Price in the forex Market or any other Investment instrument contains a few things,
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Definitely the price it self.
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Time.
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Volatility.
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Noise (Uncertainty).
Volatility is added up or decreased over time, for a period when a price momentum is set and direction of trend is sure, Price goes smoothly to one direction only and this is what we called a Trending Market.
After every trending Market, it will usually stop for a while and perhaps will continue to follow previous trend, only if the momentum is still there. Or perhaps a Reversal ?? who knows ?
. But Why do it stop ? Taking a rest ? yeah, Maybe … :21:At the end of trend, Traders usually taking up their profit and if more and more profit trader get out from the trade and collect the profit they have earned, the momentum is reduced, as example : On a Bearish Market (Bearish Trend) at the end of this trend the candle stick will slowly reduced in size, there are quite apparent that the candle stick body will become more and more smaller and the Lower candle stick tail become more and more longer.
At The end of Trend where momentum becomes lesser, the market will go into what we called a Consolidation Period, in this period the price seems to be bouncing between a same high and low for some times.
here is an Example of a GBP/USD Consolidation period using Time Frame 30M, this period is actually quite easy to spot because candle stick have same size, Same high and low.
So the next step is to wait for the price to breakthrough this price range and if the price manage to break the rectangle, we might have a BREAKOUT !! and put your order in the direction of the Breakout… hmm, sounds Easy.
OK, so this consolidation pattern is easy to spot right ? Yes… If you choose a bigger Time Frame, Below is a picture same as above only the projection is using Smaller Time Frame TF:15M and TF: 1M
See The Difference ? smaller time Frame contains more noise, more uncertainty and definitely its harder to see the big picture. I was Trading using smaller TimeFrame before and changing to bigger Time Frame, and now very comfortable with 30Minutes Time Frame, why ? I think every trader has their own choices, so not every trader using the same Time Frame, its personal matter I think. For me 1M to 15M contains to much noise, above 1H is too long (I’m a Day Trader). so TF: 30M makes a comfortable Period for me.
Regardles what TF you choose, just remember that Bigger Time Frame contains bigger Picture but smaller time frame contains movement