The swing-trader accepts a serious challenge while solving puzzles of market movement. While the majority of us recognize discrepancy and its permission within the price schedule, we sometimes not in a condition to use this reliable mechanics in our strategy of trade. Fortunately, repeating elements of a graphic landscape offer a powerful context to understand and operate vital aspects of development of a trend. Through repeating dynamics of behavior of crowd, price action aspires to follow the classical rules, which modern scientists apply to our physical Universe.
Most likely it does not carry casual character. Emotions and mathematics continuously cooperate, when designate levels of Fibonacci which we see every day on schedules. These fascinating relations give the chance to see an accurate order in usual price movement. For example, we can search for the turn or break model which is giving the chance on the schedule, but we as well observe of a ticker tape to measure emotional intensity of crowd, and to predict, when it will burn down or will switch speed.
Successful traders intuitively consider this bilateral market mechanics as they seize gamble art. Their level of skill corresponds to the specific logic which is required for association functions of the left and right hemispheres of a brain, focusing on a trade technique. Probably, future technical analysts will quantitatively define these deep interactions between behavior of herd and physical laws, and even will open new section of a technical prediction of the price. For now let’s investigate some primary characteristics of physics of the forex market.
1. The movement object aspires to remain in movement
New trends arise at low volatility of the lateral market and are characterized by the directed impulse of the price. At early stages of new trends volatility grows. But inertia aspires to slow down norm of change of the price. It often generates a series of tests or congestion minimodels while the price tries to escape from under influence of old range. At last the impulse overcomes inertia, and price movement accepts more vertical direction. This freedom of movement actually reduces volatility as weakens friction, and management intercepts the unilateral market.
To new trend can be very difficult to stop, as soon as it will speed up. As well as other moving objects, trends charge with new energy (from cash and emotions of trade). It stimulates the price to move ahead for barriers, type of the purposes established by external forces. But no trend can last infinitely. In the same way, as in case of its physical copy, market force finally will stop a trend or will reverse a direction of price movement.
The simple friction slows down sliding sphere. Active trends test a friction in the form of market gravitation. Classical trading wisdom says that for lifting buyers are necessary, but the markets under their own weight fall. Unfortunately, dynamics of this well understood mechanism rather does not correspond to nature laws. If it was so, all markets would fall to a zero at an exhaustion of trading activity. Actually, the markets keep value, forcing to assume that there is a latent center of gravitation which will be reached by the price if all participants simultaneously depart aside. This “centripetal force” during quiet time softly draws market movement to the latent middle, but can operate with amazing intensity if the price misbalances in extreme market conditions.
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