Bounce

Bounces :

a bounce scenario occures when price gets rejected of a pre definied key level area
wether it be of a support area or resistance .. or a swing igh/low..

it just m,eans that price gets rejected of a particular area.. and is seen as unfair.. this will cause nice trading scenarios where u can take advantege from,



on a bounce several points have to be met, inorder to take and play that bounce, but it depends if that bounce is anticipated from a supportish level or a resistance level.. ie a bounce to the up or downside,,


if that bounce should occure to the downside, then we have to look at resistance levels and if they hold and price refuses and gets rejected from the resistance level, then supply has to overcome  demand at this point to bounce off

else if the bounce should be upwards then we should move torwards(down) a support level wich should hold. ie due to demand getting stronger and outrun supply  or supply dries out to such an extend that demand is getting stronger .. at such a level wich causes the bounce...


for example in order to take a bounce trade to the DOWNSIDE, off a resistance level..
vice versa four a bounce to the upside offa support level

we should have following situations to be met,

1. path of least resistance should be down

2. selling pressure should be stronger then buying

3. supply should be stronger

4. corrections (buying) shoud be weaker.



so in order to judge a bounce setup and trade it , we want to see and wait how price moves torwards our key levels , now lets say for example we see how price moves torwards a key level  3,70 and price moves up to test / visit that level

so now we focus how price moves there and how it reacts @ thelevel ,
for a bounce trade worth taking we want to see in this case ,
that on the move up .. the buyng pressure and demand is reducing
and on the otherside that supply and selling is getting stronger..

so we want to see a weak price move torwards our key level..
and an increase in selling @ or arround our key level.. note that price may spike or trade one or two ticks above our key level but as slong as the demand and buying is still weak .. no need to rethink if we should play that bounce ( key levels arent fixed numbers but zones)

so we have traded @ 3,60 and removed that size on the backside.. but the follow thru aint so strong at the layside , we see an increase on the backside @3,7 signaling a strong resistance may be a head.. and if it looks like it will hold due to several actions we take the trade and antcicipate a bounce off that level..

we tarded at 3,65 and moved up again the follow thru is not really weak (relative.. but deff not strong either) and one or two orders dont change the whole picture/story

so price moved rather weak and at least with no signs of strenght to our key level.. and now lets watch some scenarios that could occure on such a level and how to spot them.. note that those scenariors can come up in various forms and sizes etc.. but u will start to see what to look out for..


Below a video of a Bounce :

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Bounce Scenarios

1. BigSize but No Front Running :

on this scenario it looks like there is some serious size

on the layside an ready to buy.ie this pictuer looks strong

but remember the prints are more important then just size on resiting orders...

if u see such size right @ reistance , but we dont see anyone jumping infront of them (at least with significant size) then there is something foul, or simply put

the market isnt ready to move up or thru this level.. no one is following the market up any further ie, no buying.. so be rather sure that price will bounce

as the saing goes no demand leads to supply

and be quick! as if that big size is one guy, it may get pulled fast and that will result mostlikely in drastic drop in price.

so in this case the order @3,65 got pulled and immediately

we see 200 at the backside.so there is supply vs. no demand

therfore u should position ursfelf for a bounce..

Scenario 2 : Supply Swamping Demand

in this scenario , we see that a big number prints @ 3.70 on the layside.

so a good sign of demand and buying but look @ the backside and how it reacts to such a buying instead of a decrease or a removing of the order ,its still standing with 600.. so there is more size on the backside and its getting ready to swamp demand at this stage and level

a bounce would be more likely, as if the layers and backers fight both with good and big size.. but one is clearly stronger u dont want to be on the weaker one .. right ?

and it gets clear on the next pic, as we see an increase on the backside

where we have previously traded ie. bought, wich is a good sign ,

as imaging u see big hits on one side but instead of the amount decraesing it even increases! now that tells us that there is more supply then anything else..

we even see a big number print on the backside @ 3,65 this just addsto the allreday told story .. that A supply is swamping demand and selling pressure increases..

therefore bounce should be anticiptaed and played

Scenario 3: No Demand

when u notice that price trades torwards our level on low volume and we have a lack of follow thru , then we can speak of no demand and no demand at a key level in this case resistance is deadly..

we see weak prints and low amounts on the layside

on the other hand we see size on the backside..no chance for price to break that level.. with such weak actions and no size to support any move up..

and no size to sustain at this level

Scenario 4: Effort vs Result

on this scenario u can see that when huge effort is taken in action

but the level still holds, then it rather bounces then breaks..

as in somecase demand will loose its firepower and the resting supplywall will still hold and therfore outnumber demand

we see a big print @ 3,70 but we still stand with 600

(ice berg) order ... a sign that there is more size then u first whitnessed

another big print of 400 , but we still stand back with 550

it just decreas a lil.. but it witholds the attacks. that level will mostlikely hold

an after a some big attacks we even increase in size at backside..

thats a sign that u rather should think about that the level will hold and u should play a bounce

Remember! nothing is Black and White! and these are just some of manny scenarios out there

but now u know what and how too look at the markets and tades that take place.. etc..

stay Tuned for more to come ;)

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