Theorem-08: Low Volumes and Volatility are Often precursor to High Volatility in Price Action (PA).
Just because markets are dynamic place and their primary job is To churn money from weak hands to strong hands.
Theorem - 09: Every MOVE in the market has 'AT LEAST' 3 legs.
AT LEAST is a rare word when used in trading just because trading is a game of probability and markets are a chaotic place. So take a note of it.
This was the most precious fact (Secret) to me analyzing markets. Thanks to Robert Miner!
Well....as mentioned earlier it is important to know what the market MOVE is, i.e., what the market is doing basically
....BUYING or SHORT COVERING,
....SELLING or SHORT-SELLING.
As in the chart below you can see there are three legs
OA-AB-BC. Those guys who don't use this fact just use indicators often get whipsawed and blame it to the markets or operators. What happens is that indicator may be finally right but due to emergence of BC leg they get confused and book losses or enter with wrong timing.
Corollary of Theorem - 09:
(a) If BC is weaker than OA (weaker means 1. Lower Volume 2. Sharpness (angle with the horizontal), 3. Price distance moved, 4. Not making new Low/High, )
Correction is over and MajorTrend shall resume eventually. BUY/SELL above/below B.
(b) If BC is stronger than OA (stronger means 1. Higher volume 2. Sharpness (angle with the horizontal) 3. Price distance moved, 4. Making new Low/High)
A short term Trend may be in the making so a further FOLLOW-UP is most likely event.
If it again makes a new High/Low or better if it Closes there, a new Trend is born at least in the short term, i.e., immediate TF in the analysis.
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