Page 29 - Module 5 - Key_Players_in_the_financial_game
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Module 5 – Understanding the game between the bulls and bears
when is an imbalance confirmed as a level?
When do we consider a zone to no longer be valid? When is it considered to be broken and needs to
be removed from our charts?
The zone is no longer valid when it's been taken out by as little as 1 pip or tick.
We don't wait for a close above or below the zone to consider a zone as a violation
We don't wait for a full OCHL candle above/below the zone.
Sometimes, we'll see zones overshot by a few pips, others by quite a few pips and we'll see it
dropping/rallying after that, most likely after our SL has been hit. If that is the case, a brand-new level
might have formed confirming willing buyers/sellers, which could be good for a trade once it pulls
back to retest it by using the confirmation type of entry.
how to draw imbalances? what patterns can we see?
There are many candlestick patterns, so many it would take you quite some time to learn about all
of them and even more to remember them. You don’t need to learn all of them to draw supply and
demand imbalances since only a few candlestick patterns are used to locate and draw the bases for
most imbalances these patterns are: engulfing patterns, piercing patterns, haramis,
morning/evening stars. High wave candles, wicky candles will not be used to draw imbalances. We
need a clear base and pauses in the market
The patterns we’ll use to locate bases for most imbalances
1. Engulfing patterns
2. Piercing patterns
3. Haramis
4. Morning and evening stars
how to draw imbalances? proximal and distal lines
The base of any imbalance can be defined by a proximal and a distal line. The distal line will be the
price furthest away from current price, the proximal line will be the closest to current price action.
Proximal lines are always at the top on demand and at the bottom on supply, the opposite for the
distal lines.
When drawing demand, you must always cover the lowest lows in the basing area or valley (swing
low). When drawing supply, always cover the highest highs in the basing area or peak (swing high).
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