Psychology in the candles?

The nature of candlestick’s are kind of funny to me, as far as how they form. I’ve noticed that so many times lets say on a five minute chart when there is an expected drop or rise. the bar will expand for the first minute or two then retrace then usually expand again in the last minute. Of course it doesn’t always happen but I do see it quite a few times even in the longer term charts. Would this be part of the psychology of trading not letting those candles scare you off the trade? And does any one else notice that or am i just cherry picking what i perceive to be happening?



Hello From a former Texan, Kemah area…

The way I view the Psychology of candles or the market in general. Is the flow and way the candles patterns appear. Your direct response to what you see and how you interpret it is what makes the difference between a successful trader and one who can’t see the feelings implied in the charts…

During news times it is very apparent emotions are running wild. Watch a news trade on a fast chart 1 or 5 min and then try and think about what you are seeing. You will notice the ones who got in wrong the price stops and maybe reverses as they try and get out of there positions. Then it continues in one direction for a bit. You will then see the price stalling and maybe a retrace. This is where some are taking profits and other who held there losing positions are now finally getting out. That may happen a number of times. At some point the larger traders in the game come into play. That is when price will normally start in The right direction and just gradually continue in the right direction . You will see minor stalling and retirements as us retailers are happy to take profit. Some times price heads in the completely wrong direction at first as it is misunderstood by many. CPI is one of those normally heads the wrong way first because people don’t know what the are looking at. Take a look sometime it is self evident and kinda of fun to see.

Here is a chart I posted on a different Site the other day it is actually showing places you can enter in a trending market off a 1 min chart… But if you look you can see the emotions of the other traders on it as well. Lets look at the bottom of the trend you can see the the last entry arrow. ten you can see the candles start getting shorter as and side ways as people get scared the trend is ending . Then some start jumping ship as they get real scared there going to start losing there profits. But it failed to make a higher high and then the fear dissipates and they start taking shorts again. This can be the same traders taken there profits at the bottom and the reentering when they see it can’t make new highs. But every time the price gets higher and higher to the old high it will eventually turn backup…

This is a lot to absorb so I will leave it at that… If you have any questions please ask… Ken Lee

Thanks for the reply, kind of weird that i didn’t see it like that I almost pictured it as one entity with that evil grin giving those fake outs just to torture traders, lol. Of course I know better but picturing it as just a whole bunch of me’s hitting that panic button kind of brings in a new perspective. I have already for the most part learned to ignore some of the noise when I have a good direction placed in, but the reasoning behind the noise was kind of the perplexing part. Ohh and love that dealbook360

You hit the nail on the head with that statement. Forex charts are nothing but a chart of human emotions, most notably fear and greed.

People don’t buy and sell because the price moves, it’s actually the other way around. Price moves [I]because [/I]people buy and sell. All you need to do is predict where a lot of people will buy or sell and you can be a profitable forex trader…

Actually, buying and selling don’t move the market. In fact, buying and selling just keeps the market in place because by definition a trade must match a buyer and a seller at the current price.

It’s the intention linked to buying/selling that does. Price move when there is no or only limited willingness to trade at current prices. Markets are 2-sided. If either side of the bid/offer backs away price must adjust to bring the trading back. For example, if all the offers disappear from a market price will start rising until if finds a place where traders are again willing to sell. Trades will not actually take place until the new equilibrium is found because there are no willing sellers.

As such, price movement creates buying and selling.

These last two were opposing statements but strangely enough they booth seem to make sense. A question on the lack of bid and ask moving price, on the physical side. Is it the lack of people hitting the sell button that drive’s price up? And if so why would there be a spike in price before a sharp drop, and is this driving force of price apparent in all time frames of candle’s?

Rhodytrader is right, but so am I. A surge of people buying will drive prices up, just as a lack of people buying will drive prices down.

The point I was trying to make is that forex prices are 100% controlled by people, it’s not random. It’s simple supply and demand with some fear and greed thrown in. :slight_smile:

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A surge of people buying will only cause prices to rise if there isn’t matching volume willing to sell at current prices. There have to be insufficient sellers for prices to rise. They will go up just as readily with the same number or fewer buyers if the offsetting selling interest declines on a relative basis. That’s why volume analysis is so useful. It can tell you whether prices are rising because of increased buying interest or decreased selling.