tradeable chart

How can we determine the direction of the larger market community by analyzing traders’ behavior and align with them? Does their behavior indicate whether large traders or retail traders are in the market? And if large traders are present, how long are they expected to stay in the market?

By examining traders’ behavior, we can gain insights into these questions. However, to answer them, we need to trade using a chart that is clear and readable enough to easily determine: 1) whether large traders are in the market, 2) in which direction they are positioned, and 3) how long they are expected to stay.

In classic analysis, the approach is usually to use multiple time frames and several indicators that simultaneously confirm a signal, such as a buy signal or confirmation of an uptrend, to enter or exit a trade with greater confidence. The rationale is that by doing so, we align with a larger community. This thinking is correct, but determining the larger community through indicators, oscillators, and classic methods has its challenges and drawbacks.

In general, if we are not in a good state of mind, we cannot have a good trade (in any chart). However, if a symbol or chart is not conducive to trading, we can look for a good trading opportunity in another chart. Therefore, if the trading position we are considering is not sufficiently clear and might negatively impact our state after entry, we should avoid entering, as a poor trade can affect our ability to handle even a clean position well.

To better understand this topic, let’s consider individuals around us in our community. Suppose we are traveling by bus and have the choice of who to sit next to. Isn’t the appearance of individuals initially influential in this choice? Imagine a person sitting next to us in disheveled clothes versus an individual with an athletic build and in a suit. The first person might indicate a lack of a healthy lifestyle and discipline, possibly breaking social norms, such as speaking loudly on the phone. On the other hand, the athletic person might not exhibit these behaviors. Thus, we would prefer to sit next to the second person.

The same observation applies in the market. The personality of traders, based on their impact on prices, determines what type of traders are currently in the market. For example, look at the Bitcoin chart:

In each of the areas marked with numbers 1 to 4, there have been different types of traders with varying amounts of capital. Which scenario shows the presence of large traders more clearly? And if we were to rate them, which scenario would receive a higher score? Ideally, we would like to be in a scenario with large traders. This means those who have enough capital that when we align with them, the price moves significantly enough to make it worthwhile.

Scenarios 1 and 4 indicate that the traders present are large, with significant capital and consistent decision-making. They do not frequently change their decisions, unlike in scenarios 2 and 3 where traders often alter their decisions, leading to inconsistent price action and creating a sideways range. In scenario 2, the large traders present in scenario 1 are in the process of cashing out and changing direction. In scenario 3, large traders are practically absent, and this scenario is created by small traders with minor amounts of capital.

Therefore, the market’s context, which includes the last 60-70 candles, should be clear enough that by observing it, we can easily determine which category of traders is present.

It is important to note that seeing clarity in a chart does not only mean observing steps and corrections, reduced distances, increased depth, and decreased skewness, leading us to eventually enter a counter-trend trade. Sometimes, the lack of these features, where we can clearly decide not to enter a trade without confusion, is also considered clarity in the chart. In other words, the trader’s decision is clear, and they are convinced not to enter the trade, or projections and extensions in the chart make it clear to enter a trade without confusion.

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