Video 1: Price Behavior
[00:10] – Welcome to the first video in this forex trading training series. This series of video is brought to you by ForexMinute.com and this Video 1 – Characteristics of Price Behavior. There are a number of things to note before we continue in this course. First of all, this is Video 1 of the series of video that will broadcast by ForexMinute.com. The series is aimed at using technical analysis to trade the forex markets.
As the course develops, it is intended to progress from basic to advance trading. Each video acts as a stepping stone to the next video. So it is imperative that each video is watched and that you don’t just skip to the advance trading nearer the end of the series. The course will include personal insights of myself – a professional forex trader, and it is assumed that viewers have at least basic knowledge of forex or financial markets.
[01:20] – We are going to start off this series by looking at characteristics of price. In financial markets, price can move in three general directions: an upward direction, a downward direction and a sideways direction. But price doesn’t move in a straight incline; when price downwards it doesn’t move in a straight decline; when price moves sideways, it doesn’t move in this dead straight sideways direction.
Instead, when price moves in an upwards direction, a downwards direction or sideways direction, price tends to behave in certain ways.
[02:08] – Let us look how the price behaves or the characteristics of price as it moves in an upward direction. You will notice that when price moves in an upwards directions, price forms a stepping motion in financial markets where price moves forward and back repeatedly but move in a general upwards direction.
When price moves in a general upwards direction, it creates a stepping or pyramid formation. We refer to this as an uptrend.
[02:45] – When price in a general downwards direction, price can once again create a stepping or pyramid formation in financial marke ts. But this time, the general direction is down. Price repeatedly moves up and down but the general direction of price is downwards. This is referred to as a downtrend. But there is more to uptrends and downtrends than just a stepping motion. The stepping motion has key characteristics that helps us to identify if price is an uptrend or a downtrend.
Let’s go back to the uptrend illustration.
[03:35] – This stepping motion or pyramid formation is created by price moving up and down. When price moves up, we refer to this as a Push; when price moves down, we refer to this as a Pullback. So an uptrend is a series of Pushes and Pullbacks; push; pullback; push; pullback. Every time price pushes and creates a pullback, we refer to this change of price direction as a High. When a pullback comes to an end and price goes for another push, we refer to this change in price direction as a Low.
So we have a High; a High; and a High; A low; and a low. The main characteristics of an uptrend is a series of higher Highs and higher Lows. We have a high, our next high is higher than the previous high. Our third high is higher than previous high. We have a low, our second low is high than our first low and that is the main characteristics of an uptrend – the series of higher highs and higher lows.
[05:05] – A downtrend is very similar. With a downtrend, we have a series of up and down movements that go in a general downward direction. When price moves down in the direction of the trend, this is labelled as Push. When price moves in the outward direction, against the downwards trend, this is referred to as a Pullback.
Push; Pullback; Push; Pullback; Push; Pullback.
Sometimes these pushes and pullbacks can be referred to as rallies and retracements. Just as an uptrend only come to the end of a Push, or the end of the pullback, this areas are marked as Highs and Lows. A high is the end of a pullback, and start of a push. A low is the end of a push, and a start of the pullback. We have one high here, and another high here.
We have three lows, one, two, three; the main characteristics of a downtrend is a series of lower lows and lower highs. We have a low and a high; our second low is lower than our first low; our second high is lower than our first high; our third low is lower than our second low. To demonstrate uptrends and downtrends further, let’s look at uptrends and downtrends on real life price chart.
[06:48] – This is an hourly chart of the great British Pound against the US Dollar, or GBP/USD. On our charts, we have a clear uptrend. Price starts down here to the left of our chart and ended on the high up here. So price has moved in an upwards direction. But let us look at the pattern of formation price has created as it moved from here to here.
We have a Push; a Pullback; a Push; a Pullback; a Push; a Pullback; a Push; a Pullback; a larger Push; a Pullback; and another larger Push; Price is up trending. We have a series of pushes and pullbacks which have created highs and lows.
As mentioned in the sliders the main characteristics of an uptrend is higher highs and higher lows. Here is our first low; here is first high. Our second low is higher than our first low; our second high is higher than our first high. Our next low is higher again, our next high is higher again and is continues. Hence we have an uptrend.
Let us look at a downtrend on the same chart – the Pound against the Dollar hourly chart.
[08:42] – Price started up here and ended down here. So price has moved in a general downwards direction. Once again let’s look at the pattern the price has created as it moves from up here to down here. Price is pushes; its pullback; its pushed; its pullback; it has gone from a very large push; its pullback; its pushed; its pullback; and its pushed.
Once again we have a series of highs and lows, created by pushes and pullbacks. Here are our highs, and here are our lows. The key characteristics is lower lows and lower highs. Here is our first low, her is our high; our second low is lower than our first low; our second high is lower than our first high; and is continuous. Hence we have a downtrend.
In future video I will show you why this is of benefit, and how knowing this characteristics of price can help us to make profits from financial markets.
[10:13] – To summarize what I have taught in this video: Price trends – uptrends and downtrends; Trends have a series of pushes or rallies and pullbacks or retracements; the characteristics of an uptrend are higher highs and higher lows; the characteristics of a downtrend are lower lows and lower highs.
In our next video, I will demonstrate the characteristics that price creates when it moves in a sideways direction. Thank you for watching this video. Please continue to watching the videos in this course. The course if brought to you by ForexMinute.com which provides Market Analysis, Training Material, Broker Reviews, and more.