In this week’s episode of Money Mondays we will be discussing the 3 stages of market price action.  There are certain characteristics that make up these price formations and more importantly how they interconnect.

Uptrending markets are defined by 3 things:

    • Higher Highs and Higher Lows
    • Demand is being respected and supply is taken out by higher highs
    • Support is being respected and resistance is taken out by higher high’s
    • (The lows control uptrends)

Downtrending markets are defined by 3 things:

    • Lower highs and lower lows
    • Supply is being respected and demand is taken out by lower lows.
    • Resistance is being respected and support is taken out by lower lows
    • (The highs control downtrends)

Oscillating/Rangebound markets are defined by 3 things:

    • Equal highs and equal lows
    • Supply and demand are being respected
    • Support and resistance are being respected

 

Todays golden nugget:

Q: How can we identify the beginning of a range bound or oscillating market bere it happens?  This is extremely useful as trends are easy to spot but range markets are only easily seen after the fact …UNTIL NOW….

A:   When Price makes a Higher High (followed by a Lower Low)

A:   When price makes a Lower Low (followed by a Higher High)

This will warn you price is not respecting the structure and to be extra careful when relying on price levels for adequate technical analysis.

“Trading success requires you to have a good method and be a good trader in order to succeed…You can’t have one without the other and expect results!” – SK

Watch this week’s Money Monday (Trader TV Show) below  to learn everything about READING PRICE ACTION.

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See you soon!