Most of us are familiar with basic mathematics like Fractions (1/2, 1/4, 3/8,etc).
In the game of trading, this mathematical tool is also useful and applicable.
Now, if someone asked you to give your views on this chart - what would you say ?
1. To buy
2. To sell
3. Don't know
Since I won't choose option 3, I am left with 2 choices, to buy or sell.
Now, I can tell that in Aug 20, it hit a peak of 1.10 and has since been going downhill and making attempt to recover. Currently, we are in a dilema , the resistance zone at 1.08 level.
Then, I check the historical patterns. It tells me in May 20, Jun 20, Sept 20, Jan 21, the price actions visited this 1.08 level and failed to break through.
WHY? It does not matter - you can find a host of economic, political, etc reasons to support. The fact is It fails to break out. That point is sufficient.
So, will it break out on this 6 attempt ?
Using fraction - we get 1/5 chance it might break out . 1 meaning this current breakout (if successful) and 5 means the past failed attempts. Now, if historical pattern is a guide (not a certainty), then we can infer that the probability of it failing to breakout is HIGHER.
With this knowledge, I will not buy now since it is premature. I will wait for the breakout to be successful followed by bullish signals before initiating a long position.
Will I then sell ? Also premature coz I need to wait for bearish signals to inform me as well. 1H chart at time of writing is still bullish.
Ya, now you understand not all charting requires action of buy or sell. Many would be WAIT, WAIT and WAIT some more.
Romans 8:25 :"But if we hope for what we do not see, we wait for it with patience."
In the game of trading, this mathematical tool is also useful and applicable.
Now, if someone asked you to give your views on this chart - what would you say ?
1. To buy
2. To sell
3. Don't know
Since I won't choose option 3, I am left with 2 choices, to buy or sell.
Now, I can tell that in Aug 20, it hit a peak of 1.10 and has since been going downhill and making attempt to recover. Currently, we are in a dilema , the resistance zone at 1.08 level.
Then, I check the historical patterns. It tells me in May 20, Jun 20, Sept 20, Jan 21, the price actions visited this 1.08 level and failed to break through.
WHY? It does not matter - you can find a host of economic, political, etc reasons to support. The fact is It fails to break out. That point is sufficient.
So, will it break out on this 6 attempt ?
Using fraction - we get 1/5 chance it might break out . 1 meaning this current breakout (if successful) and 5 means the past failed attempts. Now, if historical pattern is a guide (not a certainty), then we can infer that the probability of it failing to breakout is HIGHER.
With this knowledge, I will not buy now since it is premature. I will wait for the breakout to be successful followed by bullish signals before initiating a long position.
Will I then sell ? Also premature coz I need to wait for bearish signals to inform me as well. 1H chart at time of writing is still bullish.
Ya, now you understand not all charting requires action of buy or sell. Many would be WAIT, WAIT and WAIT some more.
Romans 8:25 :"But if we hope for what we do not see, we wait for it with patience."