Wednesday 2 December 2009

2. Closes Matter


This is something I say a lot.

How many times have you seen a nice solid bullish hourly candle collapse in the last few minutes and leave you with a bearish pin bar (hammer)? The fact is all pin bars or candles with long wicks at some point looked solid and supportive of the trend.

Closes matter.

Although a candle does tell us what is happening while it is active, the final shape is what is really critical. If price collapses then the highs (or lows) were at a level where demand and supply was imbalanced, it is therefore less likely that the trend will continue. So if this happens at one of our predetermined significant demand or supply levels, then we are seeing what we want to see, where we want to see it.

This is applicable to all time frames and is the basis upon which most traders operate. I have an alarm set to remind me of all the H4 closes so that I can check to see how we ended up and get a view as to how H4 will affect the other time frames.

The other time closes matter is in conjunction with time frames. It is important to know the correct TF for each demand and supply level, because only then do you know where to look to see if price closes above or below the level.

There will be a section on The Basics of Price Action later on.



5 comments:

  1. Hi Red Cabbage,
    I came across you blog this morning and have spent a couple of hours reading the very good information on here. I'm fairly new to trading and having spent a few painful months learning, I have discovered that supply/demand and good old pa is the way forward.
    Thanks again for the great info on here,
    Paul L

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  2. Glad you found it useful, I shall add some more articles then!

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  3. RedC, I've been following these methods for a few weeks and am having some success. I think the methods described here and on the no brainer blog/thread are very effective. I often get the direction right but price reverses on me and I end up with BE. Could I ask you a few questions about your trading technique? What is the best way to communicate? Thanks, Paul

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  4. www.nobrainertrades.com live chat room

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  5. I was in there this morning Paull. A bit busy over the next day or two but will look in again Thursday afternoon. Good stuff. Thanks, Paul

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