Namaste traders. 🙏
Image by jcomp on Freepik | Edited on Canva
I hope you all have noticed the chart shown at the beginning of my previous analysis. However, the price action shown on the right in the image below had not taken place at that time. But the main point is to understand that as soon as a price area is approached, sellers bring down the price by putting pressure on a large number of buyers. This behaviour of #market participants indicates that there are almost no buyers at the upper levels due to which sellers easily dominate and huge price movements are seen.
Image by TradingView | #GOLD chart weekly time-frame.
By the way in this blog, I will not only explain the importance of levels but will also share examples of taking trades and managing risk.
Image by TradingView | #GOLD chart 4-hour time-frame.
In the image above to the right of the blue vertical line, you can see the price action that has occurred since my previous analysis. In which the first bullish candle formed after my previous analysis blog, broke the upward trend that had been going on for the last several days, which you can identify between the 2 yellow lines on the chart. After this, we saw a pause in the price but to understand that we have to look at this chart in a smaller time frame.
Image by TradingView | #GOLD chart 1-hour time-frame.
In the white ellipse area in the image above you can see that pause in the price after the breakout, in which we can see a small red candle following the breakout candle, but instead of continued selling pressure, we saw buyers holding the price, and then after a few hours of consolidation, I placed a buy order with a smaller quantity here as soon as the price broke the high (key resistance) of the breakout candle to the upside.
Let us understand how I identified this momentum, why I placed a trade before the candle closed (which I never advised you to do) and why I thought it was right to trade with low volume here.
First of all, I did not know that this move would be so fast, nor did I expect that this entire move would fail like this after this breakout. But what I knew was that if there is consolidation in the price after coming close to an important resistance and then a breakout occurs, then the price movement becomes good. For a long-term view, confirmation is not considered without candle closing, but in a smaller time frame, especially to ride the momentum, as per my experience, trading with minimum technical risk was profitable.
Now, the risk in my trading setup would be if the price starts trading below the small consolidation zone near the resistance (which you can identify in the white ellipse area in the image above). Because breaking this small consolidation zone upwards caused a positive psychological change among market participants. Meaning, if the price starts trading below this zone, that psychological change will again become negative, due to which panic selling would then bring the price down rapidly.
So simply I took the trade with less volume to secure my position from any panic selling and set my SL order below this consolidation for a 1:2-3 risk-to-reward ratio, which I got in less than 10 min which you can understand by looking at the chart in 5 min time frame.
But here comes the most important thing Self-Control. Do you want to know why?
Because in the same flow, the price moved up to 1:6 RR (As per my setup) Now most of the traders start feeling regret after seeing the rising prices even after booking their profits. They get worried thinking that if only I had waited a little longer I could have captured this whole momentum. And then after regretting it for a long time, they finally lose control and buy at a highly inflated price without proper strategy and risk management. And then you all know what happens after that.
This is why, understanding price action, knowing your risk, proper strategy, your setup, timing and self-control are given so much importance when trading.
Hope you have learned something better from this blog!
English is not my first language. So sometimes I use 'Google Translate'. Please don't think that anything I have written in this blog has been copied from somewhere or is AI-generated.
Thank you for reading this blog.
आज के लिए बस इतना ही।
"Keep Learning, Earning, Growing, and Smiling"
🙏
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