What does it mean when price stalls around a S/D zone for several candles, neither going up or down. what does that tell us about the current zone?
Support and resistance zones can be either strong or weak, depending on what has happened with past price action.
With that said, there are always only two eventual scenarios when price eventually moves off that level:
- Price breaks the level, and continues in the direction of the trend
- Price revrses in the opposite direction.
Oftentimes, when price keeps testing a level relentlessly, it is ācoilingā for a breakout.
It is similar to how a snake coils before it strikes its victim. A less gorey example might be a baseball pitcher winding up to throw a fast ball. Heās gaining momentum just before he releases all his energy to throw the ball.
The market does the same thing. As it constantly tests, bounces, and then retests a level, it is winding up for the breakout. There are times when it just fizzles out and reverses. The key is to know what patterns at theses levels are likely to break or reverse. That takes some experience.
I love your question, though. I can tell you are aserious trader. If you would like to know a bit more about basing structures and how price coils around them, just PM me anytime. Iāll try and find an example chart.
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Thanks for in-depth explanation. Iām just getting started with trading and have a lot to learn. I sure do have passion for it, hope it pays off eventually.
Btw, I dont know how to message people on this site lol. I visited your profile but didnt find a āsend messageā button there. Not sure how I can contact you.
Cheers.
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It can mean a few things but mainly there may be stop losses there that are providing the opposite for your trade or large institutions have limit orders there and have decided that is a good point to collect orders before moving the market
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In case a currency pair is moving downwards of the selling pressure, there will be traders whoāll position the pending buy orders at a certain level thinking that the pair wonāt go lower than the buy limit order or the bearish move will stall. Now think what will happen if a large group of traders do this. There will be a massive volume of pending orders around the particular order. The demand will eventually increase after the price reaches a specific level, resulting in the steep price increase.