Make sure to understand forex accumulation!

Price movements are made up of elements that are part of a story. We can call it a drama or a soap opera. Do you know those soap operas, endless stories that are made up of the same elements, shown to you in thousands of different ways?

What do price movements boil down to in the end? It seems to me that price can do just about a few things: it accumulates, moves and stops traders out. It does it on several TFs. Now, lets forget about the TFs and think of the behavior only and focus this time on accumulation.

Accumulation is ongoing, it is only a matter of what TF or rather a timespan the trader looks at. One can spot it on M1, M5, etc, up to the monthly chart. It is the same with the moves and the stopouts. So what makes accumulation so important? Well, a move has to start somewhere and since accumulation, a move and stopouts are relative to each other, should not the trader be able to identify one to recognize the other?

Just like all chart elements, accumulation has to start somewhere and end somewhere. Also, let’s bring functions into the picture. If chart elements are relative to each other they also have their functions related to other chart elements. One does not and can not exist without the other. They are all functional and their function is to create/define other chart elements. One might think of the fractal nature of price movements, others might think that price movements are like matryoshka dolls. Although it is close to the truth but those concepts do not make price projections easy.

When it comes to accumulation, a trader needs to understand few things. First of all, accumulation signifies a turning point (although not the change of direction). Now, how many types of topping formation are possible? The trader should be familiar with all of them as they all represent accumulation, some for a longer, some for a shorter period of time. Second, the trader needs to know at what spot of the the chart the accumulation happens to understand what direction of the move out of it should be expected or whether one should wait for it to take place before a position could be added. Location of accumulation on the chart helps to understand the HTF and LTF function of accumulation.

Now, there are two things that people tend to ignore. One is that since accumulation is a topping formation, it has edges or peaks. The other is that accumulation starts with another function, a stop out. For one to identify accumulation, the stopout must be recognized, clearly identified, because for one to understand other functions of price movements, the range of accumulation must be understood fully.

This article may be useful to you in terms of triggering some thoughts and giving you the pieces of puzzles that need to be fit together. Accumulation can be explained and understood. In my system, it is also part of a larger narrative, that include all the chart elements fitting together in time, news events and technically in the picture that candles draw for us. If you are serious about trading, make sure you spend time with understanding accumulation because without it, you practically stand no chance of winning the FX game…

Trade well,

Andras