Hello friends!We continue to study the technique of forex trading with volumes of analysis, also known under the name of the VSA.
This time we will focus on the formation, which is called Testing or just Test .The bottom line is, that market makers before the start / continue a campaign to purchase / sale, often "is checked soil."Namely create false motion in order to identify the presence of strong sellers / buyers are able to stop them.And if those are not available, the movers and shakers of the currency market are beginning their "dirty work."How to recognize these moments and how to earn them, and we will find out in today's lesson.
Before we begin, I would like to recall a story from the book by Edwin Lefevre, entitled "Memoirs of a Stock Operator."It tells the story of an old and experienced trader.He had his own office and assistants.One day one of his men ran into the office and says that the shares of such a company to buy in large quantities.Some there for her th
Old trader said that it is good and appeals to his secretary: "Sell so many shares of this company." The assistant, who informed him positive news shouts: "How so?It is necessary to purchase "And he answered him:" No, we sell. "The secretary to run errands and sold slightly shares.A trader sits and watches as the market will react.The market is not declining."Let's sell even more" - old trader said.Secretary again sell shares, and the market is still not reduced.It continues to grow.
Then trader and says: "Well, it is great!And now let's purchased! »
What happens in this story?Trader tested the market on how quickly it will absorb its sale.Does the demand for the shares and whether they are buying really quickly and in large quantities.And as the market trader tested for the presence in it of some large sellers who see its sales, could also begin to sell and create obstacles for growth.He tested the market and see what is really buying shares, I began to buy them.
The same thing is happening now in the stock market and the forex market.The only difference is that the forex market, we trade in both directions, as in the stock market mainly dominated by purchases.But the action - it's a completely different story, so we parse Forex.
What is the test?
Let us turn to the definition:
test within the VSA - this movement is caused by market makers with a view to detect the presence in the market supply / demand, which may interfere with their campaign for the sale or purchase.
For example, market makers want to purchase.They forced the price down and look: if there is a large number of sellers, they are trying to seduce this false movement.And if there are no sellers, you can start some kind of large-scale campaign to buy.Below, we will analyze it in the charts, so that you will understand everything.
successful test, ie the test, after which the movement begins in the direction of the campaign by buying or selling the market-maker characterized by low volume and prices, followed by a rebound in the opposite direction.We are looking for a false move a small volume, and then in the opposite direction.After we get the confirmation that this is a test - we will be able to enter the market and make a profit.
Let's take a look at the chart, it would have been more understandable.
This is not the most beautiful graphics, but it needed to be more practical examples.the downward trend observed in the graph.
We see that after it was formed precisely, from this point, the question arises whether he will go on?
Nobody knows.Market-makers as it is known, and they want to know whether it makes sense to continue selling.Maybe the market will want to turn it up and bring them loss.
And around here, they start a small campaign Procurement:
Simply put, they want to push the market up to see if there is some kind of a large number of sellers who are happy to perceive this momentum and continue toupward movement.
If this happens, then, accordingly, market-makers in such a case open for a large number of sales is not worth it, and they are the best along with the crowd will be purchased.They check whether there is a wish to purchase and give a little momentum:
level, which was formed earlier, specially struck to activate the orders of those who put limit orders, and show that here it is the momentum up, let the guys procuring if youreally have such a desire.This testing for the presence in the market demand.
wish to purchase was not and we saw later candles down:
As the volume of purchases was a little, then we conclude that this was a test, and not some kind of an emerging movement upwards.Next, we see a confirmation of our theory in the form of candles with a direction downwards.We know that it is tested and it could start selling.The most important thing to understand the essence of this setup.Market makers check the availability in the market forces capable of resisting them.If no such force, they begin to move in the direction in which they are conceived.
How to enter the market?
But in order for us to consider this setup as an opportunity to enter in the market must be the power.If we are going to be bought in the end.Or weakness if we are to eventually sell.
The graph has been a clear trend downwards.Here there was a weakness in the background, so you can go completely on the basis of this setup in the sale.
Let's look at another example in the M15:
We have seen a strong surge, so we can assume that the trend should be upwards.But whether he will go next?After
horizontal movement on the chart it was not clear:
market could easily collapse, because he created a double top.So the question arises: Is there a sense of market makers continue to buy, or not worth it?
And they administer the test - a false move down:
It looks like a correction to trend upwards, but note that we present a small amount:
correction End implemented a low volume, and it continuesfall.And then there is the candle up.Note that the candle should be of normal size to enter the market.If the candle is small, it is better to wait and see how it behaves schedule to further enter into the market.
