A Cure for Over Trading
In trading, when two or more variables are present, a confluence exists and these areas are ripe for the picking, writes CoachShane of NetPicks.com.
When two or more things collide, a disaster can result. It doesn’t matter if it is two storm fronts like we recently saw or a vehicle collision. When things collide, many times good things do not result.
In trading, the collision of two or more things can be a blessing! Many times it can spell the difference between success or failure of a trade. Think of this…if many people are looking at X and then something happens at X, expect a reaction. If many people are looking at Y, expect a reaction. What if X and Y meet and you get twice as many people looking at the same thing? A bigger reaction? Perhaps, but at least a greater chance of something happening.
In trading, we call it a confluence. When two or more variables are present, a confluence exists and these areas are ripe for the picking.
In this chart below, it is a recent EUR/USD chart. Let’s walk through a few things:
a. is the top of the move
b. is the bottom of the move
A simple Fibonacci retracement is drawn from point A to point B and several levels are drawn on the chart.
- Is where price shot higher from and that price level is obviously supporting price at that time.