Forex Supply and Demand: Trending Market 2 - ForeXposed

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Tuesday, March 14, 2017

Forex Supply and Demand: Trending Market 2

I will continue the studies about forex price behavior.

In a trending market, we can analyze wave structure (this is not about Elliot Wave). We can see Wave Structure in each time frame, not limited to a big time frame.

Downtrend:
Forex Supply and Demand: Trending Market 2


The keyword for a trend is a "SERIES", its mean; 1 lower low and 1 lower high does not be called forming a new downtrend, but the initial process of its creation.

On the chart above, which holds the key on a downtrend is every point H, because from this foothold trend will continue its journey. From the picture above we also know the prices NEVER MOVE in STRAIGHT LINES, so it is very logical to always capitalize every Corrective Wave/Retracement as 'entry point' because we can expect the lower low is formed.

Uptrend:
Forex Supply and Demand: Trending Market 2


Otherwise, in a primary uptrend (B-C), each point L is the holder on a continuation of the trend. Having created Momentum High (MH) which will be followed by Corrective Wave/Retracement, so this correction is going to be the chance of 'entry ' because we can expect there is a big probability of series of higher high. Rather than try to Open Position against a trend, should we suppose that each correction is a gift or bonus for ' buy ' entry with expectations the next higher high is in the direction of the TREND/MOMENTUM/IMPULSE WAVE.


There are some things that are worth scrutiny on trending market:

  • The Momentum eased/reduced in a trending market NOT a sign of a trend reversal but just a rest motion, take a breath. As you ran 100 meters, and then have a short break to gather energy that has gone before.
  • Decreased momentum and volatility is due to the buyer and seller have agreed to accept the price level / new price areas are created or call it new equilibrium level (acceptance zone).
  • They (buyers/sellers) will continue to make transactions (buy/sell) in this narrow range, this activity is known as Backing and Filling, which ultimately shows the pattern/formation you know like Triangle, Flag, Wedge, etc.
Example for momentum in EU pair:
Forex Supply and Demand: Trending Market 2

Note the EU's journey from A to B that consists a series of lower low (L) and lower high (H). After L is created, we know this is a momentum low (ML). From the equilibrium/consolidation then a correction to the point H gives the opportunity to entry sell because the expectations of a downtrend are multiple lower low.

This series of lower low that forming a downtrend and will continue to walk along the momentum when still strong with it, where the end of a downtrend is down momentum will gradually disappear and create the process of reversal.


Example for momentum in GU pair:
Forex Supply and Demand: Trending Market 2


Almost as much as the EU, the GU pair are on downtrend condition by creating a series of lower low - lower high. The particular interest is the ranging market period that long enough on TF Hourly marked by L1-L4 series and H1-H4 series. In this condition, you should remember the momentum shown by each impulse wave from point A is down. So the options to ‘sell entry’ at each correction becomes logical because the probability as well as expectations of a trend there is multiple lower low.

If the thought is to do ‘buy entry’, this means you are doing a counter trend trade, which not only risky but also the probability is small.

By understanding the behavior of prices on a trend, we are no longer in hesitation to take a decision because we already have a simple trading system. Whether it's an uptrend or downtrend, any correction is an opportunity, that's it until finally the slogan "TREND IS YOUR FRIEND" is become reality and can be applied.

Hopefully, we are no longer trading forex on the conditions as in the picture below:
Forex Supply and Demand: Trending Market 2