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MENTORING - Technical analysis (with an order flow mindset) - One point…
MENTORING - Technical analysis (with an order flow mindset) - One point touch
For any business to happen, a trade location is paramount. This is striking feature of any business.
A trader should understand the trade location far better. Only if it is low risk, he should get in. Else leave it.
This location is important for large players to create an order flow. For example, why did Hyderabad Central chose Panjagutta as its location?
One of the sources for creation of order flow for large players are technical indicators.
Technical analysis does not generate business. It is used to generate business in trading and investing.
What are the major technical indicators that are used for generating business.?
Large players look for technical indicators that are very simple. They do not want to find business around complex technical indicators. Because there will be very feeble order flow there.
They create in indicators which are easy to use and execute for retail traders.
So, we will learn where retailers get easily trapped in terms of technical analysis.
Retailers use technical analysis that is very simple to use and ready-to-cook/use. It should also indicate very easily when to time the market. But indicators, as we discussed, do not make or break the trades.
Large players use these same indicators to see where order flow is generated. What are these?
Today we will discuss one point touch indicators that touch the market at one point at a time or over a time frame.
The indicators in this segment are: (a) trend line; (b) horizontal line, (c) vertical line; (d) moving averages.
A trend line touches
different
prices of the market, once at a time, over a time period. That means each time players (buyers and sellers) are valuing the market up/down. That is why a trend line can be only at an angle.
A trend line can be trending up or trending down, and can form a resistance or a support.
The more points a trend line touches, the more power it carries for the next touch? Why. Because so many stops are getting accumulated above and below the trend line! That is the reason for breakouts or breakout failures.
A horizontal line is a line that touches same price, once at a time, over a period.
A horizontal line is more powerful if it touches more number of times over a timeframe.
A trend line or a horizontal line is more powreful as the time frame increases.
A horizontal line is more powerful than a trend line, because all players, entry cost is same and their exit strategies will also be mostly same.
A vertical line can be used as an estimating tool for price projection before an event.