Guide To Interpret The Psychology Of Price

The markets are moved by the decisions of the people and institutions that participate in each instrument or asset. As emotional beings, in most cases these decisions are based on emotions and expectations. The professional and the institutional actors are very well aware of this behavior and price manipulation is often a widely used resource to obtain the necessary liquidity, we must not forget that they operate substantially large positions that are normally executed in parts.

 The range candlestick, the sudden acceleration of the price and the “punctures” of maximum and minimum levels generate emotions that induce to introduce operations immediately and that is exactly what the institutional needs to develop its positions, a large mass of miniscule orders that serve you counterparty at the most relevant levels when there is not enough liquidity for its operations. This does not mean that permanently the scalper trader must position himself against volatility, in fact in most days he takes advantage of these movements, but rather what he must do is be aware of these processes to incorporate them into his decision making. decisions and be able to select your operations.

Paying special attention to possible “stop sweeps” and psychological price dilations will avoid being committed to “emotional” positions. Often the price attacks the areas of intra-hourly minimums or maximums – bounce points of chartism – where the stops of many traders tend to be in order to continue in the opening direction having eliminated these positions. As well as the whole psychological prices –fundamentally the .00 and the .50- are usually target levels, therefore, participating immediately on them or as soon as they try to be penetrated is a low probability bet. For both scenarios, observing the closings of the candles and the intention with which the price reacts and remains above or below these levels will be decisive to learn to differentiate a dilation / manipulation of the price from an eventual positioning of the market for a change of strategy or interval.

At the same time remember that the scalper is not the first to buy or sell, buying at each minimum and selling at each maximum can cost you to take a lot of loss and cut a lot of profit. Think of it this way, if something is heavily discounted, someone is trying to get rid of it. The intraday trader partially incorporates these movements when they are already visibly in development. It only makes sense to try early purchases or sales when a possible process of accumulation or professional distribution in the price has already been identified, that is, when there is positioning or profit taking respectively at relevant intra-annual / monthly levels.