Phase of the price movement
In order to understand the big picture, I would like to refer to the principle developed by Stan Einsteina, which he calls "Phases of price movement". The basic premise of these phases is that the market found four ways to price behavior. It works for any currency pair, stock or index. The market may be in the phase of Foundation, lifting prices, consolidation, or falling prices. Phase 1 – Foundation: the price ranges before lifting; 2nd phase – the rise of prices: the price shows as higher highs and higher lows; Phase 3 – consolidation: price is in range before drop; Phase 4 – the fall of prices: price makes lower highs and lower lows.
Powerful aspect of these phases is that they allow you to know what kind of trading you have to use at a particular point in time. The idea is simple. In the phase of Foundation and consolidation of the price is in a sideways motion. The market is not under the control nor the buyers, nor by sellers. Traders can open long position (at lower range) and short positions (at the top of the range). Also traders can open positions on breakdowns within a specified range. No one knows whether there will be then the increase or decrease prices, however a strong breakout in one direction is a good indication that such a motion will occur. When the market is in the recovery phase or falling prices, traders should trade only in the trend direction. In other words traders will look for buying opportunity on a pullback during ascent, as well as the possibility of selling on a pullback during the fall.
The following are examples of these phases along with potential areas of trade (chart 1-3):
Question: how are you going to combine this concept with his timeframe on which you usually trade, to open their positions?
The first thing he wants to do for any trader is to identify the current market phase. For example, as shown on the right side of the 1st chart, the price broke the lower border of the consolidation phase. Therefore, we can assume that the phase of falling prices (phase 4). Therefore, the traders start looking for the right kind of trade (in this case, the opening of short positions on pullbacks). The 2nd chart shows how price behaved in the future.
In order to consider what happened kickbacks, they must match the interest level of prices (i.e. important moving average, a previous support level, trend line, etc.). In this case, the price rolled back to the previous support level which became a resistance level. Candle absorption added even more confluently, attracting more and more traders. An overview of the means to check what happens on the chart as if you looked at it from a great height.
What to do if you missed the opportunity to enter the market?
From time to time there are moments when you really miss the point of entrance. However, as long as the price is printing lower lows and lower highs, it remains in the phase of decline. In this case, the traders could seek additional kickbacks. As mentioned earlier, moving averages are powerful tools to be used in trending markets. The application of graphics to the previous exponential moving average with period 20 will give you additional opportunities to trade (see 3rd graph).