Why Does Weightlessness Occur in the Market?
Understanding Weightlessness and Small Candles in Trading
In trading, weightlessness refers to a market state where price action moves within a narrow range for an extended period without significant directional change. This phenomenon often occurs during weak trends or just before a major market shift. Understanding why weightlessness occurs and how to identify small candles can help traders capitalize on market movements.
The Behavior of Professional Traders and Small Candles
Market giants often enter positions with small amounts and low volumes to avoid drawing attention. They also exit with small volumes to protect their average selling price and maximize profits. By liquidating positions gradually, they prevent other traders from reacting, which helps avoid sharp price shifts.
Small candles often appear toward the end of a price movement, signaling that professional traders are closing their positions. Retail traders, who are typically more reactive, wait for the movement to complete. As their enthusiasm wanes, they stop entering at worse prices, causing the price to lose momentum and enter a state of weightlessness.
After a correction, a smaller price movement, or "leg," may form. This leg requires significant volume and money, just like the extension phase. While we measure extensions by price movement, corrections can extend to similar levels as the previous correction. As traders begin to liquidate positions, small, weightless candles may appear.
Key Signs of Weightlessness and Market Behavior
Weightlessness often occurs when price action reaches around 70% or 100% of a correction's movement. After one or two small candles, the price may continue in its original direction. The critical question for traders is: should they exit the trade after seeing these candles, or stay in?
- If weightlessness occurs near a key tension level, the probability of a market correction increases. However, if it happens elsewhere, traders should observe if candles are forming shadows at the top. Shadows in the middle of a movement suggest continuation, while shadows near the end (around 70% of the movement) may indicate the trend is nearing its end.
What Causes Weightlessness in the Market?
Weightlessness is a phenomenon observed on price charts when the price moves within a narrow range for an extended period without significant changes. It typically happens in weak trends or just before a major market move. Several factors contribute to the formation of weightlessness, including:
- Lack of Willingness to Move the Price
When the price stays within a small, stable range, it indicates a lack of momentum or strength to create a strong trend. This occurs when supply and demand balance, and neither side has enough power to push the price significantly in one direction. - Absence of News or Catalysts
Weightlessness can appear when the market is waiting for major news or events, but no fundamental factors are driving significant price changes. Traders often wait for new developments to push the market in a clear direction. - Low Trading Volume
When trading volume is low, the market struggles to move in either direction, and the price remains within a narrow range. This typically happens when there aren’t enough buy or sell orders to generate significant movement. - Market Uncertainty
Weightlessness can indicate market uncertainty. When traders are unsure of the price direction, they refrain from making trades, leading to a lack of price movement and a narrow range. - Psychological Limitations of Traders
Traders may avoid entering trades or quickly exit positions because they are psychologically unprepared for large market fluctuations. This behavior contributes to weightlessness, as neither buyers nor sellers are willing to take aggressive action. - Consolidation Phase
Weightlessness often occurs during a consolidation phase, where the price moves within a range after a sharp and fast move. This period of consolidation represents a resting phase before the trend resumes or a new trend begins.
The best place to trade after seeing weightlessness:
The best place to trade after seeing weightlessness at the end of a correction is at tension levels. These are the points where buyers and sellers have battled, and large limit orders are placed. For example, after an upward extension, when the price corrects and reaches a tension level, many limit buy orders are placed at this level, preventing the price from moving downward. The opposing traders cannot liquidate all these buy limits. Once the strength of market sell orders (taker and aggressive traders) is exhausted, the price begins to move upwards.
This principle also applies to extensions. When the price reaches the end of its movement or a key tension level, the theory of auction dynamics suggests that buyer enthusiasm and persistence decrease. Even if there aren't many sell limit orders in front of the price, there may also be few market buy orders (taker and aggressive traders) because buyers' willingness to push prices higher weakens. Thus, at tension levels, the price tends to rise once these sell limits are cleared.
In summary, weightlessness, small candles, and correction behavior often indicate that professional traders are liquidating their positions. The best trading opportunities occur after corrections at significant tension levels where large orders are present, signaling potential price movements once these orders are cleared.
Weightlessness (also referred to as "zero weight" or "no weight") is a specific phenomenon that can occur in price charts. It happens when the price moves within a narrow range for a long time without any significant change in its direction. Weightlessness typically occurs in weak trends or before a major market move begins. There are several reasons why weightlessness can form, as outlined below:
