Experiences in forex trading, by a special way.

November 14, 2022

Equilibrium Zone In Technical Analysis

Equilibrium zone in Technical Analysis is something you rarely hear. Today you will have a different perspective on the trend than the theory, by understanding the equilibrium.



CaPhiLe.com calls the equilibrium a price zone, where the psychological balance of buyers and sellers occurs.

Note that the "equilibrium zone" we are talking about here is not a market sideways.
Take a look at the image above, this is an uptrend state, the equilibrium is the price zone between the 2 purple lines.

When the price is above the equilibrium zone, which is an overbought signal, we can consider selling.
When the price is below the equilibrium zone, which is an oversold signal, we can consider buying.
Take profit when the price moves into the equilibrium zone (orange arrow)

The core of trading with equilibrium zone: We trade in "abnormal" price areas, where the market's trading sentiment is unstable, we believe that sentiment will return to equilibrium.

Equilibrium zone looks similar to trend channel, but trend channel is drawn by price levels with specific value, equilibrium zone is not.

The image above is the equilibrium zone for the uptrend, it is pointing upwards. With a downtrend, it points downwards. And with a sideways trend, it will be horizontal.

At price zones with trading signals, you need to look at smaller timeframes to find a good entry point (can look for reversal patterns as Pinbar pattern).

Like price trends, each timeframe has its own unique balance zone. When using the equilibrium zone, it is necessary to combine analysis of many time frames, to see the market more broadly.

When you understand and use the equilibrium zone to trade forex, it will be very effective.

Best regards,

CaPhiLe.Com

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