Article - Markets And Battlefields 3a

Having reviewed the basic shape of the Japanese candlestick concept of the Hanging Man now turn to the Hammer and a recent demonstration for the visualization of the concept of market reversal in a daily Forex chart.

For reference please look at the EUR/ GBP daily chart below where market reversal can be portrayed in the shape of a Hammer. 

Now, if ever a chart could illustrate the power of market struggles between longs and shorts then this chart above amply demonstrates the incessant battlefield between opposing traders from Sept 2014 to Dec 2014 with neither the longs or the shorts able to grapple the price and push it in either direction. 

On the 29th Sept 2014 the EUR/ GBP forms a hammer shape - highlighted within the red circle - to hammer out the bottom of the market so to speak. The market then rose steeply over the next 7 sessions as momentum carried the EUR/GBP from 0.7813 to 0.8018. The hammer shape is an indicator of a positive market reversal to appear after preceding sessions of price decline. However the market struggled to identify a true directional sense in the approach to Xmas and instead traded a sideways channel between the 0.7813 to 0.8018 with no fewer than 3 tops and bottoms over the 3 month period with no confirmation of a price break out either way for the remainder of 2014. 

Where Hanging Man shapes are the precursors for a potential market reversal at the top of the price action, the Hammer is the opposite, being the precursor shape for the bottom of the price action and succeeding higher prices to come. Use of other indicators overlaid like RSI, MACD, moving averages an even Fibonacci numbers will greatly enhance a trader's perspective in understanding the direction of the currency.

Further recommended readings -

http://forexeducationperspective.blogspot.com/2014/12/article-markets-and-battlefields-2.html

and

http://forexeducationperspective.blogspot.com/2015/01/article-markets-and-battlefields-2b.html

and

http://forexeducationperspective.blogspot.com/2015/01/article-markets-and-battlefields-2c.html

Pieter Bergli - DeLoren Trust Holdings

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Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

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