People don’t like chaos. We like for things to be neat, orderly, and predictable. So if humans are controlling the Forex markets through their buying and selling actions don’t you think some kind of order and predictability would arise?
Take a look at this Forex chart, do you see randomness, or a predictable pattern?
If you only see random movements, it’s because you are not looking at this with a repeatable pattern of supply and demand in mind. Let’s color in a few areas of our chart to make the pattern easier to see.
Twelve of the 26 price waves on the chart changed direction inside the blue shaded areas! This is a remarkable thing, and is the basis of the Smart Money Forex trading method. In fact, there are a total of 4 Smart Money trading signals on this chart, and all 4 were successful, profitable trades that I personally traded.
If Forex moves were random then we would only expect about 8% of the price waves to be in the blue boxes, since the boxes account for 8% of the chart’s area (yes, I measured them). In reality, that small 8% area accounted for almost 50% of the price waves.
If you’re familiar with Support and Resistance levels then you can probably tell that’s what these blue areas on my chart actually are. These Support and Resistance (S&R) levels are the foundation of my trading method, but we need to cover a few more things before we continue on to exactly how to use them. Next we’ll need to learn about candlesticks.