pullback and test, breakout, pullback and test". The "break" comes from bulls deciding that the market is low enough for an attempt to reverse the market. Maybe it hits some important horizontal chart level and bounces, causing the break of the trendline. While trending down, the market pushes through many horizontal levels on the chart creating "gaps" in the "orderflow". Market will usually retrace during the break and attempt to test some part of the chart, maybe a previous low of the trend, maybe the low of the previous day, its usually something, and there is a pool of resting orders? At these areas and traders anticipating this and attempt to continue the trend. Market makes a new low (or an attempt at a new low) and then the bulls either reverse the market on this second attempt, or the market goes sideways while everyone decides the next course of action, or the bulls fail and the market continues lower again testing itself and challenging the next roadblock.
The steeper and sharper the selloff, the wider the gaps in the orderflow and the more likely for a wild retracement maybe? Im thinking this is why the market usually takes back whatever it gave up during a news event, or when the market rips off in some direction strongly, that move is usually taken back to some degree.
This is just a broad attempt at understanding, obviously there are tells along the way like if a market cant make a new low. Transitional areas where the market starts making higher lows retesting itself in the opposite direction. Congestion/ranges. All of which can be used as a gauge of strength in either direction.
I see so many times where during this break and pullback the market will rise way above the EMA and I am assuming that this is because of wide gaps in the orderflow. The distance from the previous swing low to the current low is very tall.
Am I on the right planet? Any feedback/direction would be appreciated. Its sort of annoying that this happens so consistently and Im not entirely sure the reason and I think its a critical aspect that I need to truly understand.
Ive been looking at trending markets trying to workout why we can consistently and repeatably expect a close outside and an attempt at a new high/low. Clearly there is some phenomenon happening. Going through the lectures and my notes I cant really find a clear explanation, although this may be entirely my fault and completely missed it - theres alot in there to be fair.
The conclusion I have come to, and this is a shaky conclusion, is something like this:
When the market is trending down, its following a trendline. Most people are in agreement that this trendline is valid and are trading it. Market will sell off and retest itself, coming back to and testing previous lows and horizontal aspects of the chart. Sort of "breakout, pullback and test, breakout, pullback and test". The "break" comes from bulls deciding that the market is low enough for an attempt to reverse the market. Maybe it hits some important horizontal chart level and bounces, causing the break of the trendline. While trending down, the market pushes through many horizontal levels on the chart creating "gaps" in the "orderflow". Market will usually retrace during the break and attempt to test some part of the chart, maybe a previous low of the trend, maybe the low of the previous day, its usually something, and there is a pool of resting orders? At these areas and traders anticipating this and attempt to continue the trend. Market makes a new low (or an attempt at a new low) and then the bulls either reverse the market on this second attempt, or the market goes sideways while everyone decides the next course of action, or the bulls fail and the market continues lower again testing itself and challenging the next roadblock.
The steeper and sharper the selloff, the wider the gaps in the orderflow and the more likely for a wild retracement maybe? Im thinking this is why the market usually takes back whatever it gave up during a news event, or when the market rips off in some direction strongly, that move is usually taken back to some degree.
This is just a broad attempt at understanding, obviously there are tells along the way like if a market cant make a new low. Transitional areas where the market starts making higher lows retesting itself in the opposite direction. Congestion/ranges. All of which can be used as a gauge of strength in either direction.
I see so many times where during this break and pullback the market will rise way above the EMA and I am assuming that this is because of wide gaps in the orderflow. The distance from the previous swing low to the current low is very tall.
Am I on the right planet? Any feedback/direction would be appreciated. Its sort of annoying that this happens so consistently and Im not entirely sure the reason and I think its a critical aspect that I need to truly understand.
