Price movement on Forex

The price movement on Forex is subject to certain laws. This is not just about the laws and rules of fundamental, technical, and other analyses. Sellers and buyers play a big role here. The market movement depends on how they behave, where they are ready to make deals, what price is most profitable for them.

This is why many experienced traders claim that they only trade on the chart, without using any indicators. I.e., they look at the chart and determine what state the market is in and what price movement to expect next.

Forex price movement phases

Large participants traditionally form their positions (often at the expense of small participants), move the market in their direction (or try to follow it), close their accumulated positions at new levels, fixing profits. This behavior largely determines the phases of price movement in Forex.

1. The accumulation phase

The accumulation or set-up phase of a position is characterized by a virtually horizontal price movement. On smaller timeframes, this will be a flat, which will be outlined by support and resistance levels. The longer the price moves in this horizontal direction, the stronger and longer the accumulation phase.

This means that exiting it will already mean a potentially more significant movement up or down. As a rule, accumulation phases appear near levels, including round ones, as well as on the eve of the release of important news.

2. Phase of failure of stops (false breakout)

The phase in the price movement plays a special role. If in the first phase, participants start trading in a flat, setting stop losses for its levels, then even a small price exit from this flat already leads to the disruption of these stops, which contributes to a rapid movement to exit the flat. At the same time, a significant part of traders, seeing that the price quickly and confidently comes out of the flat, where the position was formed, assume that this is the beginning of a new big movement.

Accordingly, the majority that does not earn a priori on Forex opens positions in the direction of this movement. And again with short stops. In this regard, having exhausted a small margin, the price begins to turn against new participants, again returning to the previous channel and driving into a loss those who opened in the direction of movement immediately after leaving the flat.

3. The phase of movement to new levels

Now, when the small participants who opened in the direction of a potential large movement are "taken out", and some of the market participants are open in the other direction, the price can easily start moving to new levels. There are usually two ways to access them:

• Pulse rapid penetration;
• Slow movement, in which the price forms a trend on small timeframes, without actually correcting or returning to previous levels.

4. Position closing phase

Large formed position cannot be closed with a single click. This requires a significant number of transactions and a significant amount of time. To do this, serious traders then try to keep the price at new levels until their entire position is closed with maximum profit.

Johannes Röll

Johannes Röll was born 1978 in Brilon,Germany. Graduated RWTH Aachen University. Over the past ten years he worked as Head of the plastic card team, where he was mainly responsible for the development of the distribution, Head of sales Department and Financial Analyst,where he got experience in planning and support sales figures for branches. For the present he works as freelancer

Comments 0