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Forex Chart Patterns Analysis

March 01
03:25 2012

Here is a nice break down of how forex chart patterns are used to compress the supply and demand zones of the market. Understanding where retail forex traders put their stops is essential to determining how the banks are trading or will trade at any given point. This video shows some past examples of forex market manipulation, and the true purpose of it. In general as retail forex traders we are not privy to actual bank order flow. The next best thing however is having a in depth understanding of how most retail traders will respond when common patterns occur. Why is that important?

Knowing how the average retail trader will respond is essential information for one key reason. Where the orders are is where the banks will likely take the market. It is a simple matter of supply and demand. If you desire to buy a large amount of apples you must find someone or a group of people willing to sell a large amount of apples. Without someone will to sell them to you, you cannot buy. The same is true for the banks.

With positions that are extremely large the must find an equal amount of orders to not only enter their positions but to exit them as well. Understanding where the orders are is not a “bonus” or a “plus” for them, rather it is a necessity. Being that it is a necessity means that they will repeat the same process to assure they have this supply to meet their demand required to enter and exit such large positions. Therefore, understand how the banks will benefit from a given forex chart pattern will help us understand with a higher degree of certainty the next direction in the market.

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  1. webwout
    webwout March 01, 15:40

    Nice video , Sterling. Thanks.
    For every buyer there is a seller and vice versa .. sure but not to be taking litterally .
    There can be 1000 sellers to 1 buyer , and that is what the big boys do , right ? So, this way it’s not 50/50 and that is why they control the market. Their liquidity is so big that they can buy (or sell) as much orders as they want. Would that be the origin of 95 % losers and 5% gainers ? For every buy there is a sell. Thanks again , cheers , webwout.

    Reply to this comment
    • stersuhr
      stersuhr March 01, 22:15

      Yo Wout 🙂

      Long time no talk buddy. Very well said! I should have worded it that way. As you brought out its not and equal amount of sellers to buyers….its an equal amount of liquidity between the buyers and the sellers. There are many reasons for the 95% overall failure rate. One could argue many points. My belief is that nearly every single main strategy does one thing….it lumps retail orders into single locations. When there are many orders in one location the banks will drive the price into that area. They need the liquidity and its shooting fish in the barrel. Trading the price at face value will almost always lead to failure, the CFTC profitable trader statistics don’t lie….that being said said thank you for bringing those points out, and very well said BTW!


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