Technical-focused strategies to survive in the market: Episode 2, Price movement is the basis of all technicals [Hiroyuki Tamukai]
In this series, professional trader Hiroyuki Tamukai will give several lessons on trade techniques focused on technical analysis. The theme this time is the price movements that form the base of technical analysis. Here, thoroughly understand the essence of candlestick charts, which visualize price movements in an easy-to-understand way.
*This article is a reprint and rewrite of an article from FX攻略.com June 2018 issue. Please note that the market information written here is not the same as the current market.
Hiroyuki Tamukai Profile
Tamukai Hiroyuki. After graduating from university, he attempted qualification exams but gave up. Unable to find employment, he started his own business. He began investing during the course of running the business. He is currently a private investor after the business transfer. He also plans and organizes seminars for FX companies. His books include “FX Guide for Even Cowards Can Win” (Ikeda Shoten) and “Steadily Win with Two Chart Checks a Day for a Part-Time FX Trader” (Jiyukokuminsha).
Why the market moves
In the previous issue, we discussed that fundamentals are not used, and cannot be used.
① The major macro trend shifts do not align with the timeframes in which individual investors trade
② The textbook view of economics does not always match real price movements
③ Trade timing is not indicated
—Therefore, it is not realistic for individual investors to use fundamentals as trading materials.
As I write this in mid-March 2018, the USD/JPY has been in a range between the February 27 high of 107.67 and the March 2 low of 105.25, with prices stagnating. During this consolidation period, various news occurred, such as North Korea–Trump summit (risk-on), the resignation of U.S. NEC Chairman Kevin H. (risk-off), and the dismissal of Secretary of State Rex Tillerson (risk-off). You might feel that fundamentals should move the market, but the market does not move. Why is this?
Whether in stocks, currencies (FX), or cryptocurrencies, what moves the market is the balance of selling and buying. If selling is heavier, prices fall; if buying is heavier, prices rise. This is as simple and clear as it gets, and there is no greater truth. A range-bound market means there are many sellers near the upper boundary and not much further rise, while near the lower boundary there are many buyers, so prices do not fall. Sellers and buyers have their own strategies and motives, and the market ends up in a range as they compete within a certain width.
Conversely, if the market breaks out above the range and rises, it means buying has increased more than selling at the upper edge of the range, or selling has decreased, or both, happening simultaneously. The opposite is true if it breaks below.
Regardless of how news and fundamentals develop, market movement is determined by which side—sellers or buyers—has more participants. Therefore, in FX trading, it is necessary to look for which side is larger on the chart.