As in all setups VSA we look at the effort and result.If there is no result, then it means there is something wrong.And it's not what we expected.After we get the confirmation, you can enter the market.Stop loss set below the peak of the depression and included in the purchase.Let us again see, what happened here.There was a force in the background.The trend heading upwards.And then there was a lull.Further market makers drew us to test to find out whether there is a market willing to sell.
For this drove the price down a little:
herded her for a level that has previously been formed by local minimum points:
task of market makers - to show willing to sell, the price broke through the level and thereby stimulate theirsell.If you wish to sell begin to actively participate in the auction, the market-makers understand that now is not profitable to sell.
testing uptrend characterized breaks the previous local lows.And only after we have struck some significant line, you can begin to consider entering the market, knowing that it was definitely a test, not any there a candle in the wrong direction.
Once we break through the level, and the candle is formed in the opposite direction of the prevailing small amount:
On this small breakdown at the level we can consider the entrance.
What is worth noting?
If you are unsure whether this is a test or something else, it is best not to go at all.Because the definition of the test requires a certain skill and experience.If you do not see at the moment or are wondering what is happening on the chart, it is better to ignore and see what will happen next.Log in to the market, you always have time.It is up to you will not run away.
addition, have to be to consider the purchase power of Pone.This may be an uptrend or background to it.Or downtrend, or the background to the movement vniz.Prichёm end of correction, if it is any big correction, it can be a large amount.But here we have to be the culmination of purchases / sales.
We are looking for small bursts, which, however, are trying to attract the attention of buyers or sellers, punching, usually levels.And so the market makers is checked whether there is resistance on the market of their campaigns on purchases or sales.
Here is another good example:
Here we had a triple top.We see downward movement, but it is unclear whether it will continue down or the market will turn around and go upstairs:
Again we see that the market makers a bit customize the price upward and emerges here is a pin-bar:
HeIt breaks the previous level formed by the local minimum:
level breaks.As price action we have ready access via a pin bar on the continuation of the trend.And, at the same time it was tested by market makers.We can determine this from the volume below average:
And then there is a U-turn:
There candle might seem too small, so you can wait until later to enter the candle.For example, it was possible to wait for 2 more candles down:
Stop Loss would stand just above the tail of this candle:
about how to get out of these setups we have individual lessons.Output options each time a lot.Choose how you want.You can go to the nearest resistance levels of support or stop loss multiplied by two.
If for example, do it here on this candle, the stop loss set above the high:
After her we could really prove to myself that this is a test.Candle broke through the level and give a signal that it's time to stock up for everyone.Wishing there was no market-makers and program sales continued.
You can measure the stop loss, multiply by two, and somewhere in here to get out of the market:
could wait and get a little more profit.In fact, many output options.We dismantled them in a separate lesson in a series on the price action, which is called "exit strategy."
What are the market makers?They try to check whether the market buyers wishing to be purchased in large volumes.If they want to sell, buyers who have a lot of money they would subsequently interfere.Consumers can start buying just below, as soon as market makers enter the market and they will have to deal with them, and this is a waste of money and time.Market makers do not need.
So, before you start a campaign on sales or purchases, they check whether there is a market of opposing side.And so on false bursts (and usually should break through some of the visible level) they are trying to create a buyers desire to buy.And if there is no customer, the market makers are beginning to sell.
characterized this test a small amount of movement.And in order to go in the opposite direction, a false move with the market makers, we need to wait for confirmation.That is one large or a few medium-sized candles in the direction of the movement, which, as we expect the market will move.Stop loss set slightly below or slightly above the nearest local maximum or minimum.Usually it is the shadow of a candle, which ended the test.
Well objectives already defines as desired.You can multiply by two, and you can enter for the purpose at the next level.Also, you can close the position of parts or put any specific take profits in points, if you know that the average price moves on the pulse of 15 points.It all depends on the pair and timeframe.The goals you define yourself.
I hope that I was able to convey the essence of your setup "Test" and explain how to test the market by market makers before continuing with some of their campaigns on sales, or of purchases.
Test (within VSA) - movement caused by market makers with a view to detect the presence in the market supply / demand, which may hinder their sales campaigns / purchases.
successful test is characterized by small volume and prices, followed by a rebound in the opposite direction.
P.S. those who have just joined us, I advise you start with a reference to the previous lessons on the VSA:
- What is VSA
- Volumes forex
- culmination of purchases / sales
- Accumulation and Distribution
- Up-trust and Reverse Up-trast