Myth: If the price approaches a level repeatedly, and gets rejected from it, this means that the level is very strong. Reality: After each touch, the level becomes weaker and weaker due to the absorption of the residual orders.
Underlying concept:
1. Whenever the price keeps approaching a certain level, there are pending sell orders that are waiting to be filled. 2. Every time the price comes back to this level, a certain amount of orders gets filled. This is called absorption. 3. The more the price approaches that level, the lesser the unfilled order remains. 4. Ultimately all the orders get absorbed and we see a breakout from that level.
Example:
Disclaimer:This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.
Brilliant stuff … lots of knowledge sharing. Keep it going ✌️✌️✌️
johntradingwick
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@moneycontrol22, Thank you.
ganayalaksh
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nice one..can this be said about IGL...i am long at 531 ...but made a mistake by not selling at 580 levels.... only logic was ..i was confused between whether i need to hold for long term or swing ..whats the solution..this dilemma is huge
johntradingwick
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@ganayalaksh, You should always decide your entry, exit, SL before you enter the trade.
As for IGL, it may bounce soon. Currently, it is at 0.5 Fib level. You can keep watching the price between 546-537.
MandeepJanawa
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As always great post men, but if possible try to write image below points in larger font size.
johntradingwick
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@MandeepJanawa, You can make the text any size/width you want. Just hold the left click on the vertical scale and drag. Similarly, you can increase/decrease the width, just hold the left click on the horizontal scale and drag.
zqant
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Good/refined observation amplifying the point of Myth & Reality very well.
Good Learning for me. Thx
@johntradingwick, i might be asking a silly question , but here it is
1) at the retesting levels , are the retailers buying bcoz of the myth
2) the sellers which sold at high levels are they placing their buy orders to square off there position??