Hello and welcome to another edition of the bulls vs the bears vs the bears. Today we are going to learn how to take advantage of trading opportunities in Price Event Areas. And I will start with a simple message. The market always retraces its steps.
Some of you are probably like “What is he talking about?” Well picture this scenario. The market retraces to a level started from only to hit a brick wall before launching another strong move. What I’m trying to say is the market always finds its way back to where it started from. In other words, it never forgets where a major move originated. And you know what, this scenario happens more often that you would care to know. Not only are these second chance opportunities regular occurrences but they also present high probability opportunities – not to mention high reward to risk benefits.
So guess what we’re going to do? We are going to look at a few pictorial illustrations of this powerful high probability technique.
Let’s take a look at Example 1
Here we see a confluence of situations happening here. We have key levels being established at both support and resistance. Notice how old support becomes new resistance and vice versa. The big moves below these areas is what causes these event areas.
Notice the three arrows on the screen. They represent price hitting the key levels These hits first result in bullish pin bars at the line of support and eventually bearish pin bars at the line of resistance. You need to understand that these forays take place. when the market reverses. Why? Because it has taken note of where the initial move started from. And when you spot such a reversal, you better jump in like a sharp shooter.
Now not only can you trade pin bar signals at either key level but you can put a limit order at the test area at both levels. So at the level of support you put a stop loss just below the level of support. Whereas at the level of resistance you place your stop loss just above the the line.
Next to Example 2
Now the next example covers how to use an event area with or with out a price action signal as your event area. Now do you see the bullish pin bar next to the bearish pin bar towards towards the far left corner?This forms the event area as a consequence of the strong move that followed. This area would most definitely come in handy in subsequent retests.
Now see the bullish pin bar next to the shaded level of support. That’s definitely a buy signal since it faked out and rejected through the event, creating much needed momentum for the bulls. And as you can see, the bulls are enjoying a nice ride up the mountain. Now see the retrace in the middle of the shaded area. Here you could a limited order or stop loss near the event area. OF course that wont bother the bulls as they enjoy their climb upwards.
Now on to Example 3
Here we have an event area given us a hint of a potential price signal. Notice the big move at the 1.667 level, This suggests the market has taken note of this hot event area A long-tailed pin bar has created this price action signal and the move below it has certified it as an event area. See how the market drifted from that level as price sold lower from the pin The event area experiences a retest, leading to a retest before the market pushed above the event area. Now as the market retraces back down to the event area, nobody has to tell you that this is an event area and that you need to take not of that.
You can do two things here. You place your stop loss near the 1.6700 -1.6670 area. Or you put your hunter’s hat on and wait patiently to see if a buy signal will take place. As you can see a gorgeous long -tailed pin bar has taken shape and, upon this formation, the bulls push for the mountains. Now let’s look at another example of a price event area giving us a clue of a price signal
Notice the two pin bars forming an event area at the 0.8410. Then we see a a major price retracement taking place in January of 2014. Your best option is to draw this key resistance level and keep watch as price converges on this line. As you lie in wait watch out for the price signal for confirmation of a possible move below this area.
See how the market plunges all the way down to the key support around the 0.8080 mark. This happens after the market runs out of steam below that event area in January 14th. And see how price gives props to the key support level. It’s its way of saying “I’ll be back”
For information on second chance trading look up How to Get a Second Crack at Missed Trading Signals
That’s a wrap for ”How To Take Advantage of Second Chance Trading Opportunities in Price Event Areas ” . I hope you have gotten a full grasp of key levels and event areas. It’s pretty obvious that the market never forgets where event areas started from. Just mark these areas on your price charts and when the market retraces to these areas expect a nice high risk/reward situation.
Take care til next time
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